What are Incoterms 2020?

Incoterms 2020 are eleven standard trade terms published by the International Chamber of Commerce that set out, for a sale of goods, which party arranges and pays for carriage, insurance and customs formalities, and at what point risk passes from seller to buyer.

Which Incoterm means the seller pays duty?

DDP — Delivered Duty Paid. It is the only rule where the seller carries import clearance, duty and import VAT or GST through to the named place of delivery.

Who pays destination terminal handling charges?

Under EXW, FCA, FAS, FOB, CFR and CIF the buyer pays DTHC. Under DAP, DPU and DDP the seller does. Under CPT and CIP it depends on what the seller’s contract of carriage covers, which is why those two terms produce the most duplicated handling charges.

Do Incoterms affect the customs value?

Indirectly. The United States values imports on an FOB basis, so freight and insurance stay outside the dutiable value, while the EU, UK and Canada value on CIF and include them. A DDP price has to be unwound before duty is calculated so duty is not charged on duty.

Trade terms reference

Incoterms 2020: who pays which charge

An Incoterm decides two things: where risk passes, and who owes each cost element. Invoices do not read the sales contract — carriers and brokers bill whoever is named on the transport document. That mismatch is where importers pay charges the seller already owned. The matrix below is the allocation for all eleven rules.

Seller pays Buyer pays Depends on the carriage contract

Incoterms 2020 cost allocation matrix
Rule	Packing	Origin haul	Export clearance	OTHC	Freight	Insurance	DTHC	Import clearance	Duty & tax	Delivery	Demurrage
EXWEx Works	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
FCAFree Carrier	Seller	Seller	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
FASFree Alongside Ship	Seller	Seller	Seller	Depends	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
FOBFree On Board	Seller	Seller	Seller	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
CFRCost and Freight	Seller	Seller	Seller	Seller	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
CIFCost, Insurance and Freight	Seller	Seller	Seller	Seller	Seller	Seller	Buyer	Buyer	Buyer	Buyer	Buyer
CPTCarriage Paid To	Seller	Seller	Seller	Seller	Seller	Buyer	Depends	Buyer	Buyer	Buyer	Buyer
CIPCarriage and Insurance Paid To	Seller	Seller	Seller	Seller	Seller	Seller	Depends	Buyer	Buyer	Buyer	Buyer
DAPDelivered At Place	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Buyer	Buyer	Seller	Depends
DPUDelivered at Place Unloaded	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Buyer	Buyer	Seller	Depends
DDPDelivered Duty Paid	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Seller

Rule by rule, with the audit note

EXW

Any mode

Ex Works

Risk passes: At the seller’s premises, before loading.

The buyer owns every line, so any origin charge on a seller invoice is a re-bill that needs backup.

FCA

Any mode

Free Carrier

Risk passes: When the goods are handed to the buyer’s carrier at the named place.

OTHC is the classic FCA dispute: the carrier bills it to the buyer while the seller has already priced terminal delivery into the goods.

FAS

Sea / inland waterway

Free Alongside Ship

Risk passes: When the goods are placed alongside the vessel at the port of shipment.

Loading costs sit either side of the ship’s rail — expect duplicated wharfage and lift-on charges.

FOB

Sea / inland waterway

Free On Board

Risk passes: When the goods are loaded on board the vessel.

US customs values imports on the FOB price, so FOB terms keep freight and insurance out of the dutiable value.

CFR

Sea / inland waterway

Cost and Freight

Risk passes: On loading at origin — risk and cost split at different points.

The buyer carries risk on cargo the seller is shipping, with no insurance obligation on either side.

CIF

Sea / inland waterway

Cost, Insurance and Freight

Risk passes: On loading at origin, even though the seller pays to destination port.

Insurance is Institute Cargo Clauses (C) minimum — 110% of invoice value on the narrowest cover available.

CPT

Any mode

Carriage Paid To

Risk passes: When the goods are handed to the first carrier.

Destination handling depends on what the seller’s contract of carriage covers — read the bill of lading, not the sales contract.

CIP

Any mode

Carriage and Insurance Paid To

Risk passes: When the goods are handed to the first carrier.

Under Incoterms 2020 CIP requires all-risks cover (ICC A), unlike CIF — the one substantive change in the 2020 revision.

DAP

Any mode

Delivered At Place

Risk passes: On arrival at the named place, ready for unloading.

The buyer still clears and pays duty. Delays caused by the buyer’s clearance move demurrage back onto the buyer.

DPU

Any mode

Delivered at Place Unloaded

Risk passes: Once unloaded at the named place.

The only term where the seller must unload — unloading charges billed to the buyer are recoverable.

DDP

Any mode

Delivered Duty Paid

Risk passes: On arrival at the named place, duty paid, ready for unloading.

The seller owns every line — which is exactly why DDP shipments generate the most unowned charges billed straight to the importer.

Start with the term that leaks the most

DDP puts every cost on the seller, and yet DDP importers receive more unowned invoices than on any other term — because the carrier and the broker bill the party named on the transport document, not the party named in the contract.

DDP: charges the seller owned

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