An Introduction To Incoterms - Shipping Solutions

A SHIPPING SOLUTIONS® GUIDE
An Introduction To
Incoterms® 2020 Rules
Shipping Solutions
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Incoterms are a registered trademark of the International Chamber of Commerce.
Introduction
If you ship goods domestically, you may wonder why you need to know the international shipping
terms known as Incoterms 2020 rules as well. FOB is FOB, isn’t it?
Well, actually, no—it’s not!
While the vast majority of companies in the United States use the shipping terms identified under
the U.S. Uniform Commercial Code (UCC) when shipping domestically, these shipping terms
aren’t appropriate to use when exporting.
Domestic shippers often use a variation of the term FOB, for instance, which implies one set
of responsibilities for the shipper under the UCC but something entirely different under the
Incoterms 2020 rules, which is what most of the rest of the world relies upon. Using FOB for your
international shipment might cost you a lot more money—and put you at much greater risk—than
you ever expected.
In this white paper, we’ll look in-depth at Incoterms 2020: what they are and how they originated,
how to apply them, how exporters and importers benefit from them, and why they matter.
Table of Contents
What are Incoterms 2020 Rules? Page 5
The Origin of Incoterms Page 5
Incoterms 2020 Rules Page 6
Incoterms 2020 Definitions Page 7
a Incoterms for Any Mode of Transport Page 8
i EXW (Ex Works) Page 8

ii FCA (Free Carrier) Page 10
iii CPT (Carriage Paid To) Page 13
iv CIP (Carriage and Insurance Paid To) Page 14
v DAP (Delivered At Place) Page 15
vi DPU (Delivered At Place Unloaded) Page 16
vii DDP (Delivered Duty Paid) Page 17
b Incoterms for Sea and Inland Waterway Transport Page 18
i FAS (Free Alongside Ship) Page 18

ii FOB (Free On Board) Page 19
iii CFR (Cost and Freight) Page 21
iv CIF (Cost, Insurance & Freight) Page 22
Indicating Incoterms 2020 Rule Usage & Using Incoterms for Domestic Sales Page 23
The Importance of Incoterms 2020 Page 24
Resources Page 24
What Are Incoterms
2020 Rules?
Incoterms 2020 rules are the official terms published by the International Chamber of Commerce
(ICC). They are a voluntary, authoritative, globally-accepted, and adhered-to text for determining
the responsibilities of buyers and sellers for the delivery of goods under sales contracts for
international trade. Incoterms closely correspond to the U.N. Convention on Contracts for the
International Sales of Goods. Incoterms are known and implemented by all major trading nations.
Incoterms are only part of the whole export contract. They don’t say anything about the price
to be paid or the method of payment that is used in the transaction. Furthermore, Incoterms
2020 rules don’t deal with the transfer of ownership of the goods, breach of contract, or product
liability; all of these issues need to be considered in the contract of sale. Also, Incoterms 2020
rules can’t override any mandatory laws.
The Origin of Incoterms

Differences in trading practices and legal interpretations between traders of different countries
necessitated a need for a common set of rules. These rules needed to be easy to understand by all
of the participants in order to prevent misunderstandings, disputes and litigation.
Incoterms were first created in 1936 and were designated Incoterms 1936. Since then, Incoterms
have evolved into a codified worldwide contractual standard. They are periodically updated as
events in international trade occur and require attention. Amendments and additions were made
in 1953, 1967, 1976, 1980, 2000, 2010 and 2020.
Incoterms 2020 Rules
The most current revision of the terms, Incoterms 2020, went into effect on January 1, 2020, and
consists of 11 Incoterms.
The changes from the Incoterms 2010 rules include the following:
The most obvious change is renaming the term Delivered at Terminal (DAT) to
Delivered at Place Unloaded (DPU).
The most significant change relates to the term Free Carrier (FCA). Under this
term, the buyer can now instruct its carrier to issue a bill of lading with an on-
board notation to the seller so that they may satisfy the terms of a letter of credit.
Under the revised term CIP, the seller is now responsible for purchasing a higher
level of insurance coverage—at least 110% of the value of the goods as detailed
in Clause A of the Institute Cargo Clauses. The insurance requirement hasn’t
changed for CIF.
Incoterms 2020 rules recognize sellers who may use their own transport to
deliver the goods. The terms now expressly state that sellers can make a contract
for carriage or simply arrange for the necessary transportation.
Incoterms 2020 rules now specifically call out the import and export security
requirements and identify whether the buyer or seller is responsible for meeting
those requirements.
While you can still use previous versions of Incoterms rules, like Incoterms 2010, it’s not preferred.
In any case, you must clearly state which version Incoterms you’re using and make sure the rule is
correctly noted throughout your export documents.
Incoterm 2020 Definitions
Because each of the different Incoterms identify the responsibilities of the seller and the buyer
in the transaction at different points in the shipping journey, certain Incoterms work better for
certain modes of transportation.
Each of the 11 Incoterms is summarized below based on the mode of transport. For a more
complete list of the responsibilities for each of the terms, you should get a copy of ICC’s
Incoterms® 2020 book.
Incoterms® 2020 Rules

