At first glance, Incoterms may seem dry and complex, but at their core, they simply answer three key questions:
Who does what? Who pays for what? And who bears the risk at each stage?
Understanding these rules helps businesses avoid costly disputes and financial losses.
PART 1: 7 RULES FOR ANY MODE OF TRANSPORT
(Applicable for road, sea, air, or multimodal transport)
1. EXW (Ex Works)
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Seller: Prepares goods at their premises only.
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Buyer: Handles everything else (pickup, export/import clearance, transport).
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Risk transfer: At seller’s premises.
👉 Max responsibility for Buyer, minimum for Seller.
2. FCA (Free Carrier)
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Seller: Clears export and delivers goods to carrier.
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Buyer: Arranges main transport and import clearance.
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Risk transfer: When goods are handed to the first carrier.
👉 Highly flexible, recommended for container shipments.
3. CPT (Carriage Paid To)
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Seller: Pays transport to destination.
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Buyer: Handles import and unloading.
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Risk transfer: When goods are handed to the first carrier (NOT at destination).
⚠️ Important: Cost ≠ Risk.
4. CIP (Carriage and Insurance Paid To)
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Same as CPT, but:
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Seller must buy insurance (maximum coverage under Incoterms 2020).
👉 Better protection for Buyer.
5. DAP (Delivered at Place)
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Seller: Delivers goods to destination (not unloaded).
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Buyer: Handles import clearance and unloading.
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Risk transfer: At destination, before unloading.
6. DPU (Delivered at Place Unloaded)
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Seller: Delivers AND unloads goods at destination.
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Buyer: Handles import clearance.
👉 Only rule where Seller is responsible for unloading.
7. DDP (Delivered Duty Paid)
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Seller: Handles EVERYTHING (transport, export/import clearance, taxes).
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Buyer: Only receives goods.
👉 Maximum responsibility for Seller.
PART 2: 4 RULES FOR SEA & INLAND WATERWAY TRANSPORT
8. FAS (Free Alongside Ship)
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Seller: Delivers goods alongside vessel.
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Buyer: Loads goods, pays freight, handles import.
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Risk transfer: Alongside ship.
9. FOB (Free On Board)
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Seller: Loads goods onto vessel.
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Buyer: Pays sea freight and import clearance.
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Risk transfer: Once goods are onboard.
👉 Very popular, but not ideal for container shipments (use FCA instead).
10. CFR (Cost and Freight)
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Seller: Pays freight to destination port.
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Buyer: Handles import clearance.
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Risk transfer: When goods are onboard at origin.
👉 Seller pays, but Buyer bears risk during transport.
11. CIF (Cost, Insurance and Freight)
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Same as CFR, plus:
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Seller buys insurance (minimum coverage).
KEY TAKEAWAY: HOW TO CHOOSE THE RIGHT INCOTERM?
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Want maximum control? → Choose EXW or FCA
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Want balanced responsibility? → Choose FOB, CFR, CIF
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Want convenience (door-to-door)? → Choose DAP, DPU, DDP
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Shipping containers? → Prefer FCA instead of FOB
DON’T LET INCOTERMS SLOW YOU DOWN – LET SONGWIN HANDLE IT
Understanding theory is one thing—handling real-world logistics challenges is another. That’s where Songwin Logistics comes in:
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Trade contract consulting: Choose the most beneficial Incoterms
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Competitive sea & air freight: Global connections across 100+ countries
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Fast customs clearance: Minimize delays and unexpected costs
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Trucking & door-to-door services: Complete first-mile & last-mile solutions
👉 Turn complexity into competitive advantage with Songwin’s expertise.
CONTACT US
SONGWIN INTERNATIONAL LOGISTICS VIETNAM CO., LTD
📍 Address: 344 Nguyen Trong Tuyen Street, Tan Son Hoa Ward, Ho Chi Minh City
📞 Hotline: 083.681.3969 - 0373.262.105
📧 Email: Sales2@songwinlog.com
Songwin Logistics – Reputation Builds the Brand, Professionalism Drives Success.
