taxInvoice.appIncoterms 2020 explained
Short answer: Incoterms 2020 are 11 rules that say who pays for transport, insurance and duties, and where risk passes from seller to buyer. EXW puts almost everything on the buyer; DDP puts almost everything on the seller. FAS, FOB, CFR and CIF are for sea and inland waterway only; the other seven work for any transport. Write the term with a named place, for example 'FOB Mumbai Port, Incoterms 2020'.
| Term | Name | Transport | Seller pays main carriage | Seller insures | Import duty paid by |
|---|---|---|---|---|---|
| EXW | Ex Works | Any | No | No | Buyer |
| FCA | Free Carrier | Any | No | No | Buyer |
| CPT | Carriage Paid To | Any | Yes | No | Buyer |
| CIP | Carriage and Insurance Paid To | Any | Yes | Yes (all risks cover) | Buyer |
| DAP | Delivered at Place | Any | Yes | Not required | Buyer |
| DPU | Delivered at Place Unloaded | Any | Yes, and unloads | Not required | Buyer |
| DDP | Delivered Duty Paid | Any | Yes | Not required | Seller |
| FAS | Free Alongside Ship | Sea | No | No | Buyer |
| FOB | Free On Board | Sea | No | No | Buyer |
| CFR | Cost and Freight | Sea | Yes | No | Buyer |
| CIF | Cost, Insurance and Freight | Sea | Yes | Yes (minimum cover) | Buyer |
Where risk passes
- E and F terms (EXW, FCA, FAS, FOB): risk passes early, at or near the seller’s side.
- C terms (CPT, CIP, CFR, CIF): the seller pays the freight, but risk still passes when the goods are handed to the first carrier or loaded on the ship. This is a common surprise.
- D terms (DAP, DPU, DDP): risk passes at the destination.
How to write it on your invoice
Put the three-letter code, a named place and the version, for example “DAP Berlin, Germany, Incoterms 2020”. The commercial invoice and proforma invoice generators include an Incoterms field.
Free tools for this
- Commercial invoice generator (Incoterms field)
- Proforma invoice generator
- How to fill out a commercial invoice
Frequently asked questions
Which Incoterm should small exporters use?
For courier and air parcels, DAP is common: you pay to deliver and the buyer pays import duty. Use DDP only if you can register for and pay the buyer's import taxes.
Is FOB valid for air freight?
No. FOB is for sea and inland waterway. For air or container shipments use FCA instead.