Chart of Responsibilities and transfer of risk
Any Transit Mode Sea/Inland Waterway Transport Any Transport Mode
EXW FCA FAS FOB CFR CIF CPT CIP DAP DPU DDP
Free Free Cost Carriage Delivered Delivered Delivered

Free On Cost & Carriage
Ex Works Carrier Alongside Insurance Insurance at Place at Place Duty Paid
Board Freight Paid To
Ship & Freight Paid To Unloaded
At Named
At Buyer’s On Buyer’s Alongside On Board On Board On Board At Named At Named
Transfer of Risk At Carrier At Carrier Place
Disposal Transport Ship Vessel Vessel Vessel Place Unloaded Place
Charges/Fees
Packaging Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Loading Charges Buyer Seller* Seller Seller Seller Seller Seller Seller Seller Seller Seller
Delivery to Port/
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Place
Export Duty, Taxes

Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
& Security Clearance
Origin Terminal
Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
Charges
Loading on Carriage Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller
Carriage Charges Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller
Insurance Seller Seller
Destination Terminal
Buyer Buyer Buyer Buyer Buyer Buyer Buyer** Buyer** Seller Seller Seller
Charges
Delivery to
Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller
Import Duty, Taxes

& Security Clearance Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller
SHIPPING SOLUTIONS ®
Export Documentation and Compliance Software ®
COPYRIGHT © 2020, INTERMART , INC. ALL RIGHTS RESERVED.
INTERMART, SHIPPING SOLUTIONS AND THE SHIPPING SOLUTIONS LOGO ARE
1.888.890.7447 www.shippingsolutions.com [email protected] REGISTERED TRADEMARKS OF INTERMART, INC. INCOTERMS IS A REGISTERED
This chart is designed to provide a basic level of understanding of Incoterms ® 2020 Rules published by the International Chamber of TRADEMARK OF THE INTERNATIONAL CHAMBER OF COMMERCE.
Commerce (ICC). For a more detailed explaination, visit the ICC website.
* Seller is responsible if term is FCA at seller's facility.

