QUICK ANSWER Incoterms are the eleven International Chamber of Commerce rules that decide, in every international sale, who pays each cost, where risk passes from seller to buyer, and who clears customs on each side. Incoterms 2020 is the current version. For most ocean imports from Asia, a US importer should buy on FOB or FCA and avoid EXW and DDP.
The current version is Incoterms 2020, and it still governs contracts today. Buy on the wrong term and you can lose more than you saved negotiating the product price, which is why the chart and the "which to buy on" section below matter more than the definitions.
What the rules actually decide
Each rule is a three-letter code written into the sales contract and the commercial invoice next to a named place, for example "FOB Shanghai" or "DAP Chicago". That code allocates the freight costs, fixes the exact point where damage or loss stops being the seller's problem, and assigns export and import customs clearance between the parties.
Just as important is what Incoterms do not cover. They say nothing about transfer of ownership, payment terms, product specifications, or what happens when a contract falls through. Those live in the rest of your purchase agreement. An Incoterm is a cost-and-risk map, not a complete contract.
The 11 Incoterms 2020 rules
Seven rules work for any mode of transport, and four are written for sea and inland waterway only. The first letter tells you where the seller's obligations end: E means the seller only makes goods available, F means the seller hands over to a carrier the buyer pays, C means the seller pays carriage but risk transfers earlier, and D means the seller delivers near or at the destination.
The Incoterms 2020 chart below shows all eleven rules side by side: where risk passes, who pays the main freight, who must insure, and who clears US import customs. Export clearance sits with the seller under every rule except EXW.
Incoterms 2020 chart, all 11 rules
| Rule | Mode | Risk passes to buyer | Main freight paid by | Insurance required | US import clearance and duty |
|---|---|---|---|---|---|
| EXW | Any | Seller's premises | Buyer | No | Buyer |
| FCA | Any | Handover to carrier | Buyer | No | Buyer |
| CPT | Any | First carrier at origin | Seller | No | Buyer |
| CIP | Any | First carrier at origin | Seller | Seller, ICC (A) | Buyer |
| DAP | Any | Named destination | Seller | No | Buyer |
| DPU | Any | Destination, unloaded | Seller | No | Buyer |
| DDP | Any | Named destination | Seller | No | Seller |
| FAS | Sea | Alongside ship | Buyer | No | Buyer |
| FOB | Sea | On board vessel | Buyer | No | Buyer |
| CFR | Sea | On board vessel | Seller | No | Buyer |
| CIF | Sea | On board vessel | Seller | Seller, ICC (C) | Buyer |
Rules for any mode of transport
EXW (Ex Works)
The seller puts goods on its own dock, and everything after that, loading, export clearance, freight, import, is the buyer's job. It looks like the cheapest unit price and usually is not, because a US buyer has no standing to run export formalities in China. In practice importers who buy EXW end up paying an agent to do what FCA would have made the seller do.
FCA (Free Carrier)
The seller delivers export-cleared goods to the carrier or forwarder at a named point, and from there cost and risk are the buyer's. Incoterms 2020 added an option for the buyer to instruct the carrier to issue an on-board bill of lading under FCA, fixing the letter-of-credit problem that used to push containerized cargo onto FOB. For container freight, FCA is the correct buy on paper, and the one most importers skip out of habit.
CPT (Carriage Paid To)
The seller pays freight to the named destination, but risk transfers when goods reach the first carrier at origin. That split surprises buyers: your cargo can be damaged mid-ocean on a leg the seller paid for, and it is still your claim to make.
CIP (Carriage and Insurance Paid To)
CPT plus insurance the seller must buy for the goods, and since 2020 that cover must be all-risk ICC (A), the highest standard level. Same risk-transfer catch as CPT.
DAP (Delivered at Place)
The seller delivers to the named destination ready for unloading, and the buyer unloads, clears US customs, and pays duty. Common on domestic-feel deals where the supplier quotes "delivered to your city" but duty stays your problem.
DPU (Delivered at Place Unloaded)
The only rule that makes the seller unload. It replaced DAT from Incoterms 2010. Useful for project cargo delivered to a terminal or site where unloading is genuinely the seller's competence.
DDP (Delivered Duty Paid)
The seller does everything, including US import clearance and duty. It sounds like the easiest possible buy and it is where importers get hurt, which is why it gets its own warning below.
Rules for sea and inland waterway transport
FAS (Free Alongside Ship)
The seller places goods alongside the vessel at the named port, export-cleared. Rarely right for containers; it exists for bulk and breakbulk cargo that loads from the quay.
FOB (Free on Board)
The seller loads the goods on the vessel, export-cleared, and risk passes on board. From that moment the ocean freight, insurance, US clearance, and delivery are the buyer's, which also means the buyer controls them. FOB is the default buy for ocean imports from Asia because it hands you the freight decision without handing you China-side formalities. The mechanics of the term, including the FOB shipping point vs destination confusion in US domestic use, are in our FOB guide.
CFR (Cost and Freight)
The seller pays ocean freight to the destination port, but risk passes on board at origin, the same trap as CPT. You save the work of booking freight and give up control of routing, carrier, and speed.
CIF (Cost, Insurance and Freight)
CFR plus insurance, and here the 2020 rules only require minimum ICC (C) cover, far thinner than CIP's ICC (A). A CIF seller can insure your container against almost nothing and still be compliant, which is why importers who buy CIF should read the policy, or buy their own cargo insurance and purchase on CFR or FOB instead.
