| name | incoterms-2020 |
| description | Veteran reference for Incoterms 2020 in a sales context — all 11 terms, the cost vs risk transfer point of each, the who-pays-what responsibility matrix, the 7 any-mode vs 4 sea-only split, named-place discipline, and the recurring quoting traps (FCA vs FOB for containers, CIP vs CIF insurance, DDP duty/VAT exposure). Consulted by trade-lane-compliance-advisor. |
Incoterms 2020 Skill
Purpose: let trade-lane-compliance-advisor settle the Incoterm and named place before pricing, and explain the cost/risk split to a customer correctly. The Incoterm decides which charges from the surcharge stack land on the seller vs the buyer — get it wrong and the quote is wrong.
Source discipline: the Incoterms® 2020 rules are published by the ICC. The structure below is the standard interpretation; for a binding contractual question, cite the ICC text and flag legal review. Country/contract specifics are [verify-at-use].
When to use
- Choosing which Incoterm to propose for a deal.
- Settling a "who pays the THC / duty / insurance" question.
- Setting the quoting scope for
freight-rate-quoter.
The 11 terms — two families
Any mode of transport (7):
| Term | Cost transfer (seller pays up to) | Risk transfers | Seller does export clearance? | Notes |
|---|
| EXW Ex Works | goods at seller's premises | at seller's premises | No (buyer's job — awkward) | Maximum buyer responsibility. |
| FCA Free Carrier | delivered to carrier at named place | at hand-over to carrier | Yes | Correct term for containerized cargo. |
| CPT Carriage Paid To | main carriage to named dest | at hand-over to first carrier | Yes | Cost ≠ risk point — risk passes early. |
| CIP Carriage & Insurance Paid To | main carriage + all-risks insurance | at hand-over to first carrier | Yes | Insurance = ICC (A) all-risks by default in 2020. |
| DAP Delivered At Place | arrival, ready for unloading | at destination | Yes | Buyer handles import clearance + duty. |
| DPU Delivered At Place Unloaded | arrival and unloaded | at destination after unloading | Yes | Only term where seller unloads. (Was DAT.) |
| DDP Delivered Duty Paid | everything incl. import duty + VAT | at destination | Yes (+ import) | Maximum seller responsibility; needs importer-of-record. |
Sea & inland waterway only (4):
| Term | Cost transfer | Risk transfers | Notes |
|---|
| FAS Free Alongside Ship | alongside vessel at load port | alongside the ship | Bulk/breakbulk. |
| FOB Free On Board | loaded on board at load port | once on board | For goods that cross the ship's rail — not ideal for containers. |
| CFR Cost and Freight | main carriage to dest port | once on board at origin | Buyer handles destination + import. |
| CIF Cost, Insurance & Freight | main carriage + insurance | once on board at origin | Insurance = ICC (C) minimum by default (≠ CIP). |
The traps that change the price
- FCA vs FOB for containers. FOB/CFR/CIF assume the seller bears risk until goods are on board — fine for bulk crossing a rail, wrong for containers handed over at a CY/CFS days earlier. Use FCA/CPT/CIP for containerized cargo. Customers misuse FOB constantly; flag it, propose FCA, explain the risk-gap.
- CIP vs CIF insurance level. Incoterms 2020 raised CIP insurance to all-risks (ICC A); CIF stayed at minimum (ICC C). Don't assume they match — it changes the insurance cost and the buyer's protection.
- DDP exposure. Under DDP the seller pays import duty + VAT and usually needs to be (or appoint) the importer of record in the destination country — real money and real compliance risk. Don't propose DDP casually.
- EXW export-clearance gap. Under EXW the buyer is responsible for export clearance in the seller's own country — often impractical; FCA is usually the better "minimal seller" term.
- Named place is mandatory. "FCA" alone is incomplete — it's "FCA [named place], Incoterms 2020." The named place fixes exactly where cost/risk transfer.
Cost-allocation cheat (who pays what, by family)
- E-term (EXW): buyer pays essentially everything from the seller's door.
- F-terms (FCA/FAS/FOB): seller pays to origin hand-over/load; buyer pays main carriage + destination + import. (Buyer pays the freight surcharges.)
- C-terms (CPT/CIP/CFR/CIF): seller pays main carriage (+ insurance on CIP/CIF) to destination port/place, but risk already passed at origin; buyer handles import + destination THC (on CFR/CIF).
- D-terms (DAP/DPU/DDP): seller pays to destination; DDP also pays import duty + VAT.
A quote must match its Incoterm scope: don't include DTHC/destination on an FOB quote the buyer owns; don't omit origin haulage on an EXW quote.
Recommended resources (read on demand)
resources/responsibility-matrix.md — the full obligation grid (which party does export clearance, main carriage, insurance, unloading, import clearance, duty) per term.
Hand-offs
- Pricing within the settled scope →
freight-pricing-mechanics skill / freight-rate-quoter.
- A binding legal/contractual interpretation → flag for licensed legal review (not this skill's role).
