🎯 In 30 seconds: An Incoterm is a three-letter code in your quote, like “FCA Memphis, Incoterms® 2020”. It settles three questions: where you hand the goods over, who pays each leg of the trip, and the exact moment the risk of loss moves from you to the buyer. Pick one on purpose, name the place, and write the edition.
Which edition is current
The International Chamber of Commerce (ICC) writes the rules. The current edition is Incoterms® 2020, in effect since January 1, 2020. As of October 2026 there is no newer edition in force. ICC Austria says the next one, Incoterms® 2030, is planned for publication in late 2029, and that until then Incoterms® 2020 stay the current rules.
Older editions are still legal to use if both sides agree, which is why you always write the year. “FOB” on its own invites an argument; “FOB Port of Savannah, Incoterms® 2020” does not.
The 11 rules at a glance
Seven rules work for any transport (truck, air, container ship, rail). Four are for sea and inland waterway only. “Risk passes” means the point where damage or loss becomes the buyer’s problem.
| Rule | Mode | Risk passes to buyer | Main freight paid by | Cargo insurance |
|---|---|---|---|---|
| EXW Ex Works | Any | Goods made available at your door, not loaded | Buyer | Nobody required |
| FCA Free Carrier | Any | Handed to the buyer’s carrier at the named place | Buyer | Nobody required |
| CPT Carriage Paid To | Any | Handed to the first carrier (early) | Seller | Nobody required |
| CIP Carriage and Insurance Paid To | Any | Handed to the first carrier (early) | Seller | Seller, high cover (Institute Cargo Clauses A) |
| DAP Delivered at Place | Any | Arrives at destination, ready to unload | Seller | Nobody required |
| DPU Delivered at Place Unloaded | Any | Unloaded at destination | Seller | Nobody required |
| DDP Delivered Duty Paid | Any | Arrives at destination, import cleared | Seller (plus import duty and taxes) | Nobody required |
| FAS Free Alongside Ship | Sea | Placed alongside the ship at the port of loading | Buyer | Nobody required |
| FOB Free on Board | Sea | Loaded on board the ship | Buyer | Nobody required |
| CFR Cost and Freight | Sea | Loaded on board (early) | Seller | Nobody required |
| CIF Cost, Insurance and Freight | Sea | Loaded on board (early) | Seller | Seller, minimum cover (Institute Cargo Clauses C) |
Two things trip people up. First, in the four “C” rules you pay the freight, but the risk passed to the buyer back at the start of the trip. Second, US export clearance is the seller’s job in every rule except EXW, and import clearance is the buyer’s job in every rule except DDP.
What changed in 2020
- DAT became DPU. It is now the only rule where the seller must unload at destination.
- CIP insurance went up to the broad “all risks” style cover (Clauses A). CIF stayed at the minimum (Clauses C). Either can be changed by agreement.
- FCA got an on-board bill of lading option, so a seller paid by letter of credit can still get the shipping document the bank asks for.
What beginners usually pick, and why
- FCA (your warehouse or your forwarder’s dock). Your job ends when the buyer’s carrier has the goods. It works for air and containers, which FOB technically does not.
- FOB (named US port) for bulk or break-bulk cargo actually loaded over a ship’s rail. Many buyers ask for FOB out of habit even for containers; FCA is the cleaner match.
- CIP or CPT when the buyer wants a delivered-looking price and you have a forwarder who can quote the freight.
Worked example: one shipment, three terms
You sell $10,000 of goods to a buyer in Rotterdam (made-up numbers). Truck to your forwarder costs $600, ocean freight $1,500, insurance $60.
| Term quoted | Your price | Your risk ends |
|---|---|---|
| FCA your forwarder, Chicago | $10,600 | At the forwarder’s dock |
| CIP Rotterdam | $12,160 | Still at the forwarder’s dock, but you bought the insurance |
| DAP buyer’s warehouse | $12,100 plus local delivery | Arrival at the buyer’s door |
The CIP buyer pays more but gets one number and an insurance certificate. The FCA buyer pays less and books their own freight. Neither is “better”; it depends on who has the cheaper freight contract.
See Start a Business for where Incoterms® fit in the full export path.