What are Incoterms and why do they matter?
Incoterms (International Commercial Terms) are a set of eleven three-letter rules published by the International Chamber of Commerce that define who — buyer or seller — pays for carriage, insurance and customs at each stage of a shipment, and exactly where risk of loss or damage passes from one party to the other. They don't set price or transfer ownership; they only allocate cost, risk and responsibility, which is why the same Incoterm can sit on very different invoices.
Getting the term wrong is a common source of disputed freight bills — a buyer quoted EXW discovers they owe export customs clearance, or a seller under CIF finds they only bought minimum insurance cover. Many of those disputed line items are carrier surcharges layered on top of the base freight rate; see our freight surcharges glossary for what BAF, CAF, PSS, THC and the rest actually mean and who typically pays them under each term.
The current version, Incoterms 2020, groups the eleven rules into two families: seven that work for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four written specifically for sea and inland waterway shipping (FAS, FOB, CFR, CIF). Use the chart above to pick a term and see the cost, risk and insurance breakdown across all ten stages of a shipment.
What changed in Incoterms 2020?
The 2020 edition renamed DAT to DPU (Delivered at Place Unloaded) and extended it beyond terminals to any named place. It also split insurance requirements under CIP (now requiring a higher, Institute Cargo Clauses A level of cover) from CIF (which keeps the lower Clause C minimum), and allows the buyer or seller to arrange their own transport under FCA, DAP, DPU and DDP instead of always contracting a carrier.
Which Incoterm should I use for containers?
FCA (Free Carrier) is generally recommended for containerized cargo, since FOB and CIF were written for break-bulk shipped over a ship's rail and can leave risk transfer ambiguous once cargo sits in a container yard before loading. FCA fixes the transfer point at the seller's premises or a named carrier location, which matches how container bookings actually work.
Who arranges cargo insurance?
Only two Incoterms require the seller to insure the goods for the buyer's benefit: CIF and CIP. Under every other rule, whichever party bears the risk at a given stage is responsible for insuring it themselves — the Incoterm defines the risk transfer point, not an insurance obligation.
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<iframe src="https://cargosum.com/embed/incoterms/" width="100%" height="700" style="border:1px solid #ddd;border-radius:4px" title="Incoterms 2020 Chart — CargoSum" loading="lazy"></iframe> <p>Calculator by <a href="https://cargosum.com/incoterms/">CargoSum Incoterms 2020 Chart</a></p>