Incoterms and how to use them
blog 25/07/2022

Incoterms and how to use them

When you operate internationally, you have to think about transports. When it comes to a shipping, it is important to agree on responsibilities, costs, and risks. That is where incoterms come in. These are certain terms that are used to define who carries certain responsibilities during a transport and when risks and costs are passed on from seller to buyer.

In this blog, you will read all about incoterms, what they are, which ones we use, and how you use them.

What are incoterms

Incoterms (International Commercial Terms) are used in the transport industry as standardized terms that define who carries the responsibility for the goods during transport. They decide who is responsible at which point in the journey from seller to buyer, but also who covers which costs and who carries the risks. Who is liable in case of damages? And who takes care of customs? These arrangements are internationally agreed upon by the International Chamber of Commerce (ICC) in 2020.

Pay attention! Are you transporting to or from England? You might have to adjust your incoterm agreements. The situation at the border had changed. Make sure you check if your pricing agreements are still accurate!


Which documents do you need to transport goods to the UK? This documents checklists helps you with your transports, EASY! Download it now


Incoterm categories

In total, there are 11 incoterms, divided into four main categories. You can recognize a category by the first letter of an incoterm.

  • E-Term – The buyer arranges everything related to the transport.
  • F-terms – The buyer arranges most things related to the transport. The seller is responsible for the preparations of the shipping and the customs.
  • C-terms – C-terms work the other way around. The seller arranges most things related to the shipping. The risk of the transport is assigned to the buyer.
  • D-terms – These assign the responsibilities to the seller. The seller carries the risks and pays the bills.

This blog explains each of the 11 incoterms. You will read what the mean, who arranges which part of the transport, and who carries the risks.

Ex Works (EXW) 

In case of Ex Works (EXW), all responsibilities are assigned to the buyer. The seller has the responsibility to make the goods available at a designated place and time. This location must be agreed upon in the terms of delivery. In most cases, this will be a warehouse or factory owned by the seller. All risks and cost related to the transport are assigned to the buyer. This includes the loading of the goods at the designated place.

It is good to know that the buyer also arranges customs in this case. When it comes to transports outside of Europe, this often causes problems. Since Brexit, this also relates to transports to and from the UK. Therefore, when you do business with the UK you usually won’t use EXW. EXW is not recommended for international transports.

Free Carrier (FCA) 

FCA means freigt-free to carrier. In this case, the transporter ships the goods to an agreed upon place of delivery. The risks of the shipping transfer to the buyer when the goods are delivered to the first carrier.

Within FCA, a delivery can happen two ways. This does not have to be mentioned in the contract:

  1. If the agreed point of delivery is the factory or the office of the seller, the risk of transportation transfers when the goods are loaded on the vehicle of the buyer.
  1. When the point of delivery is elsewhere, the risks transfers once the goods are made available to the buyer and ready for unloading.

After the delivery, the buyer carries the risks and costs of the transport. An important difference with EXW is that the seller is responsible for customs related to the export of the goods. All customs related to transit and import are arranged by the buyer.

Carriage Paid To (CPT) 

With CPT, the seller takes care of the transport and costs until a agreed upon point of delivery. The risks of the transport are transfered to the buyer in an earlier stadium, being when the goods are delivered to the first carrier. The transfer of costs and risks do not happen at the same time. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods. If the terminal charges Terminal Handling Charges (THC), the buyer should ask the seller if these costs are calculated within the transport price.

Carriage and Insurance Paid To (CIP) 

In case of CIP, the seller takes care of the transport and costs until a agreed upon point of delivery. The risks of the transport are transfered to the buyer in an earlier stadium, being when the goods are delivered to the first carrier. The transfer of costs and risks do not happen at the same time. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods. If the terminal charges Terminal Handling Charges (THC), the buyer should ask the seller if these costs are calculated within the transport price.

The difference with CPT, which is dexcribed above, is that the seller is obliged to take out a goods transport insurance for the buyer’s goods. If this insurance is not enough to cover the costs of the damages, the buyer will have to cover the extra costs.

