Incoterms explained
Avoid confusion in international trade, understand who is responsible for that
About Incoterms® 2020
Incoterms (short for International Commercial Terms) are internationally recognised rules published by the International Chamber of Commerce (ICC). These terms define who is responsible for what during international shipments — from loading and transport to customs clearance, duties, and insurance.
The current version, Incoterms® 2020, includes 11 rules that help buyers and sellers avoid confusion, disputes and hidden costs.
Why it matters for your business
Incoterms influence critical parts of your supply chain:
- Who arranges and pays for transport
- When risk transfers from seller to buyer
- Who handles export/import clearance
- Who takes care of insurance and duties
Choosing the wrong Incoterm or using vague delivery locations can lead to delays, extra charges or legal risk. That’s why MOL Logistics helps apply Incoterms in real-life trade scenarios tailored to your route, role and cargo.
Multimodal vs. maritime Incoterms
Not all Incoterms® 2020 apply to every transport mode. Here’s how they are divided:
Multimodal Incoterms
Used for road, air, rail and combinations: EXW, FCA, CPT, CIP, DAP, DPU, DDP. These are flexible and suitable for door-to-door deliveries, especially within Europe or intercontinental supply chains.
EXW (Ex Works)
Buyer takes full responsibility from the seller’s door, including loading and export formalities.
FCA (Free Carrier)
Seller delivers goods to a named place, loaded and customs cleared. Buyer arranges transport from there.
CPT (Carriage Paid To)
Seller pays for transport to the destination, but risk transfers once goods are handed to the carrier.
CIP (Carriage and Insurance Paid To)
Like CPT, but seller must also provide insurance. Risk still transfers at the handover point.
DAP (Delivered At Place)
Seller delivers to a named location; buyer unloads and handles import clearance.
DPU (Delivered At Place Unloaded)
Seller delivers and unloads goods at the destination.
DDP (Delivered Duty Paid)
Seller delivers goods including import clearance and duties. Risk and cost lie fully with the seller. Be cautious: VAT and local taxes can’t always be recovered.
Do you need advice? Contact our specialist.
Maritime-only Incoterms
Used exclusively for sea or inland waterway transport: FAS, FOB, CFR, CIF. These Incoterms are commonly used for port-to-port shipments of bulk cargo or containers.
FAS (Free Alongside Ship)
Seller delivers next to the vessel at the port; buyer pays from there.
FOB (Free On Board)
Seller delivers the goods onboard the vessel at the port of shipment.
CFR (Cost and Freight)
Seller pays for transport to destination port, but risk transfers at loading.
CIF (Cost, Insurance and Freight)
Same as CFR, but seller must also provide insurance. Risk still transfers in the port of origin.
Tip: always specify the exact location (with postcode, terminal or building) to avoid confusion about where risk transfers.
Customs and insurance: what you need to know
Export clearance
In most Incoterms (except EXW), the seller is responsible for export clearance. Under EXW, the buyer arranges it, but this can be risky if they’re unfamiliar with local customs. Sellers are still expected to support the process.
Insurance
Only CIP and CIF require the seller to provide transport insurance. For all other Incoterms, insurance is optional, but strongly recommended.
Tip: Always insure the part of the transport where you carry the risk. If you’re unsure, we help determine who should be covered and when.
Let’s make your international trade crystal clear
Don’t let unclear agreements slow you down. Use Incoterms® 2020 correctly and let us help you apply them in real-world shipments.