International Commercial Terms (Incoterms), published by the International Chamber of Commerce (ICC), are the universally recognized rules that dictate who is responsible for the cost, risk, and logistics of an international shipment. When you agree to a specific Incoterm in a purchase order, you legally define exactly when the financial burden and physical liability transfer from the seller to the buyer.
The current standard is Incoterms® 2020, which categorizes the 11 rules into two distinct groups based on the mode of transport.
Here is the complete compilation of all 11 Incoterms. If you only need the three that matter most for e-commerce, start with our guide to EXW, FOB and DDP.
Category 1: Universal Incoterms (For Any Mode of Transport)
These seven terms can be used regardless of how the cargo is moving (air, ocean, rail, or truck), making them the most versatile options for modern, multi-modal supply chains.
1. EXW (Ex Works)
- The Breakdown: The seller’s only responsibility is to package the goods and make them available for pickup at their own facility (factory or warehouse).
- Who pays for what: The buyer takes on 100% of the cost and risk. The buyer must arrange origin pickup, export customs clearance, main transit, import customs, duties, and final delivery.
- Best For: Buyers who have a highly capable global freight forwarder and want absolute, granular control over every logistical cost from the factory floor to their own warehouse.
2. FCA (Free Carrier)
- The Breakdown: The seller clears the goods for export and delivers them to a named carrier or facility chosen by the buyer (like an airport terminal or a forwarder’s origin warehouse).
- Who pays for what: The seller pays for origin trucking and export clearance. The moment the goods are handed over at the named origin facility, all risk and main transit costs transfer to the buyer.
- Best For: The ICC’s recommended term for air freight and for containerized sea freight, where FOB is often used out of habit. It forces the seller to handle complex export paperwork in their own country while giving the buyer control over the main transit.
3. CPT (Carriage Paid To)
- The Breakdown: The seller clears the goods for export and pays the freight costs to transport the goods to a named destination (like the buyer’s local airport).
- Who pays for what: The seller pays for the main freight. However, the risk transfers to the buyer the moment the seller hands the goods to the very first carrier at the origin. The buyer pays for import customs and duties, and should arrange their own cargo insurance, since the risk is already theirs for the main journey.
4. CIP (Carriage and Insurance Paid To)
- The Breakdown: Identical to CPT, with one major addition: the seller must also purchase comprehensive all-risk cargo insurance.
- Who pays for what: The seller pays for the freight and the insurance policy. The risk still legally transfers to the buyer when the goods are handed to the first carrier, but the buyer is protected by the seller’s insurance policy.
5. DAP (Delivered at Place)
- The Breakdown: The seller handles the logistics all the way to the final destination (usually the buyer’s warehouse). The goods are delivered on the arriving truck, ready for unloading.
- Who pays for what: The seller pays for origin handling, main freight, and delivery to the destination. The buyer is responsible for unloading the goods and paying for all import customs clearance and duties. In retail parcel shipping this is the “duties unpaid” model, which is why many stores now ship DDP instead.
6. DPU (Delivered at Place Unloaded)
- The Breakdown: The only Incoterm where the seller is responsible for physically unloading the goods at the final destination. (This replaced the old DAT term).
- Who pays for what: The seller pays for all freight, delivery, and the labor/machinery to unload the goods. The buyer is only responsible for import customs clearance and duties.
7. DDP (Delivered Duty Paid)
- The Breakdown: The exact opposite of EXW. The seller assumes maximum responsibility, handling the entire journey from their factory to the buyer’s door.
- Who pays for what: The seller pays for all origin costs, main freight, export/import customs clearance, all import duties, and final delivery.
- Best For: Inexperienced buyers, sample runs, or low-volume orders where frictionless delivery is preferred over cost optimization. (Not recommended for high-volume scaling, as sellers often hide heavy freight markups in the unit price).
Category 2: Sea and Inland Waterway Incoterms
These four terms are historically tied to maritime law and should only be used for sea and inland waterway transport. They revolve around the moment the goods are placed on board the vessel, or alongside it in the case of FAS. The ICC’s own guidance is that they suit goods loaded directly onto the ship, such as bulk cargo. For containers, which are handed over at a terminal and can sit there for days before loading, it recommends the any-mode equivalents instead, such as FCA in place of FOB.
8. FAS (Free Alongside Ship)
- The Breakdown: The seller clears the goods for export and delivers them directly next to the shipping vessel at the origin port (e.g., on the dock or a barge).
- Who pays for what: The seller pays for origin transit. The buyer pays for the physical loading of the cargo onto the ship, the ocean freight, and all subsequent costs.
- Best For: Rarely used for standard e-commerce containers; it is primarily used for heavy machinery, grain, or oversized cargo that requires specialized loading equipment.
9. FOB (Free on Board)
- The Breakdown: The seller handles all origin costs, export clearance, and the physical loading of the cargo onto the designated shipping vessel.
- Who pays for what: The risk and cost transfer to the buyer the moment the goods are safely loaded on board the ship. The buyer pays for the ocean freight, cargo insurance, import customs, duties, and final destination delivery.
- Best For: Still the most common term in practice for container imports, and the balance it strikes is real: the seller handles origin logistics while the buyer controls the main ocean freight rates. Strictly, though, the ICC recommends FCA for containers. The seller hands the container over at the terminal, often days before it is loaded, yet under FOB still carries the risk until it is on board.
10. CFR (Cost and Freight)
- The Breakdown: The seller clears the goods for export and pays the ocean freight to transport the goods to the destination port.
- Who pays for what: The seller pays the freight, but the risk transfers to the buyer the moment the goods are loaded onto the ship at the origin. The buyer is responsible for import customs and should buy their own marine insurance, since the risk is already theirs once the goods are on board.
11. CIF (Cost, Insurance, and Freight)
- The Breakdown: Identical to CFR, but the seller is required to purchase marine insurance to protect the goods during the ocean transit.
- Who pays for what: The seller pays for the freight and minimum-coverage insurance. The risk still transfers to the buyer at the origin port.
- Best For: Buyers who want the seller to manage the ocean freight booking. However, because CIF only requires minimum insurance coverage, buyers often prefer CFR so they can purchase a more comprehensive policy themselves.
Best Practices for Your Contracts
Whenever you utilize these terms in a purchase order or contract, always include the specific named place and the version of the rules to avoid legal ambiguity.
- Example format: [Incoterm] [Named Port/Place], Incoterms® 2020
- Proper usage: FOB Shanghai, Incoterms® 2020 or DAP 123 Main St, Los Angeles, CA, Incoterms® 2020