Incoterms® 2020 Guide
Incoterms® rules are standardized trade terms used in contracts for the sale and purchase of goods. They help buyers and sellers understand defined delivery responsibilities, the allocation of certain costs, and where risk transfers between the parties.
Incoterms® Are About Delivery
Incoterms® rules help define specified responsibilities between seller and buyer in the delivery of goods. They are not simply shipping prices or payment terms. A correct Incoterm should be considered together with the sales contract, transport structure, named place, customs requirements and practical operating model.
What This Guide Covers
Understand all 11 Incoterms® 2020 rules, the difference between cost and risk, insurance responsibilities, container shipping, customs considerations, practical selection factors and how an Incoterm connects with the wider logistics process.
What Are Incoterms® Rules?
Incoterms® rules are internationally recognized trade terms published by the International Chamber of Commerce (ICC). The current edition is Incoterms® 2020 and contains 11 rules.
Delivery
The rules help identify the agreed delivery point and the specific delivery responsibilities assigned to seller and buyer.
Costs
The applicable rule identifies which party bears specified delivery-related costs within the transaction.
Risk
Each rule establishes a delivery point or event associated with the transfer of risk from seller to buyer.
The 11 Incoterms® 2020 Rules
The rules are divided into two groups: seven rules for any mode or modes of transport, and four rules intended specifically for sea and inland-waterway transport.
Rules for Any Mode or Modes of Transport
EXW, FCA, CPT, CIP, DAP, DPU and DDP may be used for shipments involving different modes of transport, subject to the actual delivery structure.
Ex Works
The seller makes the goods available at the named place, typically at the seller's premises or another agreed location. The buyer takes responsibility for the onward logistics process under the rule.
Free Carrier
The seller delivers the goods to the carrier or another party nominated by the buyer at the named place.
Carriage Paid To
The seller arranges and pays for carriage to the named destination, while risk transfers earlier at the applicable delivery point.
Carriage and Insurance Paid To
The seller arranges carriage to the named destination and also has an insurance obligation under the applicable rule.
Delivered at Place
The seller delivers the goods at the named destination ready for unloading. The seller bears the risks involved in bringing the goods to that destination.
Delivered at Place Unloaded
The seller delivers the goods at the named destination after unloading them from the arriving means of transport.
Delivered Duty Paid
The seller carries the broadest responsibility of the 11 rules, including delivery to the named destination, import clearance and applicable import duties and taxes under the rule.
Rules for Sea & Inland Waterway Transport
FAS, FOB, CFR and CIF are specifically intended for sea and inland-waterway transport in the circumstances covered by the individual rules.
Free Alongside Ship
The seller delivers the goods alongside the vessel at the named port of shipment.
Free On Board
The seller delivers the goods on board the vessel at the named port of shipment, with risk transferring according to the rule.
Cost and Freight
The seller pays the cost and freight required to bring the goods to the named destination port, while risk transfers at the delivery point under the rule.
Cost Insurance and Freight
The seller pays the cost and freight to the named destination port and also has an insurance obligation under the rule.
Incoterms® 2020 Comparison Table
Use this table as a high-level orientation. The actual rule should always be selected against the transaction's delivery structure and commercial agreement.
| Rule | Full Name | Transport | Main Concept |
|---|---|---|---|
| EXW | Ex Works | Any mode | Goods made available at named place |
| FCA | Free Carrier | Any mode | Delivery to carrier or nominated party |
| CPT | Carriage Paid To | Any mode | Seller pays carriage to destination |
| CIP | Carriage and Insurance Paid To | Any mode | CPT plus seller insurance obligation |
| DAP | Delivered at Place | Any mode | Delivered ready for unloading |
| DPU | Delivered at Place Unloaded | Any mode | Seller delivers after unloading |
| DDP | Delivered Duty Paid | Any mode | Seller handles import responsibility under the rule |
| FAS | Free Alongside Ship | Sea / inland waterway | Delivered alongside vessel |
| FOB | Free On Board | Sea / inland waterway | Delivered on board vessel |
| CFR | Cost and Freight | Sea / inland waterway | Seller pays freight; risk transfers earlier |
| CIF | Cost Insurance and Freight | Sea / inland waterway | CFR plus seller insurance obligation |
Who Pays Is Not Always Who Bears the Risk
One of the most important Incoterms® concepts is the distinction between cost responsibility and risk transfer.
Incoterms® and Containerized Cargo
A common mistake is assuming that every ocean container shipment should automatically use FOB or CIF. The actual delivery point should be examined before selecting the rule.
Incoterms® and Customs Clearance
Incoterms® can allocate specified export and import responsibilities, but the actual customs laws and requirements of each country still apply independently.
Export Clearance
The selected rule can determine which party is responsible for export formalities and related activities.
