Incoterms fix where risk and cost pass to the buyer, and in the four C rules they pass at different places
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The eleven Incoterms 2020 rules use three letters to settle delivery, risk, transport cost and customs. Ownership and payment are left to the sale contract.
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01 · The rule set
Eleven rules, one edition in force, split by type of transport
Incoterms are short trade terms that a buyer and a seller write into their sale contract. The say who does each task, who pays each cost, and when the goods become the buyer's risk. Here, risk means who bears the loss if the goods are lost or damaged.
The International Chamber of Commerce (ICC) publishes the rules. The current edition, , came into force on January 1, 2020. The ICC calls it the most recent version. As of September 30, 2026, the ICC's Incoterms pages announced no newer edition.
Incoterms 2020 has eleven rules: EXW, FCA, CPT, CIP, DAP, DPU, DDP, FAS, FOB, CFR and CIF, according to the ICC Incoterms 2020 page. The US International Trade Administration (ITA) sorts them by transport on its Know Your Incoterms page. Seven rules work for any type of transport. Four are only for goods moved by sea or inland waterway.
Each rule is followed by a or port, which says where delivery happens or where the goods are going. The ITA gives the pattern. FAS and FOB name the port of loading. CFR and CIF name the port of destination.
The first letter of each rule shows its family. In the E rule, the seller makes the goods available at its own place. In the F rules, the seller hands the goods to transport that the buyer arranged. In the C rules, the seller pays for the main transport. In the D rules, the seller delivers at the destination.
The rules are old. The ICC says they have been used in trade contracts since 1936. Its history page lists new editions in 1953, 1967, 1974, 1980, 1990, 2000, 2010 and 2020. The 2020 edition was launched in September 2019.
Figure 1 · Interactive
The Incoterms 2020 map
Tap a mode to filter. Each row shows where risk passes, where the seller's costs end, and who clears customs.
Sources: ICC, Incoterms 2020 page and Using the Incoterms 2020 rules to manage tariff risk, April 2025; ICC Academy, Place of delivery and place of risk transfer, July 31, 2025; US International Trade Administration, Know Your Incoterms. Table compiled by our Research Desk.
The risk and cost columns and the E, F, C and D groups are credited to ICC Academy (Peng Xianwei, July 31, 2025; Bob Ronai, March 26, 2020; Incoterms 2020: CFR or CIF?, August 21, 2024). Where the insurance column reads "No seller insurance obligation stated in the sources used", the sources we opened name no duty for the seller to insure. The full ICC rule text was not used.
02 · Risk
Risk moves to the buyer at delivery, and each rule puts delivery in a different place
Risk passes from seller to buyer at the moment of delivery. Bob Ronai makes this point in an ICC Academy article of March 26, 2020. So the key question for each rule is simple: where does delivery happen?
The ICC Academy sets out the answer for each rule. Under (Ex Works), risk passes when the seller puts the goods at the buyer's disposal at the named place, such as a factory or warehouse. Under (Free Carrier), there are two cases. At the seller's premises, risk passes when the goods are loaded onto the transport the buyer arranged. At another named place, it passes when the goods arrive there on the seller's transport, ready to unload.
Two sea rules use the buyer's ship. Under (Free Alongside Ship), risk passes when the goods are placed next to the vessel the buyer chose. Under (Free on Board), it passes when the goods are on board that vessel at the named port of shipment.
The C rules use the seller's transport. Under (Carriage Paid To) and (Carriage and Insurance Paid To), risk passes when the goods are handed to the the seller hired. Under (Cost and Freight) and (Cost, Insurance and Freight), it passes when the goods are on board the seller's vessel.
In the D rules, delivery and risk transfer happen at the named place of destination. The difference between two of them is unloading. Under (Delivered at Place), the seller does not unload the goods. Under (Delivered at Place Unloaded), it does, as the ICC states.
Figure 2 · Interactive
Where risk passes and where the seller's bill stops
Pick a rule. The step headed "Risk passes" marks where risk moves to the buyer; the dark step marks where the seller's costs end.
