EXW
Ex Works
Risk passes to the buyer when the goods are placed at the buyer's disposal at the named place of delivery, not loaded onto any collecting vehicle.
Any mode of transportICC · Incoterms® 2020
Incoterms® 2020: an in-depth guide to the 11 international trade rules
Incoterms® 2020 are the International Chamber of Commerce (ICC) rules that allocate delivery obligations, costs and risk between seller and buyer. Choosing the wrong rule can leave a company paying charges it never priced in, losing control of transport, or carrying the risk of loss without insurance. This guide covers what the rules are, all 11 terms, what changed in 2020, how to choose, and the mistakes we see most often in Vietnamese import and export practice.
Incoterms® 2020 responsibility matrix
The table below summarises which party bears the cost and responsibility for each step of the delivery chain under the 11 Incoterms® 2020 rules.
| Rule | Loading at seller's premises | Export clearance | Transport to port/terminal of departure | Loading onto main carriage | Main carriage | Cargo insurance | Unloading at destination | Import clearance | Import duties & taxes | Delivery to final destination |
|---|---|---|---|---|---|---|---|---|---|---|
| EXW | B | B | B | B | B | – | B | B | B | B |
| FCA | S | S | S | B | B | – | B | B | B | B |
| FAS | S | S | S | B | B | – | B | B | B | B |
| FOB | S | S | S | S | B | – | B | B | B | B |
| CFR | S | S | S | S | S | – | B | B | B | B |
| CIF | S | S | S | S | S | S* | B | B | B | B |
| CPT | S | S | S | S | S | – | B | B | B | B |
| CIP | S | S | S | S | S | S* | B | B | B | B |
| DAP | S | S | S | S | S | – | B | B | B | S |
| DPU | S | S | S | S | S | – | S | B | B | S |
| DDP | S | S | S | S | S | – | B | S | S | S |
- S Seller
- B Buyer
- S* Seller obligation (insurance)
- – Not required / negotiable
The 11 Incoterms® 2020 rules
FCA
Free Carrier
If the named place is the seller's premises, risk passes once the goods are loaded on the buyer's means of transport; at any other place, it passes when the goods, on the seller's means of transport and ready for unloading, are placed at the disposal of the buyer's carrier.
Any mode of transportFAS
Free Alongside Ship
Risk passes to the buyer when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment.
Sea and inland waterway onlyFOB
Free On Board
Risk passes to the buyer when the goods are on board the vessel nominated by the buyer at the named port of shipment.
Sea and inland waterway onlyCFR
Cost and Freight
Risk passes to the buyer when the goods are on board the vessel at the port of shipment, not at the destination port.
Sea and inland waterway onlyCIF
Cost, Insurance and Freight
Risk passes to the buyer when the goods are on board the vessel at the port of shipment; the buyer is protected through the insurance the seller has bought.
Sea and inland waterway onlyCPT
Carriage Paid To
Risk passes to the buyer when the seller hands the goods to the first carrier at the place of delivery in the country of export, unless the parties agree a specific later point.
Any mode of transportCIP
Carriage and Insurance Paid To
Risk passes to the buyer when the seller hands the goods to the first carrier at the place of delivery in the country of export; the buyer is protected by the insurance the seller has bought.
Any mode of transportDAP
Delivered at Place
Risk passes to the buyer when the goods, on the arriving means of transport and ready for unloading, are placed at the buyer's disposal at the named place of destination.
Any mode of transportDPU
Delivered at Place Unloaded
Risk passes to the buyer when the goods have been unloaded from the arriving means of transport and placed at the buyer's disposal at the named place of destination.
Any mode of transportDDP
Delivered Duty Paid
Risk passes to the buyer when the goods, cleared for import, on the arriving means of transport and ready for unloading, are placed at the buyer's disposal at the named place of destination.
Any mode of transportWhat are Incoterms?
Incoterms (International Commercial Terms) are three-letter trade terms published by the International Chamber of Commerce, first in 1936 and revised periodically since. The current edition, Incoterms® 2020, took effect on 1 January 2020. Each rule answers three core questions: where and when the seller delivers the goods, at what moment the risk of loss or damage passes to the buyer, and which party pays which costs (transport, loading and unloading, customs clearance, insurance).
Incoterms are not law. They bind the parties only when incorporated into the sales contract. Earlier editions such as Incoterms 2010 or 2000 do not automatically expire, so the contract should always state which edition applies. Incoterms® is a registered trademark of the International Chamber of Commerce.