What changed from Incoterms 2010 to 2020
Four changes matter in practice. Incoterms 2010 contracts remain valid, the terms just need to name the version they use, and older codes like DDU (retired in 2010) still show up informally and map to today's DAP.
The Incoterms 2010 to 2020 changes that matter
| Change | What it means for you |
|---|---|
| DAT became DPU | Same rule, clearer name; the seller still unloads at the destination |
| FCA on-board bill of lading option | Fixes the letter-of-credit problem that used to force containers onto FOB |
| CIP insurance raised to ICC (A) | CIP now requires all-risk cover; CIF stayed at minimum ICC (C) |
| Security obligations spelled out per rule | Security-related duties and costs are now allocated term by term |
Who pays what on a US import
Read any term left to right along the journey. Origin handling, export clearance, main freight, insurance, US entry, duty, port fees, drayage, delivery. E and F terms put the freight spend on you; C terms mean the seller bought the freight and baked it into the unit price; D terms carry the seller almost or all the way to your door.
Two cost realities do not show up in the letter of the rules. First, whoever controls freight controls the charges around it: an importer buying FOB picks the forwarder, sees the surcharges, and manages demurrage exposure at the US port, while a CIF buyer inherits whatever routing the seller bought. Second, duty is never the freight carrier's problem: on every term except DDP, the US buyer is the importer of record and owes the duty. What each term does to your true per-unit cost is exactly what our landed cost breakdown walks through. Incoterms also drive delivery dates, since each handoff point is where a delay changes owner.
Which Incoterm should a US importer buy on
For ocean freight from China, buy FOB. You keep the freight decision, the carrier choice, and the visibility, and the supplier keeps the China-side work it is equipped to do. Lane specifics are in our shipping from China to USA guide.
For containerized cargo where the letter of credit or the container yard handoff matters, FCA named at the origin terminal is the cleaner version of the same logic.
Avoid EXW unless you have your own presence at origin. Export clearance in China without the supplier's cooperation is a real obstacle, not a formality.
KEY TAKEAWAY Be careful with DDP. The seller becomes the US importer of record, which means a foreign company you cannot audit is declaring your value, classifying your goods, and paying Section 301 duty on your product. Undervaluation and misclassification by DDP sellers are a known CBP enforcement target, and the receiver holding the goods is the one left holding the problem.
If duty exposure is the concern, structure it properly through customs compliance work instead of hiding it in the seller's price.
How Platton helps you buy on the right Incoterm
The term you agree with your supplier decides how much of the shipment you control and how much duty risk you inherit. Platton prices and runs the move from the term forward, so the Incoterm works for you instead of against you.
Quotes structured from the term up
A Platton quote on FOB terms covers the move from the vessel loading in Shanghai to your receiving door, itemized, with the air freight fallback priced on the same basis when a restock cannot wait.
FOB and FCA structured cleanly
We help you buy on the term that keeps the freight decision in your hands, FOB for straight ocean, FCA at the origin terminal when a letter of credit or the container yard handoff is in play.
The DDP trap avoided
When a supplier pushes DDP, we structure the duty and clearance under your control instead, so your declared value and classification are not left to a party you cannot audit.
Insurance gaps closed on C terms
On CIF and CFR buys, we check the cover you are actually getting and quote all-risk cargo insurance on declared value where the seller's policy leaves you exposed.
Get an FOB or FCA import quote
Common Questions About Incoterms
Is Incoterms 2020 still valid in 2026?
Yes. There is no Incoterms 2025, and the ICC has not announced a successor. Incoterms 2020 took effect on January 1, 2020 and remains the current version. Contracts may still reference Incoterms 2010 if they name it explicitly, so always check which edition a purchase order cites before you rely on a term's meaning.
Which six Incoterms matter most for importers?
EXW, FCA, FOB, CFR, CIF, and DDP cover most real purchase orders. FOB and FCA are the workhorses for Asia imports, CFR and CIF appear when sellers control the freight, and EXW and DDP are the two extremes importers most often regret, one for the origin-side burden it dumps on you and the other for the duty control it hands to the seller.
Are Incoterms insurance?
No. Only CIF and CIP obligate anyone to insure the goods, and the required level differs sharply: minimum ICC (C) under CIF against all-risk ICC (A) under CIP. On every other term, cargo insurance only exists if you buy it, and the ocean carrier's own liability caps at just $500 per package under COGSA.
Is FCA the same as FOB?
No. FOB puts delivery and risk transfer on board the vessel and belongs to sea freight; FCA hands over at a named point, which fits container terminals, air freight, and multimodal moves. For containers, FCA reflects how cargo actually changes hands, while FOB survives largely on habit and familiarity.
Why is DDP risky for US importers?
Because the seller is the importer of record: it controls the declared value, the HTS classification, and the duty payment on goods that end up in your inventory. Errors, undervaluation, or an unpaid duty bill surface with CBP after delivery, and unwinding a bad DDP entry is far harder and more expensive than filing a correct one on FOB or DAP terms.
Who pays the freight bill under each Incoterm?
Under E and F terms the buyer pays the main freight; under C and D terms the seller pays it to the named point and builds it into the price. The full journey-by-journey split is in the chart and the cost section above.
Related Freight Forwarding Guides
What a freight forwarder does for US importers: the hub guide to the role behind every quote.
FOB shipping point vs FOB destination: the most-used term on this page, in depth.
Landed cost: what each term does to your true per-unit cost.
