Incoterms 2020 explained simply
Incoterms are international rules that define who pays for delivery and at what point the risk for the cargo passes from seller to buyer.
One three-letter code in the contract (EXW, FCA, CPT, DAP…) decides who arranges transport, who pays for it and who is responsible for the cargo on each leg. Let's unpack the logic without legal jargon.
Why Incoterms exist
Incoterms remove ambiguity in international trade: instead of long wording, the parties state a three-letter term, and everyone knows who loads, who carries, who insures and where the seller's responsibility ends.
How costs and risks are split
Each term sets a cost-transfer point and a risk-transfer point. For example, under EXW the buyer takes on almost everything, while under DAP the seller delivers the cargo to the destination. Note: the risk-transfer and cost-transfer moments do not always coincide — a common mistake.
How to choose a term
The choice depends on who wants to control transport and bear risk, and where. Import newcomers often prefer terms where the seller carries the cargo further; experienced ones prefer terms that give control over logistics. We've put the full table of all 11 terms on a dedicated page.
Need help choosing a delivery term for a specific deal? We'll advise and take on the transport.