22/01/2026
TIPS:Incoterms®
2020 Explained:
One Post to Understand Risk & Responsibility
In international trade, choosing the wrong Incoterm can lead to unexpected risks and costs. Here is a clear, practical summary:
Incoterms for Any Mode of Transport
EXW (Ex Works)
Seller delivers goods at their premises. Minimum seller responsibility.
FCA (Free Carrier)
Risk transfers when goods are handed over to the buyer’s nominated carrier.
CPT / CIP (Carriage Paid To / Carriage & Insurance Paid To)
Risk transfers at delivery to the first carrier, even though freight (and insurance for CIP) is paid by the seller.
DAP / DPU / DDP (Delivered at Place Series)
Risk transfers closer to the destination.
DDP = maximum seller responsibility, including import clearance and duties.
Incoterms for Sea & Inland Waterway Transport Only
FAS (Free Alongside Ship)
Goods delivered alongside the vessel at the port of shipment.
FOB (Free On Board)
Risk transfers when goods are loaded on board the vessel (not “over the ship’s rail”).
CFR / CIF (Cost & Freight / Cost, Insurance & Freight)
Risk transfers at loading on board, while the seller pays ocean freight (and insurance under CIF).
Key Takeaway
Who pays the cost is not who bears the risk.
The risk transfer point is what really matters.
Choosing the right Incoterm means better cost control, clearer responsibility, and fewer disputes.
