Incoterms 2020: From EXW to DDP Delivery Terms

Incoterms (International Commercial Terms) is a set of standard rules determined by the International Chamber of Commerce (ICC) that regulate the conditions of goods delivery in international trade. The 2020 version includes important updates to suit current trade practices.

What are Incoterms?

Incoterms rules determine:

• Place and time of goods delivery
• Transport responsibility
• Insurance obligation
• Point of risk transfer
• Cost sharing
• Document responsibility

Incoterms 2020 Rules

For All Modes of Transport (7 Rules)

1. EXW - Ex Works

Definition: Seller’s responsibility is at minimum, buyer picks up goods from seller’s premises.

Seller’s Responsibilities:

• Make goods available
• Package
• Assist with export procedures (upon request)

Buyer’s Responsibilities:

• All transport
• All risks
• Export and import customs procedures
• Insurance

When to Use:

• Domestic market sales
• When buyer has logistics experience

2. FCA - Free Carrier

Definition: Seller delivers goods to carrier at named place.

Risk Transfer:

• At seller’s premises: When loaded onto vehicle
• At another place: When made available to carrier

2020 Update:

• Bill of lading with “on board” notation can be obtained

3. CPT - Carriage Paid To

Definition: Seller pays freight to destination, risk transfers at delivery to first carrier.

Note:

• Risk and cost transfer points differ
• Insurance is buyer’s responsibility

4. CIP - Carriage and Insurance Paid To

Definition: CPT + Insurance

2020 Update:

• Minimum insurance level: ICC (A) - Full coverage

5. DAP - Delivered at Place

Definition: Seller delivers goods at destination ready for unloading.

Seller’s Responsibility:

• All risk and cost to destination
• Export customs procedures

Buyer’s Responsibility:

• Unloading
• Import customs procedures

6. DPU - Delivered at Place Unloaded

Definition: Replaced DAT. Seller delivers goods by unloading.

2020 Change:

• Delivery place can be anywhere, not just terminal

7. DDP - Delivered Duty Paid

Definition: Maximum responsibility for seller. Entire process with seller.

Seller’s Responsibilities:

• All transport and insurance
• Export and import customs procedures
• All taxes
• Door delivery

When to Use:

• If seller can handle import procedures
• Turnkey projects

For Sea and Inland Waterway Transport Only (4 Rules)

8. FAS - Free Alongside Ship

Definition: Goods are placed alongside ship at loading port.

9. FOB - Free On Board

Definition: Risk transfers when goods are loaded onto ship.

Most Used:

• Standard in sea trade
• Risk transfers at ship’s rail

10. CFR - Cost and Freight

Definition: Seller pays freight to destination port.

Note:

• Risk transfers at loading port
• Insurance is with buyer

11. CIF - Cost, Insurance and Freight

Definition: CFR + Insurance

2020 Update:

• Minimum insurance: ICC (C)

Selecting the Right Incoterms

Evaluation Criteria

1. Mode of Transport

   • Sea: FAS, FOB, CFR, CIF
   • Multimodal: Others

2. Risk Tolerance

   • Low risk: DDP, DAP
   • High risk: EXW, FCA

3. Logistics Experience

   • Experienced: EXW, FOB
   • Beginner: CIF, DDP

4. Cost Control

   • Cost-focused: FOB, FCA
   • Convenience-focused: CIF, DDP

Sector Recommendations

For Exporters:

• General: FCA or FOB
• If strong sales power: CIF or CIP

For Importers:

• If logistics expertise: FOB
• If seeking convenience: CIF or DAP

Common Mistakes

1. Using sea terms in multimodal transport

   • FOB not appropriate for container transport

2. Confusing risk and cost transfer points

   • In CIF, risk transfers at loading port

3. Confusing insurance responsibility

   • In FOB, insurance is buyer’s responsibility

4. Ignoring import taxes

   • In DDP, all taxes are with seller

Conclusion

Selecting the right Incoterms is critical for managing trade risks and optimizing costs. As Gökçe Trade, we help you determine the most appropriate delivery terms for your transactions.

Contact us for Incoterms consultancy.