Any Transit Mode
** If seller incurs costs under its contract of carriage, seller cannot recover the costs from the buyer without buyer's agreement.
Download a free copy of the Incoterms 2020 Chart of Responsibilities and Transfer of Risk.
Incoterms for Any
Mode of Transport
The ICC has divided the 11 Incoterms into those that can be used for any mode of transportation,
and those that should only be used for transport by “sea and inland waterway.” That’s because
companies were too often choosing Incoterms where risk and responsibilities transferred at a
point that made no sense in a non-ocean journey.
Under Incoterms 2020, the following terms can be used for any mode of transport: Ex Works,
Free Carrier, Carriage Paid To, Carriage Insurance Paid To, Delivered at Place, Delivered at Place
Unloaded, and Delivered Duty Paid.
Ex Works (EXW)
Under the Incoterms 2020 rules, EXW means the seller has fulfilled its obligation when the
goods are made available to the buyer, usually at the seller’s location. The seller should package
the goods appropriately or as specified in the agreement between both parties. The buyer is
responsible for loading the goods on their transport and everything else necessary to get the
goods to the final destination.
The risk or liability for the goods transfers from the seller to the buyer when the goods are
made available at the named place. That means that if damage occurs while the goods are
being loaded on the buyer’s transport, the buyer is at risk even if the seller is assisting with the
loading. Precautions should be taken.
Ex Works and Routed Export Transactions
Although the U.S. Foreign Trade Regulations (FTR) don’t reference Incoterms and the
Incoterms 2020 rules don’t reference any countries’ specific trade regulations, Ex Works is the
trade term that is often used during a routed export transaction.
According to the FTR, a routed export transaction occurs when the foreign buyer of the goods
contracts with a freight forwarder or other agent to export the merchandise from the United
States. That arrangement works with the Incoterm EXW, although it could work with other
terms, namely FCA (Free Carrier).
Sellers in the United States often choose EXW because they think it minimizes their
responsibilities and risk. However, under the FTR and the Export Administration Regulations
(EAR), they do not escape their responsibilities for export compliance and the requirement
that they provide required data elements to the buyer’s agent (usually a freight forwarder)
that has been authorized to submit the electronic export information through AESDirect. (See
the article, Why I Hate Routed Export Transactions.)
Using Ex Works
Although EXW is frequently used for exports from the United States, it is almost universally
reviled by those who make a living at training others about the use of Incoterms. In most
cases, FCA would be a better alternative for these folks, although one of the four C-terms—
Cost & Freight (CFR), Cost Insurance & Freight (CIF), Carriage Paid To (CPT), and Carriage
Insurance Paid To (CIP)—may be even better yet if the seller wants to handle international
transportation.
For sellers, using EXW means they give up control of the goods almost immediately at the risk
that export controls aren’t being followed or that the goods never actually leave the country.
Some companies insist they use EXW because they want to be able to recognize the revenue
for the sale immediately. However, the ICC’s Incoterms 2020 book clearly states that the
recognition of revenue is independent of any Incoterm rule:
Perhaps most importantly, it must be stressed that the Incoterms

rules do NOT deal with the transfer of property/title/ownership of
the goods sold. These are matters for which the parties need to
make specific provisions in the contract of sale.
For the buyer, using EXW means they not only have to deal with a foreign country’s export
requirements, they have to arrange to have the goods loaded on a carriage from the seller’s
location or other named place.
Free Carrier (FCA)

