Incoterms 2020 Explained: EXW, FOB, CIF, DAP, DDP Compared

What Are Incoterms 2020?

Incoterms 2020 are a set of rules for delivery terms in international trade, published by the International Chamber of Commerce (ICC). Each rule is a three-letter code, such as EXW, FOB, CIF, DAP or DDP, that defines who pays for carriage, the point at which the risk of loss or damage passes from seller to buyer, and who handles export and import customs clearance.

Incoterms 2020 took effect on 1 January 2020 and remain the current edition. In its 2026 workplan, the ICC states that it will begin work on revising the rules to lay the groundwork for Incoterms 2030, but there is no draft or effective date yet. If you come across references to an Incoterms edition later than 2020, check the ICC website first.

Incoterms are not law. They apply only when the parties agree to use them, so the contract should state the rule, the place and the edition clearly, for example “FOB Shanghai Incoterms 2020”. The parties can still choose an older edition, such as Incoterms 2010, if they say so. Incoterms do not cover transfer of title, payment terms or dispute resolution; these must be agreed separately in the contract.

The 11 Incoterms 2020 Rules in 2 Groups

Group 1: Rules for any mode of transport (7 rules)

These can be used for sea, air, road and rail transport and for multimodal transport, including containerized cargo.

• EXW (Ex Works): The seller makes the goods available to the buyer at the seller’s premises, with no obligation to load them onto the collecting vehicle. The buyer is responsible for everything after that.
• FCA (Free Carrier): The seller delivers the goods to the carrier nominated by the buyer at the agreed place. If delivery takes place at the seller’s premises, the seller must also load the goods. If it takes place elsewhere, such as a warehouse or container yard, the seller brings the goods there but does not have to unload them.
• CPT (Carriage Paid To): The seller pays carriage to the named destination, but risk passes once the goods are handed to the first carrier in the country of origin.
• CIP (Carriage and Insurance Paid To): As CPT, but the seller must also insure the goods for the buyer.
• DAP (Delivered at Place): The seller transports the goods to the named destination and delivers them on the arriving vehicle, ready for unloading. The buyer unloads and handles import clearance.
• DPU (Delivered at Place Unloaded): Replaces DAT from Incoterms 2010. The seller must also unload the goods at destination, and the destination can be any place, not only a terminal.
• DDP (Delivered Duty Paid): Similar to DAP, but the seller must also clear the goods for import and pay the duty, VAT and other taxes in the buyer’s country. This is the rule that places the greatest burden on the seller.

Group 2: Rules for sea and inland waterway transport only (4 rules)

• FAS (Free Alongside Ship): The seller places the goods alongside the vessel nominated by the buyer at the port of shipment. It is not widely used today; one example is heavy machinery.
• FOB (Free on Board): The seller loads the goods on board the vessel nominated by the buyer. Risk passes once the goods are on board, and the buyer pays the ocean freight.
• CFR (Cost and Freight): The seller pays ocean freight to the port of destination, but risk passes once the goods are on board at the port of shipment.
• CIF (Cost, Insurance and Freight): As CFR, but the seller must also insure the goods for the buyer.

Incoterms 2020 Comparison Table: All 11 Rules

The C rules (CPT, CIP, CFR, CIF) involve two critical places: the delivery point at origin, where risk passes to the buyer, and the destination to which the seller pays carriage. If the goods are damaged in transit, the risk already lies with the buyer.

Cargo Insurance: How CIF and CIP Differ

Only CIF and CIP require the seller to insure the goods to cover the buyer’s risk, and the minimum level of cover differs between them.

• CIF: At least Institute Cargo Clauses (C) or equivalent, which covers named perils only. This is the same level as under Incoterms 2010.
• CIP: Incoterms 2020 raised the requirement to Institute Cargo Clauses (A) or equivalent, which is all-risks cover, subject to the policy exclusions.
• Sum insured: At least 110% of the contract price, in the contract currency, covering the goods from the point of delivery to the named destination.

The parties can agree a different level of cover from the minimum; a CIF buyer, for example, may ask the seller to insure under Clauses (A) instead. Under the other rules, neither party is obliged to insure, so whichever party bears the risk at each stage should consider arranging its own insurance.

