INCOTERMS® 2020

Quick Reference Card and Practical Guide

Incoterms® 2020 are the International Chamber of Commerce (ICC) rules for the use of domestic and international commercial terms. They define the allocation of costs, risks, and responsibilities between seller and buyer in a commercial transaction. This guide covers all 11 Incoterms® 2020 rules with practical guidance for India-EU trade.

IMPORTANT: Incoterms define the delivery point (risk and cost allocation) — they do not govern title transfer, payment terms, or force majeure. Always specify the named place precisely (e.g. "FOB JNPT, Nhava Sheva, India, Incoterms® 2020" not just "FOB").

PART 1 — RULES FOR ANY MODE OF TRANSPORT

The following seven rules apply to any mode of transport including road, rail, air, sea, and multimodal. They are the only rules that should be used for multimodal containerised cargo.

EXW — Ex Works (Named Place of Delivery)

Practical note: EXW is the minimum obligation for the seller. For India-EU trade, EXW is problematic because: (a) the Indian exporter cannot obtain the Shipping Bill and export documents without physical possession of the goods — so even under EXW, the seller in India must assist with export formalities; (b) EU buyers rarely have the practical ability to arrange export customs in India. Avoid EXW for cross-border trade; use FCA instead.

FCA — Free Carrier (Named Place of Delivery)

Practical note: FCA is the recommended alternative to FOB for containerised cargo. Incoterms 2020 includes a new option: if the buyer needs a "shipped on board" B/L for LC purposes, the parties can agree that the carrier issues such notation after loading. This solves the practical problem that under FCA the goods are delivered to the container yard before loading — making a "shipped on board" B/L technically premature.

CPT — Carriage Paid To (Named Place of Destination)

Practical note: Risk and cost split at different points under CPT — seller pays freight to destination but risk passes at origin when goods handed to the first carrier. Buyer should arrange their own cargo insurance as the seller bears no insurance obligation.

CIP — Carriage and Insurance Paid To (Named Place of Destination)

Practical note: Incoterms 2020 upgraded the minimum insurance requirement for CIP from Institute Cargo Clauses (C) to Institute Cargo Clauses (A) (all-risks cover) — a significant improvement over the old CIP. Recommended for high-value multimodal cargo where the seller wishes to provide comprehensive cover.

DAP — Delivered at Place (Named Place of Destination)

Practical note: DAP is the most common Incoterms for India-EU trade where the seller wishes to manage the full logistics chain to the buyer's named location in Europe. Buyer is responsible for EU import clearance, customs duties, and unloading at destination. DAP is the natural choice for DDP-like logistics without the seller assuming EU customs obligations.

DPU — Delivered at Place Unloaded (Named Place of Destination)

Practical note: DPU (formerly DAT — Delivered at Terminal) is the only Incoterm where the seller is responsible for unloading at the destination. Named place should specify clearly whether it is a terminal, warehouse, or the buyer's premises.

DDP — Delivered Duty Paid (Named Place of Destination)

Practical note: DDP is the maximum obligation for the seller — the seller bears all costs including EU customs duty and import VAT. For Indian exporters, DDP is very difficult to operate without an EU EORI number, a customs agent in the EU, and liability for EU import VAT. Most Indian exporters should avoid DDP unless they have a dedicated EU entity or logistics partner. Where buyers request DDP, consider DAP as a negotiated alternative.

PART 2 — RULES FOR SEA AND INLAND WATERWAY TRANSPORT ONLY

The following four rules apply only to sea and inland waterway transport. They should NOT be used for containerised cargo — use FCA, CPT, or CIP instead. These rules are appropriate for bulk cargo, break-bulk, and non-containerised sea freight where the seller can physically place the goods on board the vessel at the port.

FAS — Free Alongside Ship (Named Port of Shipment)

Seller delivers goods alongside the vessel at the named port of shipment — on the quay or in a lighter alongside. Risk passes when goods are alongside. Buyer is responsible for loading onto the vessel, ocean freight, insurance, and all subsequent costs. Seller clears goods for export. Rarely used in modern containerised trade.

FOB — Free On Board (Named Port of Shipment)

Practical note: FOB is the most widely used Incoterm in Indian export practice — it is the default term on most Indian export invoices and Shipping Bills. However, for containerised cargo (FCL or LCL), FOB is technically inappropriate because the seller delivers to the container yard, not on board the vessel. The practical risk-transfer point for FCL cargo is at the container yard gate (better matched by FCA). Despite this, FOB continues to be used widely for containerised India-EU trade because of familiarity and its simplicity in relation to Shipping Bill filing.

CFR — Cost and Freight (Named Port of Destination)

Seller pays freight to the named destination port. Risk passes when goods on board at the port of shipment. Insurance is NOT the seller's responsibility — buyer should arrange. Seller handles export clearance and loading. Used in commodity and bulk trades. Not recommended for containerised cargo (use CPT instead).

CIF — Cost, Insurance and Freight (Named Port of Destination)

Practical note: CIF is widely used for India-EU commodity and bulk trade. Note that the minimum insurance under CIF is Institute Cargo Clauses (C) — the lowest level of cover. Buyers should negotiate for ICC (A) or arrange supplementary cover. CIF value at the EU port of entry is the basis for EU customs value calculation and therefore the customs duty computation.

PART 3 — QUICK COMPARISON TABLE

PART 4 — RECOMMENDED INCOTERMS FOR INDIA-EU TRADE

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