Incoterms 2020 are ICC trade terms that split costs and risk between seller and buyer. EXW leaves almost everything to you, including export clearance. FCA and FOB hand over at a carrier or ship. CIF adds seller-paid freight and insurance, but risk still passes at loading. DAP delivers to your named place. Name the rule, place and edition in your contract.
Buyer guide
Incoterms 2020 for sourcing from India: EXW, FCA, FOB, CIF and DAP compared
Incoterms decide who pays for each step of a shipment and who carries risk at each point. This guide compares five common rules in plain English for buyers sourcing from India.
What Incoterms 2020 are and are not
Incoterms are trade terms published by the International Chamber of Commerce (ICC). They say who handles which tasks, costs and risks when goods move from seller to buyer [1]. The 2020 edition took effect on 1 January 2020 and has eleven three-letter rules [1].
They are not law. They apply only if the contract expressly names them [2]. Write the rule, the place and the edition, for example "FOB Mumbai, Incoterms 2020".
The rules cover delivery, risk, costs and who clears customs. They do not settle price or payment terms. The ICC text on EXW, for example, deals only with delivery, risk, costs and clearance, and says nothing on title [5]. Settle those points in your purchase order or contract.
Cost and risk: two separate questions
Buyers often mix up two ideas. The first is who pays for each step. The second is where risk passes, meaning who bears loss or damage from that point on. Under most rules these two points are close, but they are not always the same place.
Think of the journey as steps: packing, loading at the factory, export clearance, freight to the port, loading on the ship, sea freight, insurance, import clearance, delivery to your door. Each rule draws a line. Steps before the line are the seller's. Steps after it are yours.
The rules fall into four groups. E is departure (EXW). F means main carriage is unpaid by the seller (FCA, FOB). C means main carriage is paid by the seller (CIF). D is arrival (DAP) [2].
EXW: Ex Works
Under EXW the seller places the goods at your disposal at a named place. That may or may not be its premises [5]. Delivery does not require loading or export clearance [5].
- The buyer arranges and pays carriage, and handles export formalities, duties and taxes [5].
- Risk passes at delivery. If the seller loads the goods, the buyer may arguably bear the risk during loading, so agree this in advance [5].
- Name a precise point. If you do not, the seller may pick the point that suits it best [5].
The ICC Academy says EXW is most suitable for domestic trade. It strongly encourages FCA instead when goods cross a border, because complications can arise in relation to the export of the goods [4]. Ask early who will act as exporter of record and file the export documents.
FCA: free carrier
Under FCA the seller delivers the goods to the carrier you name, or loads them onto your collecting vehicle if delivery is at its premises [4]. The seller handles export clearance [4][6]. Risk passes to you on delivery [3].
FCA works for any mode of transport, including multimodal shipments [4]. DSV calls it the preferred choice for containerised goods [3]. If you want the seller to keep the loading risk and the export paperwork, FCA is the usual alternative to EXW [4].
FOB and CIF: sea freight terms
FOB and CIF are for sea and inland waterway transport only [2]. Under FOB the seller clears the goods for export and loads them on the vessel at the named port. Risk passes to you once they are on board [3].
Under CIF the seller also pays freight to the named destination port and arranges insurance, with the buyer as beneficiary [6]. Risk still passes to the buyer on board at the departure port [6]. So the seller pays for the sea leg, but you carry the risk on it. That is why the insurance matters.
DSV advises FCA instead of FOB for containerised goods, and CIP instead of CIF for bulk or non-containerised cargo [3]. Many orders ship in containers, by air or by courier, so check which rule really fits.
DAP: delivered at place
Under DAP the seller pays carriage to the named place and bears risk until the goods are ready for unloading there [3][6]. You unload at your own risk and cost [6]. You handle import clearance and pay import duties and taxes [3][6].
With DAP the seller arranges carriage to your named place, but it does not mean the price is all-in. Duties and taxes stay with the buyer. Ask the seller to state exactly which charges are in the quote.
