Incoterms 2020: which rule to quote when you sell alone

Incoterms are the three-letter terms, such as FOB or DAP, that the International Chamber of Commerce (ICC) publishes so that a buyer and a seller in different countries mean the same thing by a price. Each rule says where the seller delivers, who pays which costs, who arranges export and import clearance, and the point at which the risk of loss or damage passes to the buyer. This guide is about choosing one when you quote, and writing it so it can be read only one way.

If you are still drafting the quote itself, relaysolo.com has how to write a quotation email, which covers unit price, MOQ and validity. This guide goes deeper on the trade term line.

Which version is current

Incoterms® 2020 is the current edition and has applied since 1 January 2020. ICC has started work on a successor, expected to be called Incoterms® 2030, which ICC expects to launch in late 2029. Until then, quote under 2020. If you see "Incoterms 2025" or "Incoterms 2026" on a website, those editions don't exist.

Older editions (2010, 2000) are still valid if both sides name them, because Incoterms apply only when the contract says so. That's why the version matters: "FOB Ningbo" alone leaves room for argument about which rulebook applies.

The 11 rules, in two groups

ICC splits the rules by transport mode. Seven work for any mode, including containers, air, road and rail. Four are only for sea and inland waterway transport.

Notice the "C" rules (CPT, CIP, CFR, CIF). The seller pays freight all the way to destination, but the risk passes much earlier, when the goods are handed to the carrier or loaded on board in the seller's country. If the goods are damaged at sea under CIF, it's the buyer's loss and the buyer claims on the insurance. Many new sellers assume the opposite.

Shipping containers? Use FCA, CPT or CIP

This is the most common mistake in small-exporter quotes, and ICC addresses it directly. FOB, CFR and CIF put the delivery point "on board the vessel". With a container, you don't load anything on board. You, or your trucker, hand the container to the carrier at a terminal or depot, often days before it's lifted onto the ship. ICC's guidance notes say FOB "is not appropriate" where goods are handed over at a container terminal, and that CPT and CIP are the appropriate rules rather than CFR and CIF.

Why it matters to you: under FOB, the goods are still at your risk while they sit in the terminal, in the hands of a carrier the buyer chose. Under FCA, delivery happens when you hand them over, which matches what actually happens.

Where FCA delivery happens. If the named place is your own premises, you deliver when the goods are loaded onto the buyer's truck. If it's anywhere else, such as the carrier's terminal, you deliver when your truck arrives there with the goods ready for unloading, and the buyer's side unloads.

"But my buyer's bank wants an on-board bill of lading." This was the classic reason to stick with FOB, especially under a letter of credit. Incoterms 2020 added an option to FCA for this: if both sides agree, the buyer must instruct its carrier to issue the seller a bill of lading with an on-board notation. If you need that, say so in the quote and the proforma invoice.

Many buyers will still ask for FOB out of habit. You can accept it for containers if you understand the extra terminal risk, but FCA describes the handover more accurately, and ICC's own introduction advises sellers to use it.

Why EXW is rarely the easy option

EXW looks like the least work: the buyer collects from your door and handles everything. ICC's notes point out two problems.

• You don't have to load the goods. In practice you usually will, with your own forklift and staff, but under EXW the risk of anything going wrong while loading is technically the buyer's, and the buyer's insurer may not see it that way.
• You don't have to clear the goods for export. The buyer, a foreign company, must do it, and in many countries a foreign buyer can't easily act as exporter. Customs authorities in your country may still need export information from you. If clearance fails, the goods sit at your door.

ICC suggests FCA where the buyer expects difficulty with export clearance. FCA at your premises is almost the same deal as EXW (the buyer still collects), but you load and you clear for export, which is what usually happens anyway.

CIF and CIP: how much insurance you must buy

Under both rules the seller buys cargo insurance for the buyer's benefit. Incoterms 2020 made them different:

• CIF requires only limited cover, complying with Institute Cargo Clauses (C), unless you agree something higher.
• CIP requires extensive cover, complying with Institute Cargo Clauses (A) or similar. Clauses (A) is broadly "all risks" with exclusions; (C) covers a narrower list of named events.
• Under both, the minimum insured amount is the contract price plus 10% (110%), in the currency of the contract.

