An Incoterm answers three questions in three letters: where the risk passes from seller to buyer, who pays which costs, and who handles export and import clearance. The current rules are Incoterms 2020. Always write the rule, the named place and the edition, for example "CIF Jeddah, Incoterms 2020".
The 11 rules
| Rule | Risk passes to buyer | Seller pays main carriage | Insurance | Best for |
|---|---|---|---|---|
| EXW Ex Works | Goods made available at seller's premises | No | — | Domestic or buyer-collected goods |
| FCA Free Carrier | Handed to buyer's carrier at named place | No | — | Containers; the modern replacement for FOB in container trade |
| CPT Carriage Paid To | Handed to first carrier | Yes | — | Containers, multimodal |
| CIP Carriage & Insurance Paid To | Handed to first carrier | Yes | Seller, all-risks cover (ICC A) | Containers, manufactured goods |
| DAP Delivered at Place | Arrived at named place, ready for unloading | Yes | — | Door delivery, import cleared by buyer |
| DPU Delivered at Place Unloaded | Unloaded at named place | Yes | — | Terminal or site delivery |
| DDP Delivered Duty Paid | At named place, import cleared and duties paid | Yes | — | Only if the seller can clear imports in the buyer's country |
| FAS Free Alongside Ship | Alongside vessel at loading port | No | — | Bulk, heavy cargo |
| FOB Free on Board | On board the vessel at loading port | No | — | Bulk: grains, sugar, fertilizer, ores, oil |
| CFR Cost and Freight | On board at loading port | Yes | — | Bulk where seller arranges the vessel |
| CIF Cost, Insurance and Freight | On board at loading port | Yes | Seller, minimum cover (ICC C) | Bulk; the most quoted term in commodity offers |
Common mistakeUnder CFR and CIF the seller pays freight to the destination, but the risk already passed to the buyer when the goods went on board at loading. A "CIF" price does not mean the seller is responsible until discharge.
Bulk shipping basics
- Charter party: the contract to hire a vessel. Voyage charters are usual for commodity cargoes.
- Laycan: the window in which the vessel must arrive for loading.
- Notice of readiness (NOR): the master's notice that the vessel is ready; laytime starts from it.
- Laytime, demurrage, despatch: time allowed to load or discharge; the charge if exceeded; the reward if faster.
- Draft survey: measures cargo weight from the vessel's displacement.
- Clean on-board bill of lading: no remarks about damaged goods; required by most LCs.
Container shipping basics
- 20' and 40' containers; reefers for frozen and chilled goods; flexitanks for edible oils.
- Typical payloads are limited by weight as much as volume: check road and port limits at destination.
- Use FCA, CPT or CIP rather than FOB or CIF: the seller hands containers to the carrier at a terminal, not over the ship's rail.
TradeScout24 Trade Desk · Source: ICC Incoterms® 2020; no newer edition has been announced by ICC · Last reviewed 25 Oct 2026