Reference

Incoterms 2020 — who pays, who carries the risk

An Incoterm answers three questions and only three: where the seller delivers, where risk passes, and which costs each side pays. It does not set the price, the payment method or title. Use this reference to pick the rule that matches your actual handover, then put the numbers into the landed-cost calculator.

Risk and cost can pass at different places

In CPT, CIP, CFR and CIF the seller pays freight to the destination, but risk passes when the goods are handed to the first carrier or loaded on board. A seller can therefore pay to move goods it no longer owns commercially. Read the risk point before the freight line; the two are not the same handover.

The 2020 rules list cost obligations in article A9 and risk in A3 for every term. When a contract adds a clause that moves one without the other, state it explicitly instead of assuming the Incoterm covers it.

The Incoterm is not the sales contract

Incoterms cover delivery, risk, costs and clearance. They do not cover payment terms, title, product compliance, warranties, force majeure or the law that governs the contract. A DDP term does not make the seller responsible for product safety, and an EXW term does not remove the buyer's import obligations.

Use the term as a short handover clause, then write the commercial terms around it. If the buyer and seller want the seller to handle import clearance, DDP or DAP plus a separate service agreement is clearer than stretching FCA.

All entries

EXW — Ex WorksThe seller makes the goods available at its premises. The buyer collects, exports, insures, imports and delivers. FCA — Free CarrierThe seller delivers the goods to the carrier nominated by the buyer, cleared for export, at the named place. CPT — Carriage Paid ToThe seller pays carriage to the named destination, but risk passes when the goods are handed to the first carrier. CIP — Carriage and Insurance Paid ToThe seller pays carriage and buys broad cargo insurance to the named destination; risk still passes at the first carrier. DAP — Delivered at PlaceThe seller delivers the goods ready for unloading at the named place; the buyer clears import and pays duty. DPU — Delivered at Place UnloadedThe seller delivers and unloads the goods at the named place; the buyer clears import and pays duty. DDP — Delivered Duty PaidThe seller delivers to the named place with import cleared and duty paid; the seller is usually the importer of record. FAS — Free Alongside ShipThe seller delivers the goods alongside the vessel at the named port; the buyer loads and pays the main carriage. FOB — Free On BoardThe seller delivers the goods on board the buyer's vessel at the named port; the buyer pays the main carriage. CFR — Cost and FreightThe seller pays freight to the destination port, but risk passes when the goods are on board at origin. CIF — Cost, Insurance and FreightThe seller pays freight and buys minimum cargo insurance to the destination port; risk passes on board at origin.

Use these with

Landed Cost Calculator

Add duty, import tax, freight and handling to a goods value to get the true landed cost and per-unit cost.

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US Import Duty Calculator

Estimate US duty from the first dollar — the $800 de minimis is suspended.

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UK Import Duty Calculator

No duty at or below £135 for most goods, but 20% VAT applies from the first pound.

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VAT / GST Calculator

Add or remove VAT or GST with country presets for the UK, EU, Canada, Australia, Japan, Singapore and the UAE.

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