What Incoterms cover and what they do not
Understanding the scope of Incoterms avoids the most common mistake: expecting a three-letter term to settle every issue in the contract. Incoterms 2020 organise each party's obligations into 10 articles (A1–A10 for the seller, B1–B10 for the buyer), including:
- The place and time of delivery (A2/B2) and the transfer of risk (A3/B3).
- Which party contracts for carriage and for insurance (A4/A5).
- The delivery or transport document the seller must provide (A6).
- Export, transit and import clearance obligations (A7/B7).
- Checking, packaging and marking (A8) and the allocation of costs (A9/B9).
- The notices each party must give the other (A10/B10).
Incoterms do not deal with the following matters, which the parties must agree in the contract or leave to the governing law:
- Transfer of ownership (title): the transfer of risk is not the same as the transfer of title.
- Price, method and timing of payment (T/T, L/C, documentary collection and so on).
- The contract of carriage: Incoterms say who contracts for carriage, but do not replace the bill of lading or the carrier's terms.
- Breach of contract, remedies, force majeure and dispute resolution.
- Quality, quantity and intellectual property in the goods.
A complete international sales contract always needs, side by side: an Incoterms rule with a precise named place, payment terms, a retention-of-title or ownership clause, the governing law and a dispute-resolution forum.
The 11 Incoterms 2020 rules in two groups
Incoterms 2020 contain 11 rules, which the ICC groups by mode of transport. Seven rules can be used for any mode of transport, including multimodal transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four rules are for sea and inland waterway transport only: FAS, FOB, CFR and CIF. These maritime rules are tied to the ship's side or the vessel itself, so they only make sense when the seller puts the goods directly alongside or on board, typically for bulk cargo.
| Code | Name | Common description | Mode | Risk passes to the buyer when |
|---|---|---|---|---|
| EXW | Ex Works | Goods made available at the seller's premises | Any mode | Goods are placed at the buyer's disposal at the seller's premises, not loaded |
| FCA | Free Carrier | Goods handed to the buyer's carrier | Any mode | Goods are delivered to the carrier nominated by the buyer at the named place |
| FAS | Free Alongside Ship | Goods placed alongside the vessel | Sea and inland waterway | Goods are placed alongside the ship at the named port of shipment |
| FOB | Free On Board | Goods loaded on board the vessel | Sea and inland waterway | Goods are on board the vessel at the named port of shipment |
| CFR | Cost and Freight | Seller pays sea freight | Sea and inland waterway | Goods are on board the vessel at the port of shipment |
| CIF | Cost, Insurance and Freight | Seller pays sea freight and insurance | Sea and inland waterway | Goods are on board the vessel at the port of shipment |
| CPT | Carriage Paid To | Seller pays carriage | Any mode | Goods are handed to the first carrier contracted by the seller |
| CIP | Carriage and Insurance Paid To | Seller pays carriage and insurance | Any mode | Goods are handed to the first carrier contracted by the seller |
| DAP | Delivered at Place | Delivered to destination, not unloaded | Any mode | Goods are ready for unloading on the arriving vehicle at the named place |
| DPU | Delivered at Place Unloaded | Delivered and unloaded at destination | Any mode | Goods have been unloaded at the named place of destination |
| DDP | Delivered Duty Paid | Delivered, import cleared, duties paid | Any mode | Goods are ready for unloading at destination, cleared for import and duty paid |
The E, F, C and D families
- E (EXW): the seller only makes the goods available at its own premises; the minimum obligation for the seller.
- F (FCA, FAS, FOB): the seller delivers to transport arranged by the buyer, and the buyer pays the main carriage. Risk and cost transfer at the same point in the country of export.
- C (CFR, CIF, CPT, CIP): the seller contracts and pays for main carriage to the destination, but risk passes to the buyer in the country of export. These are the rules with "two critical points".
- D (DAP, DPU, DDP): the seller bears all risks and costs until the goods reach the named destination; these are "arrival" contracts.