Steps are drawn from ICC Academy, Place of delivery and place of risk transfer, July 31, 2025, and ICC Academy, Insider thoughts: Bob Ronai on Incoterms 2020 Rules, March 26, 2020.
03 · Cost
Cost follows risk in seven rules, but in the four C rules the seller pays all the way to the destination
In most rules, the costs switch sides at the same point as the risk. In the E, F and D rules, any cost before delivery is the seller's and any cost after delivery is the buyer's, the ICC Academy explains.
The C rules work differently. The seller also pays to get the goods to their destination. But risk has already passed to the buyer, at handover to the carrier or on loading. So in the C rules, cost and risk pass at different places. The seller pays for the transport while the buyer bears the transport risk, as the ICC Academy puts it.
At the far end sits (Delivered Duty Paid). Here the seller pays all duties, taxes and import formalities in the buyer's country, according to the ICC's April 2025 guide, Using the Incoterms 2020 rules to manage tariff risk. The rules do not change tariff rates or customs procedures, the ICC notes on its page for the guide. They only decide whether the buyer or the seller handles them.
Figure 3 · Try it
Who pays what under each rule
Set the cost of each block and pick a rule. The split updates.
Incoterms 2020 rule
Seller pays
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Buyer pays, not counting optional insurance
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Seller / buyer split
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Formula: each block goes to the party the map in Figure 1 assigns. Export clearance goes to the seller except under EXW. Main carriage goes to the seller under the C and D rules. Insurance goes to the seller under CIP and CIF. Unloading goes to the seller under DPU. Import clearance and duty go to the seller under DDP. Under the other rules, insurance is left out of the buyer's total, since the sources used name no duty to buy it.
Our Research Desk allocated five cost blocks using the ICC allocation in the table above. Loading, pre-carriage and terminal charges are not modeled. Amounts are for illustration and are not Ossiano pricing.
This calculator explains the concept only. The contract of sale and the carriage contract set the actual split, and charges vary by port, carrier and customs regime.
04 · Customs and insurance
Only EXW puts export customs on the buyer, only DDP puts import customs on the seller, and CIF and CIP make the seller insure
Customs follows a simple pattern. means the customs steps to send goods out of the seller's country. The seller does it under every rule except EXW. means the customs steps, duties and taxes to bring goods into the buyer's country. The buyer does it under every rule except DDP.
Bob Ronai sets out this split for the ICC Academy. The ICC's tariff risk guide shows the same split in its tables.
CIF and CIP each carry an insurance duty for the seller. Under CIF, the seller must buy insurance cover for the buyer against loss of or damage to the goods, according to the ICC Academy. The ICC keeps (C) as the default level of that cover. These clauses are standard sets of cargo insurance terms. Under CIP, Incoterms 2020 requires a higher level of cover, in line with Institute Cargo Clauses (A) or similar.
CFR differs from CIF on insurance. Under CFR, the seller owes the buyer no duty to buy insurance cover, the ICC Academy notes.
05 · What changed in 2020
Incoterms 2020 renamed DAT and updated FCA for sea transport
The 2020 edition made two changes worth knowing. The old rule Delivered at Terminal (DAT) became Delivered at Place Unloaded (DPU). FCA was revised for goods sold FCA that travel by sea. Both changes are listed on the ICC Incoterms 2020 page.
06 · Limits
Incoterms stop at delivery, cost and customs; ownership, payment and documents sit in the contract
Incoterms leave three big questions open. The ITA lists them. The rules do not say when title passes. Title means legal ownership of the goods. The rules do not say how or when the buyer pays. And they do not list the documents the seller must provide for customs clearance in the buyer's country.
Those questions are settled in the sale contract, the payment terms and the trade documents. The ITA advises that, from January 1, 2020, all sales contracts should refer to the Incoterms 2020 rules. For how payment is secured, see our guides to letters of credit and the payment terms spectrum. For documents, see the trade documents checklist.
