Incoterms® 2020 in plain English

Incoterms® rules are three-letter trade terms. Each one says who arranges and pays for transport, where the seller's part of the delivery ends, where the risk of loss passes to the buyer, and who handles export and import formalities.

The basics

• Write the rule, a precise place and the version together, for example “FCA seller's dock, Hamilton, Ontario, Incoterms® 2020”. A rule without a place leaves the most important question open.
• The rules do not set the price, the payment terms, when ownership passes, or what happens if the material is not as described. Those belong in your contract.
• The seller's part ends at the place named in the rule. From that point the buyer carries the risk of loss, even if the seller has paid for the transport (the C rules).
• We never arrange transport, insurance or customs, and never handle payment for goods. The parties agree and arrange these directly.

Rules for any kind of transport

Truck, rail, container, air, or more than one of them. Most scrap moved by truck or in containers uses one of these.

• EXW — Ex Works

  Seller's part ends

  When the material is made available at the seller's own site. The buyer collects it.

  Main transport

  The buyer arranges and pays for it, usually including loading.

  Common for local pickups. For a load that crosses a border, the buyer must also handle the export formalities in the seller's country, so FCA often fits better.

• FCA — Free Carrier

  Seller's part ends

  When the seller hands the material to the buyer's carrier at the named place, often loaded onto the truck at the seller's dock.

  Main transport

  The buyer arranges and pays for it. The seller handles export clearance.

  A good fit for most truckload sales from a plant or yard: say whether the seller loads.

• CPT — Carriage Paid To

  Seller's part ends

  When the material is handed to the first carrier, even though the seller pays the transport to the named destination.

  Main transport

  The seller arranges and pays for it, to the named destination.

• CIP — Carriage and Insurance Paid To

  Seller's part ends

  As CPT: when the material is handed to the first carrier.

  Main transport

  The seller arranges and pays for it, and also buys cargo insurance for the buyer.

• DAP — Delivered at Place

  Seller's part ends

  When the material arrives at the named place, ready to be unloaded.

  Main transport

  The seller arranges and pays for it. The buyer unloads and handles import clearance.

  Common when a yard or processor delivers to a mill or compounder.

• DPU — Delivered at Place Unloaded

  Seller's part ends

  When the material has been unloaded at the named place.

  Main transport

  The seller arranges and pays for it, and unloads. The buyer handles import clearance.

  The only rule in which the seller unloads at the destination.

• DDP — Delivered Duty Paid

  Seller's part ends

  When the material arrives at the named place, ready to be unloaded, cleared for import.

  Main transport

  The seller arranges and pays for it, and also handles import clearance and pays import duties and taxes.

  The most work for the seller. A seller outside the buyer's country may not be able to clear goods there. Import duties and taxes may apply: check with a customs broker.

Rules for sea and inland waterway only

For bulk loaded straight onto a vessel. For material loaded into containers inland, FCA, CPT or CIP usually fit better.

• FAS — Free Alongside Ship

  Seller's part ends

  When the material is placed alongside the vessel at the named port of shipment.

  Main transport

  The buyer arranges and pays for the sea freight.

• FOB — Free on Board

  Seller's part ends

  When the material is loaded on board the vessel at the named port of shipment.

  Main transport

  The buyer arranges and pays for the sea freight.

  In North America “FOB” is often used for domestic truck shipments with a different meaning. If you mean the Incoterms® rule, write “FOB [port], Incoterms® 2020”.

• CFR — Cost and Freight

  Seller's part ends

  When the material is on board the vessel at the port of shipment, even though the seller pays the freight.

  Main transport

  The seller arranges and pays for the sea freight to the named destination port.

• CIF — Cost, Insurance and Freight

  Seller's part ends

  As CFR: when the material is on board the vessel at the port of shipment.

  Main transport

  The seller arranges and pays for the sea freight and buys basic cargo insurance for the buyer.

We do not quote freight or insurance. Ask carriers, freight forwarders or customs brokers directly.

Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This guide is our own summary, not the ICC's text. For the official rules and their full wording, see the ICC. The ICC's Incoterms® rules page