Key changes from Incoterms 2010 to Incoterms 2020
| Topic | Incoterms 2010 | Incoterms 2020 |
|---|---|---|
| Delivery at a terminal | DAT: delivered at terminal, unloaded | DPU: delivered at any agreed place, unloaded; listed after DAP |
| CIP insurance level | Minimum Institute Cargo Clauses (C) | Minimum Institute Cargo Clauses (A), the widest cover |
| CIF insurance level | Minimum ICC (C) | Unchanged at minimum ICC (C); parties may agree higher cover |
| On-board bill of lading under FCA | Not addressed | Parties may agree that the buyer instructs its carrier to issue an on-board B/L to the seller |
| Own means of transport | Third-party carrier assumed | FCA, DAP, DPU and DDP allow the seller or buyer to use its own transport |
| Security requirements | General reference | Security-related obligations and costs allocated explicitly in A4/A7 and A9/B9 |
| Allocation of costs | Spread across several articles | Consolidated in a single article A9/B9 for each rule |
Incoterms 2020 also add explanatory notes for users at the start of each rule and reorder the articles, moving delivery and transfer of risk to the front to underline their importance.
The "two critical points" of the C rules
The most misunderstood feature of CFR, CIF, CPT and CIP is that risk and cost transfer at two different places. Risk passes to the buyer when the goods are loaded on board (CFR, CIF) or handed to the first carrier (CPT, CIP) in the country of export. Yet the seller still has to pay carriage to the named port or place of destination.
Example: under CIF Rotterdam, if the vessel runs into a storm and the cargo is damaged at sea, the buyer in the Netherlands bears that risk, even though the Vietnamese seller paid freight to Rotterdam. The buyer claims under the insurance policy that the seller bought and assigned. For this reason a C rule should also name the port of shipment when the buyer needs certainty about where risk passes, for example "CFR Rotterdam, shipped from Cat Lai".
How to write an Incoterms rule correctly in a contract
An Incoterms rule is only complete with three elements: the rule code, a named place that is as precise as possible, and the edition.
- State the three-letter code: FOB, FCA, CIF and so on.
- Name the place according to the logic of the rule: for E and F rules it is the delivery place in the country of export; for C rules it is the port or place of destination; for D rules it is the destination.
- State the edition: "Incoterms® 2020".
- Where possible, specify the exact point: warehouse name, terminal, inland container depot (ICD), factory address.
Correct examples: "FOB Cat Lai, Vietnam, Incoterms® 2020"; "FCA Song Than ICD, Ho Chi Minh City, Vietnam, Incoterms® 2020"; "DAP ABC Warehouse, VSIP Bac Ninh Industrial Park, Vietnam, Incoterms® 2020". Incomplete or wrong examples: "FOB Vietnam" (no port), "CIF" (no place), "FOB Hamburg" when Hamburg is the destination port (FOB must name the port of shipment).
Containers: why FCA, CPT and CIP beat FOB, CFR and CIF
With containerised cargo the seller usually hands the container to the carrier at a container yard (CY), an inland depot or a CFS several days before the vessel sails. From that moment the seller has no control over the goods, yet under FOB, CFR or CIF the risk stays with the seller until the container is loaded on board. If the container is damaged in the yard or during handling, the seller carries a risk it cannot manage.
FCA, CPT and CIP solve this, because risk passes to the buyer when the goods are handed to the carrier, which is when the seller actually loses control. The ICC has recommended this for several editions. The usual objection is that a letter of credit demands an on-board bill of lading; Incoterms 2020 address this by letting the parties agree under FCA that the buyer will instruct its carrier to issue an on-board bill of lading to the seller.
Incoterms and customs valuation in Vietnam
Incoterms directly affect how value is declared on the customs declaration. Under Vietnam's customs valuation rules (Circular 39/2015/TT-BTC as amended), the customs value of exports is the selling price at the border gate of export, excluding international freight and insurance, which is effectively an FOB basis. The customs value of imports is the price actually paid up to the first port of import, including international freight and insurance, which is effectively a CIF basis.
In practice, when importing on EXW, FCA or FOB terms, the importer must add international freight and insurance (actual or as determined under the rules) to the declared value. When importing on DAP or DDP terms, costs incurred after the first port of import can be deducted if they are separately documented. When exporting on CIF or CFR terms, the declared value should exclude international freight and insurance. Commercial invoices should show the price of goods, freight and insurance separately to keep the declaration clean.
Choosing the right Incoterms rule: decision guidance
There is no single "best" rule. The right choice depends on each party's logistics capability, the mode of transport, the payment method and how much control the company wants to keep. Work through these questions:
- What is the mode of transport? For containers, air, road or multimodal moves, use the any-mode rules (FCA, CPT, CIP, DAP, DPU, DDP). Keep FAS, FOB, CFR and CIF for bulk cargo or goods loaded directly onto the vessel.
