1. EXW – Ex Works

Definition:

The seller makes goods available at their premises (factory, warehouse, etc.). The buyer takes on all costs, risk, and responsibility from that point onward.

Seller’s Responsibilities:

Make goods available for pickup
Provide basic documents

Buyer’s Responsibilities:

Origin inland transport, export clearance, freight, insurance, import clearance, and final delivery

When to Use EXW:

When the buyer has strong logistics capability in the seller’s country
Common in domestic sales, less practical for international shipments

Example:

A buyer in Japan purchases electronics from a supplier in Canada. The goods are made available at the supplier’s warehouse in Toronto, and the buyer arranges pickup, export customs, and international transport.

2. FCA – Free Carrier

Definition:

The seller delivers goods to the carrier (chosen by the buyer) at a named place — such as a terminal, port, or forwarder’s warehouse. Risk transfers at that point.

Seller’s Responsibilities:

Export clearance
Delivery to agreed location/carrier

Buyer’s Responsibilities:

Main carriage, insurance, import clearance, and final delivery

When to Use FCA:

Highly flexible; ideal for containerized shipments, air shipments
Can be used at inland points as well as ports/airports

Example:

A German manufacturer delivers machinery to the buyer’s forwarder at Frankfurt Airport. Once the cargo is handed over, responsibility shifts to the buyer.

3. CPT – Carriage Paid To

Definition:

The seller arranges and pays for carriage to a named destination. However, risk transfers once the goods are handed to the main carrier, responsible for the longest leg.

Seller’s Responsibilities:

Export clearance
Inland transport and freight to destination point

Buyer’s Responsibilities:

Insurance (if desired)
Risk after goods handed to main carrier
Import clearance and onward delivery

Key Point: Costs and risks don’t transfer at the same place.

Example:

A clothing supplier in Turkey ships garments to a warehouse in London. The seller pays freight to London, but risk passes once the cargo is handed over to the airline.

4. CIP – Carriage and Insurance Paid To

Definition:

Same as CPT, but the seller also provides insurance coverage (minimum level under Incoterms 2020: Institute Cargo Clauses A).

Seller’s Responsibilities:

Export clearance, freight, and insurance up to destination

Buyer’s Responsibilities:

Risk after goods handed to main carrier
Import clearance and local delivery

Example:

An electronics exporter in South Korea ships laptops to New York under CIP. The seller arranges freight and insurance coverage, protecting the buyer during international transit.

5. DAP – Delivered At Place

Definition:

The seller delivers goods to a named place in the buyer’s country, ready for unloading. This is typically to the Buyer’s door or warehouse.

Seller’s Responsibilities:

All transport costs to the named place
Export clearance

Buyer’s Responsibilities:

Unloading goods
Import clearance, duties, and taxes

Example:

A French wine exporter delivers goods to the buyer’s distribution center in Toronto. The buyer arranges customs clearance and pays duties, but the seller handles transport up to the facility.

6. DPU – Delivered at Place Unloaded

Definition:

The seller delivers and also unloads goods at the named place. This is the only Incoterm requiring the seller to unload at destination.

Seller’s Responsibilities:

Transport to named place
Export clearance
Unloading at final location

Buyer’s Responsibilities:

Import clearance, duties, and taxes

Example:

A construction equipment supplier in Italy ships a crane to a project site in Dubai. The seller delivers it to the site and arranges unloading, making it simple for the buyer.

7. DDP – Delivered Duty Paid

Definition:

The seller bears maximum responsibility — delivering goods to the buyer’s premises, with all duties and taxes paid.

Seller’s Responsibilities:

Export and import clearance
Freight, insurance, duties, taxes, and delivery to final destination

Buyer’s Responsibilities:

Unloading (unless agreed otherwise)

When to Use DDP:

Best for buyers who want a complete, turnkey solution
Less common in practice because of high risk for the seller

Example:

A US-based supplier sells spare parts to a buyer in Brazil. The seller arranges all logistics, pays customs duties, and delivers directly to the buyer’s warehouse in São Paulo.

Key Differences Between the Seven Terms

Final Takeaway

Incoterms for all modes of transport are the backbone of today’s global trade. They provide the flexibility needed for containerized, multimodal, and air shipments.

EXW/FCA are common when buyers want control.
CPT/CIP balance seller-arranged freight with earlier risk transfer.
DAP/DPU/DDP simplify delivery, offering buyers maximum convenience.

👉 In the next article of our series, we’ll explore how to choose the right Incoterm for your business — with practical tips and common mistakes to avoid.