Under the Incoterms 2020 rules, FCA means the seller loads the goods on the buyer’s transport at
the seller’s premises, or the seller delivers them to another named place.
Most often, the buyer hires a transport that picks up the goods at the seller’s warehouse. The
seller must load the goods on the buyer’s transport, at which point the risk for the goods transfers
to the buyer.
Alternatively, the seller and buyer may agree that the seller transport the goods to a place
other than the seller’s warehouse, like the freight forwarder’s warehouse or the carrier’s
terminal. The risk or liability for the goods transfers from the seller to the buyer when the
goods are made available at the named place. In this case, the buyer is responsible for
unloading the goods from the seller’s transport.
In both cases, the seller should package the goods appropriately or as specified in the
agreement between both parties. In addition, the seller is responsible for export clearance.
Free Carrier and Routed Export Transactions
Most Incoterms experts argue that FCA is the best Incoterm to use when the buyer is arranging
the main carriage of the goods, which means the international transportation. It is certainly
the most commonly used Incoterm.
Sellers often choose this term because they think it minimizes the amount of effort on their
part. Some buyers love to use this term, because everyone in the transportation process is
working for them and they have more control.
FCA is certainly a better option than Ex Works, which many U.S. companies like to use, but it
puts responsibility for export clearance on the seller. That’s not necessarily a bad thing even
though it can put the use of FCA in conflict with the U.S. Foreign Trade Regulations (FTR).
The FTR calls exports where the buyer arranges the international transportation a routed
export transaction and requires the buyer to give written authorization for the Electronic
Export Information (EEI) filing through AESDirect to a U.S. party.
To comply with the obligations assigned under both Incoterm 2020 FCA and the Foreign Trade
Regulations, the buyer should provide written authorization to the seller to submit the EEI.
For the seller, this gives them access to transportation information they may not otherwise be
privy to if they weren’t doing the filing.
Free Carrier and Bills of Lading
The most significant change in Incoterms 2020 rules relates to FCA. Under this term, the buyer
can now instruct its carrier to issue a bill of lading with an on-board notation to the seller so
that the seller may satisfy the terms of a letter of credit.
Under an F-group rule, the “at a named place” is on the seller’s side, but the buyer hires the
main carrier and freight forwarder. The seller does not control shipments under the F term, so
the freight forwarder and carrier have no obligation to the seller.
This has caused problems in the past when selling under a letter of credit, because
international carriers would have no reason to provide the bill of lading to the seller who
would typically need it to get paid under a letter of credit.
The FCA Incoterms 2020 rule provides a potential solution—the buyer and seller may agree in
the sales contract that the buyer must instruct the carrier to provide the seller with an on-
board transportation document.
While the buyer may instruct the carrier to provide the required bill of lading to the seller,
there is no guarantee the carrier will comply. Even if they do, they will not issue the document
before the goods are actually loaded, which may cause delays for the seller to get paid under
the letter of credit.
Using Free Carrier
As mentioned above, FCA is generally considered the best F-group Incoterm to use. However,
those same experts will usually say FCA has some definite downside for exporters:
There are some challenges of utilizing a letter of credit under FCA as described above.
The seller may not be familiar with the freight forwarder being used.
There is potential for diversion of the goods before they leave the United States
or to another county in violation of the Export Administration Regulations (EAR)
after they leave the U.S.
Carriage Paid To (CPT)
Under the Incoterms 2020 rules, CPT means the seller is responsible for clearing the goods for
export and delivering them to the first carrier or another person stipulated by the seller at a
named place of shipment, at which point risk transfers to the buyer. The seller is responsible for
the transportation costs associated with delivering goods to the named place of destination,
which is always on the buyer’s side.
Since this is a standard export transaction, the seller or its agent is responsible for submitting the
Electronic Export Information (EEI) through AESDirect on the ACE portal if such a filing is required.
Using Carriage Paid To
With all of the C-group terms, including CPT, the seller is responsible for contracting
international transportation. The named place where the transfer of responsibility occurs is
always on the buyer’s side. Since liability for the goods transfers once the seller delivers the
goods to the carrier, the buyer has responsibility for goods they don’t control.
For these reasons, exporters often like to use C-group terms while buyers may not.
Carriage and Insurance Paid To (CIP)
Under the Incoterms 2020 rules, CIP means the seller is responsible for delivering goods to the first
carrier or another person stipulated by the seller at a named place of shipment, at which point risk
transfers to the buyer. The seller is responsible for the transportation costs and insurance associated
with delivering goods at least to the named place of destination, which is always on the buyer’s side.
CIP is one of only two Incoterms 2020 rules that identify which of the parties must purchase
insurance (the other being Cost, Insurance and Freight).
With the release of the Incoterms 2020 rules, the amount of insurance required under CIP has
increased to at least 110% of the value of the goods as detailed in Clause A of the Institute Cargo
Clauses rather than the lower level provided under Clause C, which is what was required for
CIP in the 2010 rules and still is required for CIF. This is because CIP is most commonly used for
manufactured goods with higher value than the commodity goods more typically shipped under CIF.
Using Carriage and Insurance Paid To
With all of the C-group terms, including CPT, the seller is responsible for contracting
international transportation. CPI adds the additional responsibilities of purchasing insurance.
The named place where the transfer of responsibility occurs is always on the buyer’s side.
Experienced exporters often like to use CIP because everyone in the international transport
works for them yet risk transfers to the seller as soon as the goods are provided to the carrier.
Delivered at Place (DAP)