- Who has better freight rates and logistics capability? The party with strong carrier contracts and a reliable forwarder should arrange the main carriage.
- Who can handle customs? The seller should clear for export and the buyer for import, which is why FCA and DAP are usually more balanced than EXW and DDP.
- Is payment by letter of credit? Choose a rule that produces the right transport documents (on-board bill of lading, insurance document for CIF/CIP) and lets the seller control them.
- Who needs cargo insurance, and at what level? For high-value goods consider CIP (ICC A) or arrange your own cover rather than relying on CIF (ICC C).
- Who pays and handles charges at destination? Agree terminal handling charges, delivery order fees, demurrage and storage at the port of discharge to avoid disputes.
| Situation | Suggested rule |
|---|---|
| Vietnamese exporter shipping containers, buyer nominates the forwarder | FCA (seller's warehouse or ICD/port of export) |
| Vietnamese exporter shipping containers and wanting to control freight | CPT or CIP named destination |
| Bulk exports (rice, wood chips, clinker, steel coils) loaded directly onto the vessel | FOB, CFR or CIF |
| Importing high-value machinery, buyer wants control of insurance and transport | FCA at origin, buyer arranges insurance |
| Buyer has no logistics team and wants delivery to its warehouse | DAP (buyer clears import) |
| Seller is able to unload at the project site | DPU |
| Seller has an entity or partner able to act as importer in the buyer's country | DDP |
Incoterms and international payment
Incoterms and the payment method must be designed together. Under a letter of credit subject to UCP 600, banks examine documents only, so the delivery term must produce a set of documents the seller actually controls. Under EXW the seller rarely holds a bill of lading in its own name to present. Under CIF and CIP the credit will call for an insurance document that matches the risks, amount and currency required. Under the D rules the seller still carries the transit risk after presenting documents, which should be weighed when choosing the payment method.
Common mistakes when using Incoterms
- Using FOB, CFR or CIF for container, air or road shipments, so the risk point no longer matches how the goods are actually handed over.
- Omitting a precise named place or the Incoterms edition.
- Believing that CIF or CFR means the seller bears risk up to the destination port.
- Believing that the CIF seller must buy all-risks cover, when the minimum is only ICC (C).
- Choosing EXW when a foreign buyer cannot act as exporter in Vietnam, or DDP when the seller cannot act as importer in the buyer's country.
- Failing to agree port charges (THC, delivery order fees, demurrage and storage), leading to cost disputes at both ends.
- Treating the transfer of risk as the transfer of ownership or the trigger for payment.
- Adding variants such as "FOB stowed" or "CIF landed" without defining them in the contract.
If you are unsure which rule fits a specific shipment, the GLG team can compare the total landed cost under each option and point out where the risk needs to be insured before you sign.
Frequently asked questions
Can Incoterms 2010 still be used?
Yes. Incoterms are not law, so parties may still refer to Incoterms 2010 if they wish. It is better to use Incoterms® 2020 and always state the edition in the contract to avoid misunderstanding.
Which Incoterms rules are most common in Vietnam?
Vietnamese exporters still mostly sell FOB, while importers often buy CIF or CFR. For containerised cargo, FCA, CPT and CIP are a better fit in terms of risk and are recommended by the ICC.
Do Incoterms determine when ownership passes?
No. Incoterms only deal with the transfer of risk, costs and delivery obligations. Ownership is governed by the sales contract and the applicable law.
How do CIF and CIP differ on insurance?
Under Incoterms 2020, CIF only requires minimum cover on ICC (C) terms, while CIP requires the widest cover, ICC (A). Both require a minimum insured amount of 110% of the contract price.
Can an Incoterms rule be modified in the contract?
Yes, but the modification should be spelled out clearly, for example who pays loading costs or terminal handling charges. Non-standard abbreviations such as "FOB stowed" easily lead to disputes if they are not defined.
How do Incoterms affect customs declarations in Vietnam?
Exports are valued at the price at the border gate of export (effectively FOB), and imports at the price up to the first port of import (effectively CIF). So when buying FOB, FCA or EXW, the importer must add international freight and insurance to the declared value.
Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This content is for general guidance and does not replace legal or banking advice for a specific transaction.
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