The table below compares all five rules. It is a simplification, and the full ICC text is the authority for each.
| Rule | Export clearance | Main freight paid by | Risk passes to buyer | Transport mode |
|---|---|---|---|---|
| EXW | Buyer [5] | Buyer [5] | When goods are placed at buyer's disposal at the named place [5] | Any mode [2] |
| FCA | Seller [4] | Buyer [6] | On delivery to the buyer's carrier, or loaded at seller's premises [4][6] | Any mode [2] |
| FOB | Seller [3] | Buyer [7] | When loaded on the vessel at the named port [3] | Sea and inland waterway only [2] |
| CIF | Seller [7] | Seller, with insurance [6] | On board at the departure port [6] | Sea and inland waterway only [2] |
| DAP | Seller [6] | Seller [6] | At the named place, ready for unloading [3] | Any mode [2] |
Import clearance, duties and taxes stay with the buyer under all five rules (ICC library texts [5][7]; [3] and [6] for DAP and CIF). Guides describe these rules in slightly different words, so check the ICC text.
A worked example
Imagine a buyer in Dubai ordering 500 framed prints from a factory in Noida. The numbers below are made up only to show who pays what.
- EXW Noida: The factory quote covers goods only, say 100 cost units. The buyer arranges collection and the export formalities, and pays freight, insurance and import duty. The buyer carries risk from the pickup point, including loading.
- FCA Noida (or a named terminal): The quote may rise slightly, say to 102, because the seller now loads and clears the goods for export. The buyer still pays main freight and insurance.
- CIF a named sea port: The quote might read 120 because it includes freight and insurance. The buyer pays import clearance, duties and taxes and delivery from the port, but carries risk once the goods are on board.
- DAP Dubai warehouse: The quote might read 130. The buyer pays import clearance, duties and taxes, and unloading, and the seller carries risk until arrival.
A higher number does not mean a worse deal. It means the seller is doing more. Compare quotes on the same rule and the same named place.
How to choose and what to confirm
- Decide who you trust to manage export clearance and freight. If you have your own forwarder, EXW or FCA can work.
- Match the rule to the transport. Use sea-only rules only for sea freight [2].
- Name a precise place and the edition. A vague place leaves the choice of point to the seller under EXW [5].
- Ask who insures the goods and who is the beneficiary.
- Ask who handles import duties, taxes and customs paperwork at your end.
Rules and practice change, and forwarders sometimes describe them differently. Confirm the exact obligations in the ICC text, and with your forwarder or accountant. This guide is general information and is not legal, tax or customs advice.
How this applies when you work with us
For the full detail on EXW Noida, see our EXW Noida guide.
Further reading
Further reading
- Incoterms Rules, ICC (International Chamber of Commerce). iccwbo.org
- Overview of the Incoterms Rules, gmp-compliance.org. gmp-compliance.org
- What are Incoterms, DSV. dsv.com
- Incoterms 2020: EXW or FCA, ICC Academy. academy.iccwbo.org
- EXW Ex Works guidance note, ICC library (Incoterms 2020 text). library.iccwbo.org
- Incoterms rules explained: allocation of risk, cost and responsibility, Trade Treasury Payments. tradetreasurypayments.com
- Incoterms 2020 rules for sea and inland waterway transport (ICC library, chapter 5), International Chamber of Commerce. library.iccwbo.org
FAQ
Questions buyers ask
What is the difference between EXW and FOB?
Under EXW the buyer collects from the seller's place and handles export clearance, freight and risk from there. Under FOB the seller clears the goods for export and loads them on the ship at the named port, and risk passes once they are on board. FOB suits sea freight only.
Why do guides suggest FCA instead of EXW for exports?
Under EXW the buyer must handle export formalities, which can complicate things for both sides. The ICC Academy strongly encourages FCA for goods crossing a border. Under FCA the seller completes export clearance and, at its own premises, loads the goods onto your collecting vehicle.
Does CIF mean the seller carries the risk until the goods arrive?
No. Under CIF the seller pays freight and arranges insurance to the destination port, but risk passes to the buyer once the goods are on board at the departure port. Check that the insurance names you as beneficiary and that its cover suits your goods.
Who pays import duty under DAP?
The buyer. Under DAP the seller pays carriage to the named place and carries risk until the goods are ready for unloading. You unload, clear customs at your end, and pay import duties and taxes. Ask the seller to confirm in writing what the quoted price includes.
Do Incoterms say when I own the goods?
Not in the ICC text on EXW, which deals only with delivery, risk, costs and clearance. Incoterms also do not set price or payment terms. Put ownership transfer, payment and dispute rules in your contract or purchase order, and take legal advice if the order is large.
Do I have to use Incoterms 2020, or can I use an older edition?
Incoterms apply only if the contract names them. You can name the edition you prefer, but the 2020 edition is the most recent one and took effect on 1 January 2020. Whatever you choose, write the rule, the named place and the edition in the contract.
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