If you move a buyer from CIF to CIP for container cargo, check the insurance cost first and price it in. If a buyer asks for CIF with "all risks", that's allowed, but it's an extra you should agree in writing.

DAP, DPU and DDP: delivering in the buyer's country

Under these three, you carry the risk all the way to the named destination. That's a lot for one person to manage from abroad, so be sure of the freight cost and of who will handle things on arrival.

• DAP. You deliver on the arriving vehicle, ready for unloading. The buyer unloads, clears import and pays duties and taxes.
• DPU. It replaced DAT (Delivered at Terminal) in 2020, and the place can now be anywhere, not only a terminal. ICC notes it is the only rule that requires the seller to unload at destination. Only use it if you can arrange unloading there.
• DDP. You also clear the goods for import and pay import duties and taxes. ICC calls this the maximum level of obligation of all eleven rules, and advises considering DAP or DPU if you can't obtain import clearance. In practice, many countries charge import VAT or GST at the border. To pay it as the importer, a foreign seller may need a local tax registration or an agent, and may not be able to recover the tax. Ask a customs broker in the destination country before you quote DDP.

A quick way to choose

• Buyer has their own forwarder and wants to control freight? FCA (your premises or the export terminal). Use FOB only if the goods really go straight on board, such as bulk or break-bulk.
• Buyer wants a price delivered to their port, and you can get good freight rates? CPT (or CIP, adding insurance) to the destination port or inland depot. Use CFR/CIF only for non-container sea cargo.
• Small, urgent or sample shipments by courier? Usually DAP, with import duties for the buyer. Say so clearly; see sample requests.
• Buyer wants everything paid to the door, duties included? DDP only after a broker in that country confirms you can be the importer and what it costs. Otherwise offer DAP.
• Buyer asks for EXW? Offer FCA at your premises instead and explain that you'll load and handle export clearance.

How to write it in a quote

ICC recommends this format: [rule] [named place or port] Incoterms® 2020. Its own example is "CIF Shanghai Incoterms® 2020". The ® isn't needed in a contract.

Make the place as precise as you can. "FCA Shenzhen" can mean dozens of terminals; "FCA Yantian container terminal, Shenzhen" can't. If the place is your factory, give the address.

Trade term: FCA [terminal name, city, country] Incoterms 2020
Price: [currency] [unit price] per [unit], packed in [packing]
Freight from [terminal] to [destination] is arranged and paid by the buyer.
Export customs clearance: by seller. Import clearance, duties and taxes: by buyer.

Repeat exactly the same line in your proforma invoice and, if there is one, the sales contract. If the buyer pays by letter of credit, check that the credit states the same rule and place.

What Incoterms don't settle

ICC is explicit that the rules are not a contract of sale. They don't deal with:

• When ownership of the goods passes to the buyer.
• Payment: the time, place, method or currency. That's your payment term, a separate line.
• What happens if either side breaches the contract.
• Sanctions and export controls.

So "CIF Rotterdam" doesn't mean you get paid when the goods are on board. It only means you've delivered. Whether you're paid depends on what the payment term says. If a buyer delays a balance because of a holiday at their end, see working weeks and holidays. If you have to change a price after quoting, here is how to tell the buyer. When you explain a trade term to a buyer who reads English through a translation tool, spell out the rule's full name once; see plain English for non-native buyers.

Sources

• ICC, Incoterms® 2020: overview of the rules and the changes from 2010 (FCA on-board bill of lading, CIP insurance, DAT renamed DPU).
• ICC Digital Library, Incoterms® 2020, Introduction (what the rules do and don't cover; how to incorporate them), rules for any mode and rules for sea and inland waterway (explanatory notes and articles A2, A3, A5).
• ICC Netherlands, Incoterms® 2030: revision under way, 31 August 2026 (launch expected in late 2029).
• U.S. International Trade Administration, Know your Incoterms.
• ICC, Incoterms® trademark and copyright policy. Incoterms® is a trademark of the International Chamber of Commerce.

Read next

• Export payment terms compared and what to check in a letter of credit, in Getting paid.
• How to write a proforma invoice, in Samples, orders and documents.
• Bank detail change fraud and phishing aimed at exporters, in Fraud and safety.
• All guides in Quoting and trade terms and Working across markets. How we check sources: about this handbook.