Under the Incoterms 2020 rules, DAP means the seller is responsible for all charges and risks in
transit until the goods reach their named destination on the buyer’s side, at which point the risk
transfers to the buyer. Cost and risk transfers from seller to buyer simultaneously at the point
the goods are available for unloading; the buyer is responsible for all costs and risks associated
with unloading the goods and clearing customs to import the goods into the named country of
destination.
Using Delivered At Place
When using DAP, it’s important the buyer and seller identify the destination precisely, because
both risk and cost transfer at this point. Under this Incoterm, the seller is not required to
unload goods unless specified. However, if the seller’s contract of carriage includes unloading
the goods at the place of delivery, they may not recover that cost from the buyer unless
agreed upon by the buyer.
Delivered at Place Unloaded (DPU)
Previously named Delivered at Terminal (DAT) under the Incoterms 2010 rules, this Incoterm has
been renamed Delivered at Place Unloaded because the buyer and/or seller may want the delivery
of goods to occur somewhere other than a terminal, such as a construction site. Though it is the
most obvious change to Incoterms from the 2010 to the 2020 rules, it is not the most significant.
Under the Incoterms 2020 rules, DPU means the seller is responsible for clearing the goods for export
and bears all risks and costs associated with delivering the goods and unloading them at the named
port or place of destination. The buyer is responsible for all costs and risks from this point forward,
including clearing the goods for import at the named country of destination.
Using Delivered At Place Unloaded
This term is often used for consolidated containers with multiple consignees, and it is the only term
that tasks the seller with unloading the goods. This is because if a delivery has multiple consignees,
the seller can break down the shipment to make the goods available for them. Also, if items require
additional or special handling the seller agrees to be responsible for, they should select this term.
With DPU, sellers should be sure they have engaged someone at the destination to handle the goods
to unload them. If they don’t want to be responsible for this step, they should use the DAP instead.
Delivered Duty Paid (DDP)
Under the Incoterms 2020 rules, DDP puts the maximum risk and responsibility on the seller. It
requires the seller take responsibility for clearing the goods for export including the EEI filing, bear
all risks and costs associated with delivering the goods, unload goods at the terminal at the named
port or place of destination, clear the goods for import clearance and payment, and bring the goods
to the place of destination. Risk transfers to the buyer at the destination, so it should be stated
clearly and precisely.
Using Delivered Duty Paid
DDP is an extremely risky term for the seller. With DDP, the seller is obliged to clear the goods for
both export and import, to pay all import duties as well as required VAT and other taxes, and to
execute all customs formalities.
Sellers may not understand the complex and bureaucratic import clearance procedures that exist in
some countries. They may not know how to hire a reputable and competent customs broker in the
destination country. They may not know the current import duty rates for their goods or be aware
if those duty rates change. In addition, fulfilling the obligations under DDP may make the seller’s
company register in the country of import and may require them to pay corporate income tax.
DDP also has questionable value to importers, since the likelihood of timely delivery of goods
depends on the seller successfully navigating the intricacies of the destination country. Exceptions
that might make DDP an acceptable Incoterms 2020 rule to use include shipments of replacement
parts, low-value shipments, free samples, and product literature or other marketing materials.
Incoterms for Sea and
Inland Waterway
Transport
The ICC has divided the 11 Incoterms into those that can be used for any mode of transportation
and those that should only be used for transport by “sea and inland waterway.” That’s because
companies were too often choosing Incoterms where risk and responsibilities transferred at a
point that made no sense in a non-ocean journey.
Under Incoterms 2020, the following terms should only be used for sea and inland waterway
transport: Free Alongside Ship, Free On Board, Cost & Freight, and Cost, Insurance & Freight.
Free Alongside Ship (FAS)

Under the Incoterms 2020 rules, FAS means the seller has fulfilled its obligation when the goods
are made available alongside the vessel (for example, a quay or barge) nominated by the buyer
at the named port of shipment. The buyer is responsible for loading the goods on their transport
and everything else necessary to get the goods to the final destination.
The risk or liability for the goods transfers from the seller to the buyer when the goods are
alongside the ship, and the buyer bears costs from that point forward.
Using Free Alongside Ship
FAS is normally used only in a few instances with bulk cargo, such as oil or grain. Except for a few
undeveloped or small ports, rarely will you have access to drop things off right at the side of a ship.
Free on Board (FOB)

