Incoterms 2020: A Complete Guide for Importers and Exporters
Eleven rules, three-letter shorthand, and the source of half of all trade disputes. Here's what EXW, FOB, CIF and DDP really mean — and the mistakes that cost buyers money.
이 가이드는 영어와 중국어로 제공됩니다. 문구가 다를 경우 영어판이 우선합니다.
What Incoterms do — and don't do
Incoterms (International Commercial Terms), published by the ICC, define the allocation of costs, risks and responsibilities between buyer and seller for the delivery of goods. The current edition is Incoterms 2020, which applies to the 11 rules issued that year. They do not transfer ownership of goods, do not govern payment terms, and do not override contract law — they only settle the logistics handover.
Because Incoterms are incorporated by reference, the rule you name in the contract is legally binding. Writing 'FOB Shenzhen' or 'CIF Hamburg' into a proforma invoice is enough to bind both parties to the ICC's definition — which is why misusing a term is expensive.
The 11 rules in plain language
Group E (departure): EXW — buyer collects the goods at the seller's premises; buyer bears nearly all cost and risk. Group F (main carriage unpaid): FCA, FAS, FOB — seller delivers to a carrier or vessel chosen by the buyer. Group C (main carriage paid): CFR, CIF, CPT, CIP — seller pays the main freight but risk transfers earlier, at shipment. Group D (arrival): DAP, DPU, DDP — seller bears the costs and risks of delivery to the destination; DDP adds duty and taxes.
The buyer's practical takeaway: the more letters after the 'D', the more the seller handles — and the higher the price should be, because the seller prices in the extra risk. A suspiciously low DDP quote usually means the seller underestimates destination-side costs and will invoice you for the difference later.
The three most expensive mistakes
1) Treating EXW as a door price — with EXW, the buyer arranges everything from the factory gate, including export customs. 2) Confusing FOB with 'delivered' — under FOB, risk transfers when the goods are on board the vessel; the buyer pays for ocean freight and insurance. 3) Assuming CIF includes insurance covering everything — CIF requires only minimum insurance cover (Institute Cargo Clauses C), which excludes many common perils.
자주 묻는 질문
EXW or FOB — which should I choose?
For most importers with their own freight forwarder, FOB (or FCA) is the sweet spot: the seller handles export formalities and delivers to the vessel, and you control the ocean leg. EXW only makes sense when you have a local agent in the seller's country — otherwise you are paying someone to do what the seller could do cheaper.
What are the risks of DDP?
Under DDP the seller bears destination customs and taxes, which is convenient for the buyer — but if the seller misdeclares value or HS code, the buyer (as importer of record) can still face liability, and delays at customs are harder to control from the seller's side. Get the seller's written commitment on duties, taxes and clearance timelines, and specify that customs clearance is a condition of the DDP price.
Does Incoterms transfer ownership of the goods?
No. Incoterms only allocate costs, risks and responsibilities for delivery. Ownership (title) transfer is governed by the sales contract and applicable law — which is why payment terms (T/T, L/C) and reservation-of-title clauses matter independently of the Incoterms rule you choose.
이 가이드는 일반적인 상업 정보이며 법률, 세무, 통관 자문이 아닙니다. 실행 전에 관세사, 시험기관 또는 법률 전문가와 요건을 확인하십시오.
믿을 수 있는 소싱 파트너가 필요하신가요?
PRIMELINK TECHNOLOGY는 중국 인증 공장에서 고품질 제품을 조달하도록 돕고 OEM/ODM 및 투명한 물류를 지원합니다.