What Incoterms Help
to Clarify
Delivery Point
Defines the exact point where the seller delivers the goods, such as factory, carrier location, port of loading, or final destination.
Transfer of Risk
Shows the point where risk transfers from seller to buyer, even if the shipment cost is still handled by another party.
Cost Responsibility
Helps identify who pays for freight, loading, insurance, customs clearance, duties, and delivery-related charges.
Seller, Buyer
and Risk Transfer
Incoterms should not only be read as shipping terms. They are a practical guide to understand who handles each stage of the shipment journey.
Seller’s Obligation
The seller is responsible for preparing and delivering the goods based on the selected Incoterm. In some terms, this responsibility ends at the seller’s premises. In others, the seller may need to arrange freight up to the destination country or final place.
Buyer’s Obligation
The buyer takes over responsibility based on the agreed delivery point. This may include freight charges, customs duties, import clearance, insurance, or onward delivery.
Transfer of Risk
Risk transfer is the point where loss or damage responsibility moves from seller to buyer. This point is important because cost responsibility and risk responsibility may not always transfer at the same stage.
Point of Delivery
and Transfer of Risk
The table below gives a simplified explanation of common Incoterms 2020 rules. It is designed to help businesses quickly understand the main delivery point, risk transfer point, and basic responsibility split.
| Term | Full Name | Delivery Point | Risk Transfers At | Main Responsibility |
|---|---|---|---|---|
| EXW | Ex Works | Seller’s premises | When goods are made available to buyer | Minimum seller responsibility |
| FCA | Free Carrier | Agreed place or carrier location | When goods are handed to the carrier | Seller delivers to named carrier or place |
| FAS | Free Alongside Ship | Alongside ship at loading port | When goods are placed alongside the vessel | Used mainly for sea freight cargo |
| FOB | Free On Board | On board vessel at loading port | When goods are loaded on board | Buyer usually handles main sea freight |
| CFR | Cost and Freight | Port of destination | When goods are loaded on board at origin | Seller pays freight, buyer carries risk after loading |
| CIF | Cost, Insurance and Freight | Port of destination | When goods are loaded on board at origin | Seller pays freight and minimum insurance |
| CPT | Carriage Paid To | Named destination | When goods are handed to first carrier | Seller pays carriage to destination |
| CIP | Carriage and Insurance Paid To | Named destination | When goods are handed to first carrier | Seller pays carriage and insurance |
| DPU | Delivered at Place Unloaded | Named destination, unloaded | After goods are unloaded at destination | Seller responsible until unloading |
| DAP | Delivered at Place | Named destination | When goods are ready for unloading | Buyer handles unloading and import duties |
| DDP | Delivered Duty Paid | Named destination | When goods are delivered to buyer | Maximum seller responsibility |
Terms by
Shipment Type
Rules for Any Mode of Transport
- EXW — Ex Works
- FCA — Free Carrier
- CPT — Carriage Paid To
- CIP — Carriage and Insurance Paid To
- DPU — Delivered at Place Unloaded
- DAP — Delivered at Place
- DDP — Delivered Duty Paid
Rules for Sea and Inland Waterway Transport
- FAS — Free Alongside Ship
- FOB — Free On Board
- CFR — Cost and Freight
- CIF — Cost, Insurance and Freight
Sea freight terms are commonly used when cargo is moved through ports and vessels. Selecting the correct term helps avoid confusion between loading responsibility, freight cost, and shipment risk.