Under the Incoterms 2020 rules, FOB means the seller has fulfilled its obligation when the goods
are loaded on the vessel nominated by the buyer at the named port of shipment. With FOB, the
seller is responsible for loading the goods on the transport, while the buyer is responsible for
everything else necessary to get the goods to the final destination.
The risk or liability for the goods transfers from the seller to the buyer when the goods are on
board the vessel, and the buyer bears costs from that point forward.
Using Free On Board
Because the seller is responsible for the goods until they are loaded on the vessel, they need to ensure
the goods arrive at the vessel. Since most goods are now delivered to container yards rather than right
to a particular vessel, FOB is normally used only in a few instances with containers at smaller ports.
If FOB is the agreed upon term, both buyer and seller must agree upon exactly what “loaded on board”
means in the sales contract, because it can vary for different types of vessels and commodities.
Incoterms vs. Uniform Commercial Code
Companies in the United States that are new to exporting and importing often get tripped up with
the use of Incoterms for their international transactions after years of using traditional domestic
terms of sale that usually include some variation of FOB, such as FOB Origin or FOB destination.
These terms establish the contractual rights and responsibilities between a buyer and seller for
delivery, risk of loss, title, and payment of freight charges. The definition of these terms, as well as a
few others, derive from a combination of (1) the provisions of the Uniform Commercial Code, Article
2 (the UCC), (2) the National Motor Freight Classification (NMFC), and (3) industry usage.
When it comes to international trade, however, companies using best practices will switch
to Incoterms 2020 rules in quotations, purchase orders, contracts, commercial invoices, and
other commercial documentation when dividing the responsibilities for risk transfer, costs and
responsibility for carrier selection between the buyer and the seller.
In the case of FOB, it’s common for shippers to use this trade term for their domestic shipments. It’s
not common, and frequently not appropriate, to use FOB for international shipments.
Cost and Freight (CFR)
Under the Incoterms 2020 rules, CFR means the seller has fulfilled its obligation when the goods are
delivered and loaded on the vessel they’ve nominated at the named port of shipment.
The risk or liability for the goods transfers from the seller to the buyer as soon as the goods are loaded
on board the vessel before carriage takes place, and the buyer bears costs from that point forward.
Using Cost and Freight
With all of the C-group terms, including CFR, the seller is responsible for contracting
always on the buyer’s side.
Although buyers and less experienced exporters may prefer an F-group term, C-group terms
are preferable to more experienced exporters, because they allow you to deal directly with
the carrier; documentation, bills of lading, and all the information needed for letters of credit
originate from a single place. Additionally, using C-group terms allows you more negotiation
power, especially if you book a lot of freight.
That being said, like all four of the Incoterms 2020 rules designed for sea and inland waterway
transport, CFR is best used in situations where sellers have direct access to the vessel for
loading, i.e. bulk cargo or non-containerized goods. For most exports, Carriage Paid To (CPT)
might be a better Incoterms choice.
Cost, Insurance, and Freight (CIF)
Under the Incoterms 2020 rules, CIF means the seller is responsible for loading properly packaged
goods on board the vessel they’ve nominated, cost of carriage to the named port of destination on
the buyer’s side, and insurance to that point. CIF is one of only two Incoterms 2020 rules that identify
which of the parties must purchase insurance.
Unlike the Incoterms 2020 change to the term Carriage and Insurance Paid To (CIP), which increases
the amount of insurance coverage required on the goods, CIF maintains that the minimum level
of coverage identified by Clause C of the Institute Cargo Clauses is enough. That’s because CIF is
generally used in shipments of lower-value goods than CIP.
In both cases—CIF and CIP—the insurance should cover, at a minimum, 110% of the value of the
goods as provided in the sales contract. The insurance should cover the goods at least to the point of
delivery.
The risk or liability for the goods transfers from the seller to the buyer as soon as the goods are loaded
upon the vessel before the international carriage takes place.
Using Cost, Insurance and Freight
With all of the C-group terms, including CIF, the seller is responsible for contracting
always on the buyer’s side.
Although buyers and less experienced exporters may prefer an F-group term, C-group terms
are preferable to more experienced exporters. These terms allow you to deal directly with
the carrier; documentation, bills of lading, and all the information needed for letters of credit
originate from a single place. Additionally, using C-group terms gives you more negotiation
power, especially if you book a lot of freight.
That being said, like all four of the Incoterms 2020 rules designed for sea and inland waterway
transport, CIF is best used in situations where sellers have direct access to the vessel for
loading, i.e., bulk cargo or non-containerized goods. For most exports, Carriage Paid To (CPT)
might be a better Incoterms choice.
Indicating Incoterms
2020 Rule Usage
If parties want Incoterms 2020 rules to apply, the best way to make that clear in their sales
contracts and on their export paperwork is as follows:
“[the chosen incoterms rule], [named port, place, or point] Incoterms 2020”.
CIF, Shanghai, Incoterms 2020, or
DAP, No. 123, ABC Street, Importland, Incoterms 2020
Using Incoterms for

