Incoterms 2020 Explained: International Delivery Terms Guide
Incoterms 2020 are 11 internationally recognized trade terms published by the ICC that define how costs, risks, and responsibilities are divided between buyer and seller in cross-border transactions.
What Are Incoterms 2020?
Incoterms 2020 are 11 internationally recognized trade terms published by the International Chamber of Commerce (ICC) that define how costs, risks, and responsibilities are divided between buyer and seller in cross-border transactions. First published in 1936 and most recently updated in 2020, Incoterms are referenced in over 90% of international trade contracts.
Each Incoterms rule answers three fundamental questions: who pays the costs, who bears the risk of loss or damage, and who arranges documentation and transport.
The 11 Incoterms 2020
| Code | Full Name | Transport Mode | Risk Transfer Point |
|---|---|---|---|
| EXW | Ex Works | Any | Seller's premises |
| FCA | Free Carrier | Any | Named place (carrier) |
| CPT | Carriage Paid To | Any | Carrier at origin |
| CIP | Carriage and Insurance Paid To | Any | Carrier at origin |
| DAP | Delivered at Place | Any | Named destination |
| DPU | Delivered at Place Unloaded | Any | Named place (unloaded) |
| DDP | Delivered Duty Paid | Any | Named destination |
| FAS | Free Alongside Ship | Sea only | Alongside vessel |
| FOB | Free on Board | Sea only | On board vessel |
| CFR | Cost and Freight | Sea only | On board vessel |
| CIF | Cost, Insurance and Freight | Sea only | On board vessel |
Incoterms Groups
Group E (Minimum Seller Obligation)
EXW: Seller's responsibility ends at their premises. Buyer handles everything: loading, export customs, transport, insurance, import customs.
Group F (Main Carriage Unpaid)
FCA, FAS, FOB: Seller delivers to a named point. Main transport is buyer's responsibility. Risk transfers at the delivery point.
Group C (Main Carriage Paid)
CPT, CIP, CFR, CIF: Seller pays main carriage but risk transfers at origin. Cost and risk transfer points differ.
Group D (Delivered)
DAP, DPU, DDP: Maximum seller obligation. Seller delivers to destination. DDP includes all duties and taxes.
How to Choose the Right Incoterm
- Experience level: New to export: FCA. Experienced: CIF or DDP
- Control preference: Want transport control: C or D group
- Risk appetite: Minimize risk: EXW (seller) or DDP (buyer)
- Transport mode: Sea: FOB/CIF. Multi-modal: FCA/CIP
- Customs capability: No destination customs capacity: avoid DDP
Frequently Asked Questions
What changed from Incoterms 2010 to 2020?
DAT was renamed DPU (delivery place is no longer limited to terminals). FCA now allows on-board bill of lading notation. CIP minimum insurance was raised to ICC-A (CIF remains ICC-C).
Are Incoterms mandatory?
No, they are trade customs, not law. However, they are the standard language of international trade and strongly recommended to prevent disputes. Contracts should specify "Incoterms 2020."
Which Incoterm does Kolay Parsiyel use?
Kolay Parsiyel typically operates under DAP (door delivery, customs by buyer) or DDP (door delivery including customs and duties). Both options are quoted for comparison.
Do Incoterms affect price?
Yes. EXW is the lowest quoted price (excludes all transport). DDP is the highest (includes everything). Always compare on the same Incoterm basis.
References
- ICC Incoterms 2020 Official Publication
- International Chamber of Commerce
- UNCTAD Trade Facilitation
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