Incoterms® define who pays, who insures, and where risk transfers between buyer and seller. Use this guide to align responsibilities, control costs and avoid disputes.
Incoterms® define who pays, who insures, and where risk transfers between buyer and seller. Use this guide to align responsibilities, control costs and avoid disputes.
Incoterms® (International Commercial Terms) are globally recognised rules that define the obligations, costs and risk transfer between buyers and sellers in international trade.
Instead of negotiating responsibilities from scratch, both parties agree on a single three-letter term like FOB or CIF that already specifies who arranges freight, who insures the shipment, and the point where risk shifts from seller to buyer.
Incoterms® are not a substitute for a full sales contract and must be referenced clearly, e.g. “FOB Mumbai Port, Incoterms® 2020”.
IMPORTANCE
Clear responsibilities reduce disputes, hidden costs and operational delays at origin or destination.
Clarity
Incoterms® clearly define who handles each stage of the shipment.
Risk control
Correctly applied terms prevent delays, duplicated effort and surprise charges.
Transport Modes
Some Incoterms apply to all modes, while others are sea-only.
Choosing the right term for your mode avoids compliance gaps and insurance mismatches.
See all terms →
Trade Flow
Understand where risk transfers to avoid grey areas in your contract.
Incoterms® are grouped by how responsibilities are shared between seller and buyer and which transport modes they apply to.
| Term | Stands For | Meaning (Simplified) |
|---|---|---|
| EXW | Ex Works | Seller makes goods available at their premises. Buyer takes on almost all costs and risks from that point onward, including export formalities (unless otherwise agreed). |
| Term | Stands For | Meaning (Simplified) |
|---|---|---|
| FCA | Free Carrier | Seller delivers goods to a carrier or place nominated by buyer. Risk transfers at the delivery point. Suitable for all modes, including containerised shipment. |
| FAS | Free Alongside Ship | Seller delivers goods alongside the vessel at the loading port. Buyer is responsible from that point onward. Used for non-containerised sea shipments. |
| FOB | Free On Board | Seller delivers and loads goods on board the vessel at the loading port. Risk transfers once shipment is on board. Traditionally used for sea freight (non-container). |
| Term | Stands For | Meaning (Simplified) |
|---|---|---|
| CFR | Cost and Freight | Seller pays cost and freight to destination port, but risk transfers once goods are loaded on the vessel at origin. Sea/inland waterway only. |
| CIF | Cost, Insurance & Freight | Same as CFR, but seller must also provide minimum insurance for buyer’s benefit. Still, risk transfers at origin once goods are on board. |
| CPT | Carriage Paid To | Seller pays freight to a named destination. Risk transfers to the buyer when goods are handed to the first carrier. Used for all modes. |
| CIP | Carriage & Insurance Paid To | Same as CPT, but seller must also arrange insurance. Under Incoterms® 2020, CIP typically requires higher insurance cover than CIF. |
| Term | Stands For | Meaning (Simplified) |
|---|---|---|
| DAP | Delivered At Place | Seller delivers goods ready for unloading at the named place of destination. Buyer handles import customs clearance, duties and taxes. |
| DPU | Delivered at Place Unloaded | Seller delivers and unloads goods at the named place of destination. Buyer handles import formalities. This is the only Incoterm where seller must unload. |
| DDP | Delivered Duty Paid | Seller bears almost all responsibilities and costs, including import clearance, duties and taxes at destination. Maximum seller obligation. |
Legacy terms: Older versions (DAF, DES, DEQ, DDU) were replaced in later revisions. Always reference Incoterms® 2020 explicitly in contracts.
Reduce risk by choosing the right term and naming the correct place or port.
We help you map responsibilities clearly so your contracts, documentation and execution stay aligned across buyers, sellers, carriers and customs.
Use these tools with the right Incoterm to plan accurate costs and timelines.
Straight answers to common trade-term questions.
Incoterms® are not laws, but contract standards. They are binding only when referenced in an agreed sales contract.
No. Incoterms® cover delivery, risk and cost allocation—not payment terms such as LC or advance payment.
The right term depends on your control over logistics, trade experience, and compliance requirements in each country.
Share your trade lane, shipment type and current commercial terms — we’ll map responsibilities clearly.
Get Expert Guidance Contact Amigo Logistics