Delivered at Place Unloaded (DPU) 

DPU assigns the responsibility for risks and costs to the seller until the agreed upon point of delivery. The seller will have to unload the goods for the buyer. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods.

Delivered At Place (DAP) 

DPU assigns the responsibility for risks and costs to the seller until the agreed upon point of delivery. The seller will have to offer the goods to the buyer, but he is not obliged to unload them. This is the difference with DPU, as described above. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods.

Delivered Duty Paid (DDP) 

DDP assigns the responsibility for risks and costs to the seller until the agreed upon point of delivery. The seller will have to offer the goods to the buyer, but he is not obliged to unload them. This is the same as DAP. The difference is in arranging the customs. All costs and responsibilities related to the customs related to the export, transit, ánd import of the goods are assigned to the seller.

Difference DAP and DDP

In essence, DAP and DDP are the same. The seller is responsible for risks and costs to the seller until the agreed upon point of delivery. The only difference is ll costs and responsibilities related to the customs related to the export, transit, ánd import of the goods are assigned to the seller in case of DDP. In case of DAP, the buyer arranges all customs related to the import of the goods.

Free Alongside Ship (FAS) 

FAS is only used in case of shipping. With FAS, the goods must be delivered alongside the ship. In practice, this means besides the ship. Before the delivery besides the ship, all costs and risks are assigned to the seller. After delivery, the buyer carries them. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods.

This Incoterm is relevant for bulk and piece goods. Containers are often transferred in the terminal. In that case, FCA is more relevant.

Free On Board (FOB) 

FOB is also only used in case of shipping. In case of FOB, the goods must be delivered on the ship. Incoterms 2020 defines on the ship as past the railing of the ship.

Before the delivery on the ship, all costs and risks are assigned to the seller and on the ship they are split between buyer and seller. After unloading from the ship, the buyer carries them. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods.

Cost and Freight (CFR) 

The seller carries all costs of the transport, until the goods arrive at the port of arrival. The risk of the transport is transferred to the buyer earlier, being when the goods are loaded onto the ship. An important detail is that insurance of the goods is not part of the agreement.

If the terminal charges Terminal Handling Charges (THC), the buyer should ask the seller if these costs are calculated within the transport price. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods.

Cost Insurance and Freight (CIF) 

The seller carries all costs of the transport, until the goods arrive at the port of arrival. The risk of the transport is transferred to the buyer earlier, being when the goods are loaded onto the ship. This is the same as CFR. The difference with CFR, which is described above, is that the seller is obliged to take out a goods transport insurance for the buyer’s goods in case of CIF. This is not necessary with CFR.

If the terminal charges Terminal Handling Charges (THC), the buyer should ask the seller if these costs are calculated within the transport price. All costs and responsibilities related to the customs related to the export and transit of the goods are assigned to the seller. The buyer arranges all customs related to the import of the goods.

How to use incoterms

Incoterms become important when goods have to travel from point A to point B. It is important to make arrangements between buyer and seller about responibilities during transport. By using one of the standardized options as discussed above, misunderstandings can be prevented.

Some Incoterms are only applicable to transports overseas. This is the case for FAS, FOB, CFR, and CIF. When you only use road transport, you will not use these.

Incoterms 2022?  

Incoterms are updated once every ten years. The last update is from 2020. There are no specific Incoterms from 2021 or 2022. You can use the Incoterms 2020 for transports happening now. A next update is expected in 2030. Nu sudden changes for the time being!

A previous edition are the Incoterms 2010. Nowadays, they are barely ever used. It is important to mention the specific Incoterm year in your contracts to prevent misunderstandings.

Easy Road Transport and Incoterms 

As Easy Road Transport, we will not make agreements about Incoterms with you. Incoterms are agreements between buyer and seller. Easy Road is a transporter. Therefore, you will not find Incoterm agreements in our contracts.

As Easy Road Transport, we come across Incoterms in our work. However, this relates more to the question who is called about agreements or problems. When you have come to a special agreement with your clients, we would like to be updated!


Do you want to know the costs of transporting your goods from A to B? The price calculator lets you calculate your transport costs. No more surprises for you! Fill in the price calculator now!