Import Clearance
The buyer or seller may have import responsibilities depending on the selected rule. Destination-country law remains decisive.
Indonesia
For Indonesian imports, the Incoterm should be reviewed alongside HS classification, duties, taxes, LARTAS and the actual import process.
Which Incoterms® Include Insurance?
Among the 11 Incoterms® 2020 rules, CIF and CIP contain seller insurance obligations.
CIF
Applies to sea and inland-waterway transport and includes a seller insurance obligation under the rule.
CIP
Can be used for any mode or modes of transport and includes a seller insurance obligation under the rule.
Other Rules
The other rules do not impose the same seller insurance obligation as CIF and CIP.
Incoterms® Are Not Payment Terms
Incoterms® address defined delivery responsibilities, certain costs and risk. Payment terms determine when and how the buyer pays the seller.
Incoterm
Example: FOB. This is a delivery rule dealing with defined responsibilities, costs and risk.
Payment Term
Example: Letter of Credit. This describes the agreed payment arrangement.
Sales Contract
The sales contract connects the Incoterm, payment terms, commercial terms and other agreed conditions.
How Should You Choose an Incoterm®?
There is no single Incoterm that is automatically best for every transaction. Start with the actual delivery structure.
1. What Transport Mode?
Determine whether the shipment uses sea, air, road, rail or multiple modes.
2. Where Is Delivery?
Define the exact named place: seller premises, terminal, port, warehouse, factory or another agreed destination.
3. Who Arranges Main Carriage?
Identify whether the buyer or seller will arrange the principal transportation.
4. Who Handles Import?
Check who will handle destination import formalities under the rule and whether that party can practically perform them.
5. Is Insurance Required?
Check whether the transaction should use a rule containing a seller insurance obligation, such as CIF or CIP.
6. Where Should Risk Transfer?
The intended delivery and risk-transfer point should match the commercial understanding of the parties.
Common Incoterms® Mistakes
Using FOB for Every Ocean Shipment
The actual delivery structure may be containerized and terminal-based, making FCA worth considering.
Treating CIF as All-Inclusive
CIF does not mean that the seller handles every destination cost or every risk through the buyer's final location.
Ignoring the Named Place
A delivery rule without a properly understood named place can create significant ambiguity.
Confusing Risk and Cost
Some rules separate the point where transport is paid from the point where risk transfers.
Ignoring Import Compliance
A seller agreeing to DDP should assess whether it can perform the destination import requirements.
Treating Incoterms® as Payment Terms
Delivery responsibilities and payment arrangements are separate elements of the transaction.
Incoterms® for Imports into Indonesia
For Indonesian imports, the selected Incoterm should be reviewed together with international freight, import customs, duties, taxes, LARTAS requirements, domestic trucking and delivery.
Incoterms® for Exports from Indonesia
For Indonesian exports, consider who will arrange factory pickup, export customs, port or airport delivery, international carriage, insurance where applicable and destination responsibilities.
Connect the Incoterm to the Logistics Cost
The commercial impact of an Incoterm depends on the actual transportation and destination structure. Product cost is only one part of the total transaction.
NS Continent's logistics tools can help customers examine individual shipment components before requesting a quotation.
Import Tax Calculator
Review import duty and tax considerations for Indonesian import planning.
Open Import Tax Calculator →CBM Calculator
Calculate cargo volume before assessing container and freight arrangements.
Open CBM Calculator →Chargeable Weight Calculator
Compare gross and volumetric weight for air-freight planning.
Open Air CWT Calculator →From Incoterm to Practical Logistics
An Incoterm is only one part of a shipment. The selected rule must connect with cargo preparation, freight, customs, trucking, warehousing and final delivery.
Ocean Freight
FCL, LCL and international ocean transportation according to the shipment structure.
Explore Ocean Freight →Customs
Import and export customs coordination connected with the actual shipment requirements.
Explore Customs →Trucking
Domestic movement between factories, warehouses, terminals and delivery locations.
Explore Trucking →Tools for International Trade Planning
Practical logistics tools can help convert commercial information into shipment planning decisions before cargo moves.
HS Code Identifier
Research potential product classification candidates before customs and tariff analysis.
Open HS Identifier →3D Load Planner
Visualize cargo placement and container utilization before stuffing.
Open 3D Load Planner →Logistics Tools
Explore the wider NS Continent logistics-tool ecosystem for shipment planning and calculations.
Explore Logistics Tools →Incoterms® Frequently Asked Questions
Common questions about Incoterms®, logistics responsibilities, costs and risk.
Need Help Choosing an Incoterm®?
Share the origin, destination, cargo, transport mode and proposed Incoterm. NS Continent can help connect the commercial trade term with the actual freight, customs, trucking, warehousing and delivery requirements.