Common Mistakes When Choosing Incoterms

1. Using FOB or CIF for containerized or air cargo

FAS, FOB, CFR and CIF apply to waterborne transport only, so they should not be used for air cargo. With containerized cargo, the seller usually hands over the container at a container yard or warehouse several days before it is loaded on the vessel. Under FOB or CIF, the seller still bears the risk until the goods are on board, even though they are no longer under the seller’s control. FCA, CPT or CIP therefore reflect the actual handover more closely. Incoterms 2020 also added an option under FCA allowing the parties to agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller, to support payment by letter of credit. If you still use FOB or CIF for container shipments, both parties should have the same understanding of where risk passes. (For more on container types, see our shipping container size guide.)

2. Assuming the seller bears the risk to destination under CIF

Under CIF, risk passes to the buyer once the goods are on board at the port of shipment, and the insurance the seller arranges is only at the (C) level. For high-value or fragile goods, ask for higher cover or take out additional insurance yourself, and agree clearly which destination port charges the seller has already paid.

3. Choosing DDP without checking import duty and VAT

Under DDP, the seller must act as importer and pay import duty, VAT and other taxes in the buyer’s country. This may require registering as an importer or taxpayer in that country, which is difficult in many cases. If the seller cannot actually act as importer, use DAP instead.

4. Using EXW for exports without planning export clearance

Under EXW, the buyer must handle export clearance, but in many countries the exporter must be a locally registered legal entity, so a foreign buyer often cannot do it. The seller may also need proof of export for tax purposes. If the seller is already handling export clearance and loading the goods, FCA reflects the facts more accurately.

5. Naming the place too vaguely

Writing only “DAP Bangkok” can lead to disputes over where delivery takes place. Be specific, for example by naming the warehouse, container yard or warehouse address, because this point determines where costs and risk end.

A Note for Thai Importers: Customs Duty Is Based on the CIF Value

Section 17 of the Customs Act B.E. 2560 (2017) requires the customs value of imported goods to include insurance, freight, unloading, loading and handling charges associated with transporting the goods to the customs point of entry. The basis for import duty is therefore comparable to the CIF value, whatever the trade term used.

• When buying FOB or FCA, add the international freight and insurance to the price of the goods.
• When buying EXW, also include transport and other costs in the country of origin.
• Where there is no insurance or freight value, it is set as prescribed by notification of the Director-General of the Thai Customs Department.
• When buying DAP or DDP at a price that includes post-import costs, such as transport within Thailand or import duties and taxes, these costs can be deducted if they are shown separately.

Import VAT is also calculated on a base that combines the CIF value with import duty and other applicable taxes, so buying FOB or EXW does not reduce your import taxes. Importers should keep freight invoices and proof of insurance premiums to support the declared value. For the full process, see How to import goods into Thailand: 7 customs steps.

How Thai Importers and Exporters Should Choose Incoterms

For Thai importers

• If you want to control freight yourself: Choose FCA for containerized or air cargo and FOB for goods loaded directly onto the vessel, then have a Thai freight forwarder arrange the main carriage.
• If you want the seller to arrange transport: With CPT, CIP, CFR or CIF you do not need to book space yourself, but check which destination charges you will have to pay.
• Insurance: When buying EXW, FCA or FOB, insure the goods yourself. When buying CIF, consider whether (C) level cover is sufficient.
• DDP and EXW: Use DDP only when the seller can genuinely act as importer in Thailand. If in doubt, DAP is usually easier to work with. EXW suits cases where you have an agent at origin who can collect the goods from the factory and handle export clearance for you.

For Thai exporters

• Choose FCA instead of EXW: You handle export clearance in Thailand yourself, keep control of the documents, and your risk ends when the goods are handed to the buyer’s carrier.
• Containerized cargo: Consider FCA, CPT or CIP instead of FOB, CFR or CIF. If the buyer pays by a letter of credit that requires an on-board bill of lading, write this FCA option into the contract.
• Quoting delivered prices: CPT, CIP or DAP work well when you have a logistics partner at destination. Use DDP only when you can actually clear the goods for import and pay the taxes in the buyer’s country.

For advice on choosing Incoterms, arranging international freight, cargo insurance, or import and export customs clearance, contact KTC Global Logistics at 02-286-1967 or LINE: @ktclogistics.