Domestic Sales
Because they use Incoterms for international sales, some companies have started using Incoterms
for their domestic sales as well instead of using the Uniform Commercial Code (UCC) terms. This is
perfectly acceptable as long as their contracts identify what set of terms they’re using.
The Importance of
Incoterms 2020 Rules
By correctly using Incoterms, you’ll be able to partner more harmoniously, transport and deliver
your goods more easily, and get paid more quickly. And who doesn’t want that?
Each Incoterms 2020 rule provides exporters and importers clear, succinct rules that help them
understand their responsibilities, clarify any gray areas in contracts, and save a lot of headaches
when used correctly. Incoterms reduce the risk of legal complications by giving buyers and sellers
a single home base from which to reference trade practices.
Resources
With the changes in Incoterms 2020 rules, you may be looking for more resources. We can help!
Get a copy of ICC’s Incoterms® 2020 Rules book.
For a more detailed understanding of which term or terms your company should
be using in your international transactions, register for an Incoterms® 2020 Rules
seminar or webinar offered by International Business Training. If you don’t want
to attend a half-day class, you can get the book provided at these seminars and
webinars: Incoterms® 2020 for Importers and Exporters.
Shipping Solutions® export documentation and compliance software helps ensure you have
included all the required information, including your Incoterms 2020 rule of choice and the
proper Incoterms citation on your export paperwork. Let us show you how easy it is to use.
Register today for a free online demo of the software. There’s absolutely no obligation.

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A SHIPPING SOLUTIONS® GUIDE

Well, actually, no—it’s not!

The Origin of Incoterms Page 5

Incoterms 2020 Rules Page 6

Incoterms 2020 Definitions Page 7

a Incoterms for Any Mode of Transport Page 8

i EXW (Ex Works) Page 8

b Incoterms for Sea and Inland Waterway Transport Page 18

i FAS (Free Alongside Ship) Page 18

The Importance of Incoterms 2020 Page 24

The Origin of Incoterms

Incoterms® 2020 Rules

Free Free Cost Carriage Delivered Delivered Delivered

Export Duty, Taxes

Insurance Seller Seller

Import Duty, Taxes

* Seller is responsible if term is FCA at seller's facility.

Ex Works and Routed Export Transactions

Perhaps most importantly, it must be stressed that the Incoterms

Free Carrier (FCA)

Free Carrier and Routed Export Transactions

Using Free Carrier

Using Carriage Paid To

Using Carriage and Insurance Paid To

Delivered at Place (DAP)

Using Delivered At Place

Using Delivered At Place Unloaded

Using Delivered Duty Paid

Free Alongside Ship (FAS)

Free on Board (FOB)

Using Free On Board

Using Cost and Freight

Using Cost, Insurance and Freight

CIF, Shanghai, Incoterms 2020, or

DAP, No. 123, ABC Street, Importland, Incoterms 2020

Using Incoterms for

Get a copy of ICC’s Incoterms® 2020 Rules book.

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