Incoterms® 2020: who clears customs and who bears the risk
Operational guide · ICC 2020 rules
What the Incoterms® are
The Incoterms® (International Commercial Terms) are a set of 11 rules published by the International Chamber of Commerce (ICC) that define the responsibilities of the seller and the buyer in an international sale transaction. The current edition is Incoterms® 2020, in force since 1 January 2020.
They determine three key things: who arranges and pays for carriage, who clears export and import, and where the risk of loss or damage to the goods transfers from seller to buyer.
The 11 Incoterms® 2020 at a glance
| Code | Name | Main carriage | Export clearance | Import clearance | Risk passes to buyer at… |
|---|---|---|---|---|---|
| EXW | Ex Works | Buyer | Buyer | Buyer | Seller’s premises |
| FCA | Free Carrier | Buyer | Seller | Buyer | Delivery to the nominated carrier |
| FAS | Free Alongside Ship | Buyer | Seller | Buyer | Alongside the ship at the port of shipment |
| FOB | Free On Board | Buyer | Seller | Buyer | On board the ship at the port of shipment |
| CFR | Cost and Freight | Seller | Seller | Buyer | On board the ship (seller pays freight) |
| CIF | Cost, Insurance and Freight | Seller | Seller | Buyer | On board the ship (seller pays freight + min. insurance) |
| CPT | Carriage Paid To | Seller | Seller | Buyer | Delivery to the first carrier |
| CIP | Carriage and Insurance Paid To | Seller | Seller | Buyer | Delivery to the first carrier (seller pays full ICC A insurance) |
| DAP | Delivered At Place | Seller | Seller | Buyer | Place of destination (not unloaded) |
| DPU | Delivered At Place Unloaded | Seller | Seller | Buyer | Place of destination (unloaded) |
| DDP | Delivered Duty Paid | Seller | Seller | Seller | Place of destination (duties included) |
Functional groups
Group E — Departure (EXW)
The seller merely makes the goods available. All risk and cost fall on the buyer from the point of origin.
Group F — Main carriage unpaid (FCA, FAS, FOB)
The seller delivers the goods to the carrier nominated by the buyer. The buyer arranges and pays for the main carriage.
Group C — Main carriage paid (CFR, CIF, CPT, CIP)
The seller pays for the main carriage, but risk transfers to the buyer at the point of shipment/delivery to the carrier. Cost and risk are decoupled.
Group D — Arrival (DAP, DPU, DDP)
The seller bears risk and cost up to destination. Maximum seller obligation. DDP is the extreme case: the seller also clears import and pays the duties.
Maritime vs. any mode
| Sea only | Any mode of transport |
|---|---|
| FAS, FOB, CFR, CIF | EXW, FCA, CPT, CIP, DAP, DPU, DDP |
Using a maritime Incoterm (FOB, CIF…) for road transport or a multimodal container is a common mistake that creates uncertainty over the point of risk transfer. For road, the “any mode” Incoterms are the appropriate ones.
Who must take out insurance
Only CIF and CIP oblige the seller to take out insurance:
- CIF: minimum cover (ICC clause C).
- CIP: full cover (ICC clause A, “All Risks”), since Incoterms® 2020.
Under the other terms, insurance is the responsibility of whoever bears the risk (usually the buyer, if they wish to be protected).
What Incoterms® do NOT govern
Although they assign delivery, cost and risk obligations, the Incoterms® do not replace:
- The contract of carriage (CMR, CIM, etc.).
- The applicable customs or regulatory law.
- The carrier’s liability regimes.
- Ownership of the goods (which depends on the sale contract and the applicable law).
Official sources cited
Want to verify your actual operation?
Compare Incoterms® for my operationThis guide is for informational purposes only and does not constitute legal advice. Always consult the official text in force.