07 · Ossiano view
The rule on the contract tells a financier where the goods are at risk and who holds the insurance
OBSERVATION 01
The C-rule gap is where finance lives
Under CFR and CIF, the buyer carries the risk on the voyage while the seller pays the freight. So the buyer's financier is exposed from loading, before the goods arrive.
OBSERVATION 02
CIF and CIP set different insurance floors
The ICC keeps Institute Cargo Clauses (C) as the CIF default and asks for Clauses (A) or similar under CIP. So the insurance document behind a CIF sale and a CIP sale can carry different cover.
OBSERVATION 03
Ownership stays a separate question
The ITA states the rules do not settle when title passes. That is why the and the sale contract carry that weight. See our guides to the bill of lading and title and ownership in commodity trade.
Summary
Three letters settle delivery, risk, cost and customs; ownership and payment sit elsewhere
Incoterms 2020 has been in force since January 1, 2020. It has eleven rules: seven for any type of transport and four for sea and inland waterway. Risk passes from seller to buyer at delivery.
In the E, F and D rules, the seller pays the costs up to delivery. In the C rules, the seller also pays transport to the destination, even though risk passed earlier, at handover or loading.
The buyer clears exports only under EXW. The seller clears imports only under DDP. The rules do not say when ownership passes or how payment works.
Related guides: The bill of lading; The trade documents checklist; Title and ownership in commodity trade; Letters of credit; How LNG cargoes are financed. Instrument cards: Letter of credit (sight); Documentary collection, documents against payment (D/P); Trade credit insurance; Open account. Every term on this page is defined in the Trade Finance Glossary.
For questions on how these shifts affect existing or planned trade finance exposures, contact the Ossiano Research Desk.
Sources
- International Chamber of Commerce, Incoterms 2020, undated, accessed September 29, 2026. Supports: the eleven rules; use since 1936; eleven three-letter trade terms in effect from January 1, 2020; DAP versus DPU unloading; CIF insurance at Institute Cargo Clauses (C); CIP insurance at Institute Cargo Clauses (A) or similar; DAT renamed DPU; FCA revised for sea carriage.
- International Chamber of Commerce, Incoterms rules, undated, accessed September 29, 2026. Supports: Incoterms 2020 in force since January 1, 2020, the most recent version; no successor edition announced as of September 30, 2026.
- International Chamber of Commerce, Incoterms rules history, undated, accessed September 30, 2026. Supports: edition years 1936 to 2020; 2020 update launched September 2019.
- US International Trade Administration, Know Your Incoterms, undated, accessed September 30, 2026. Supports: seven rules for any mode and four for sea and inland waterway; named place or port for each rule; rules do not cover title, payment or customs documents; contracts should reference Incoterms 2020 from January 1, 2020.
- ICC Academy (guest post by Bob Ronai), Insider thoughts: Bob Ronai on Incoterms 2020 Rules; What are they about?, March 26, 2020. Supports: risk passes on delivery; cost split in E, F and D rules and in C rules; export and import formalities.
- ICC Academy (Peng Xianwei), Place of delivery and place of risk transfer, July 31, 2025. Supports: risk transfer points for EXW, FCA, FAS, FOB, CPT, CIP, CFR, CIF and the D rules; C rules split cost and risk; DPU unloading; DDP import clearance. Source of the Incoterms map in Figure 1.
- ICC Academy (Peng Xianwei), Incoterms 2020: CFR or CIF?, August 21, 2024. Supports: seller insures for the buyer under CIF; no seller duty to insure under CFR.
- International Chamber of Commerce, Using the Incoterms 2020 rules to manage tariff risk in international trade (PDF), April 2025. Supports: who handles export clearance, and who handles import clearance and tariffs, under each rule (page 2); DDP seller responsibility for duties, taxes and import formalities.
- International Chamber of Commerce, Using the Incoterms 2020 rules to manage tariff risk in international trade, April 24, 2025. Supports: the rules do not affect tariff rates or customs procedures.
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