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See who handles loading, customs, freight, insurance and risk under each of the eleven rules in one chart. Answer a few questions to pick the right rule and get the wording for your contract.
How will the goods travel?
Where should the seller’s responsibility end?
Who pays for the main carriage (freight)?
RECOMMENDED RULE
FCA
Free Carrier
The seller clears the goods for export and hands them to the buyer’s carrier; main carriage is on the buyer. The right choice instead of FOB for containers.
When risk passes
When the goods are handed to the carrier named by the buyer at the agreed place. At the seller’s premises, the seller loads.
Since 2020 the parties can agree that an on-board bill of lading is issued for sea carriage, which matters under letters of credit.
HOW TO WRITE IT IN THE CONTRACT
FCA [named place], Incoterms® 2020
Name the place as precisely as you can and state the version of the rules; without it, the parties may read different rules.
Dark cells are the seller, light cells the buyer. Only CIF and CIP oblige anyone to insure; under the other rules, whoever carries the risk insures for themselves.
| Rule | Loading at origin | Export clearance | Main carriage | Insurance | Unloading at destination | Import and duties | Risk passes |
|---|---|---|---|---|---|---|---|
| Any mode of transport | |||||||
| EXW | Buyer | Buyer | Buyer | No obligation | Buyer | Buyer | Seller’s premises |
| FCA | Seller | Seller | Buyer | No obligation | Buyer | Buyer | Handed to carrier |
| CPT | Seller | Seller | Seller | No obligation | Buyer | Buyer | First carrier |
| CIP | Seller | Seller | Seller | Seller (A) | Buyer | Buyer | First carrier |
| DAP | Seller | Seller | Seller | No obligation | Buyer | Buyer | Destination |
| DPU | Seller | Seller | Seller | No obligation | Seller | Buyer | Unloaded at destination |
| DDP | Seller | Seller | Seller | No obligation | Buyer | Seller | Destination |
| Sea and inland waterway only | |||||||
| FAS | Buyer | Seller | Buyer | No obligation | Buyer | Buyer | Alongside ship |
| FOB | Seller | Seller | Buyer | No obligation | Buyer | Buyer | On board |
| CFR | Seller | Seller | Seller | No obligation | Buyer | Buyer | On board |
| CIF | Seller | Seller | Seller | Seller (C) | Buyer | Buyer | On board |
The first seven rules work for any mode of transport; the last four are for sea and inland waterway only.
Ex Works
The rule with the least for the seller to do. Loading, export clearance, carriage and import are all on the buyer.
Risk passes. When the goods are placed at the buyer’s disposal at the seller’s premises, not loaded.
A buyer often struggles to clear exports in the seller’s country; FCA at the seller’s premises usually fits better.
Free Carrier
The seller clears the goods for export and hands them to the buyer’s carrier; main carriage is on the buyer. The right choice instead of FOB for containers.
Risk passes. When the goods are handed to the carrier named by the buyer at the agreed place. At the seller’s premises, the seller loads.
Since 2020 the parties can agree that an on-board bill of lading is issued for sea carriage, which matters under letters of credit.
Carriage Paid To
The seller pays the freight, but risk passes to the buyer once the goods are with the first carrier. Cost and risk split at different points.
Risk passes. When the goods are handed to the first carrier; the seller pays carriage to destination but risk passes early.
Carriage and Insurance Paid To
As CPT, plus the seller insures the goods for the buyer. Since 2020 the minimum cover is the broad Institute Cargo Clauses (A).
Risk passes. When the goods are handed to the first carrier.
Delivered at Place
The seller brings the goods to the place in the buyer’s country at its own risk; unloading, import clearance and duties are on the buyer.
Risk passes. When the goods are placed at the buyer’s disposal at the destination, on the vehicle and ready for unloading.
Delivered at Place Unloaded
The only difference from DAP is that the seller also unloads. It replaced DAT in 2020; the destination can be any place, not only a terminal.
Risk passes. When the goods are unloaded and placed at the buyer’s disposal at the destination.
Delivered Duty Paid
The rule with the most for the seller to do: import clearance and duties are on the seller too.
Risk passes. When the goods are placed at the buyer’s disposal at the destination, cleared for import and ready for unloading.
The seller must be able to act as importer in the buyer’s country; if not, use DAP.
Free Alongside Ship
Used for bulk and break-bulk cargo. The seller clears for export and places the goods alongside the ship; loading is on the buyer.
Risk passes. When the goods are placed alongside the ship at the port of shipment, on the quay or a barge.
Not suitable for containers: a container is handed to the carrier at the terminal before it goes on board. ICC recommends FCA, CPT or CIP instead.
Free On Board
The seller clears for export and loads the goods on the buyer’s ship; freight, insurance and import are on the buyer.
Risk passes. When the goods are loaded on board the ship at the port of shipment.
Not suitable for containers: a container is handed to the carrier at the terminal before it goes on board. ICC recommends FCA, CPT or CIP instead.
Cost and Freight
Freight is on the seller, risk is on the buyer from loading. The goods travel at the buyer’s risk, so the buyer insures them.
Risk passes. When the goods are loaded on board at the port of shipment; the seller pays freight to the destination port.
Not suitable for containers: a container is handed to the carrier at the terminal before it goes on board. ICC recommends FCA, CPT or CIP instead.
Cost, Insurance and Freight
As CFR, plus the seller insures the goods for the buyer. The minimum cover is the narrower Institute Cargo Clauses (C); wider cover must be agreed.
Risk passes. When the goods are loaded on board at the port of shipment.
Not suitable for containers: a container is handed to the carrier at the terminal before it goes on board. ICC recommends FCA, CPT or CIP instead.
Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This page summarises the rules and does not replace the official text; check the ICC publication and your customs broker before you sign. Work out your margin per product with the profit margin calculator.
Incoterms are eleven rules published by the International Chamber of Commerce (ICC) that set out, in international trade, where the seller delivers the goods, who pays for carriage and insurance, when risk passes to the buyer and who handles customs.
Under both, risk passes to the buyer when the goods are loaded on board at the port of shipment. Under FOB the buyer pays freight and insurance; under CIF the seller pays freight to the destination port and insures the goods for the buyer with at least Institute Cargo Clauses (C) cover.
A container is handed to the carrier at the terminal before it is loaded on board. ICC therefore recommends FCA, CPT and CIP instead of FOB, CFR and CIF for containers; otherwise the seller keeps the risk during a terminal process it cannot control.
DAT was renamed DPU (Delivered at Place Unloaded) and the destination is no longer limited to a terminal. The minimum insurance under CIP rose to Institute Cargo Clauses (A), while CIF stays at (C). Under FCA, the parties can agree that an on-board bill of lading is issued.
No. Incoterms deal with delivery, costs, risk and customs; payment terms, transfer of title and remedies for breach belong in the sales contract.
State the rule, the named place and the version together, for example “FCA Leeds, seller’s warehouse, Incoterms® 2020”. The more precisely the place is named, the less room there is to argue about where risk passed.
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