Incoterms 2020: EXW, FOB, CIF, DDP Explained
Definition
Incoterms are standard trade terms published by the International Chamber of Commerce that set out, for a sale of goods, who arranges and pays for transport, insurance and customs, and the point at which risk passes from seller to buyer.
| Term | Incoterms (EXW, FOB, CIF, DDP) |
|---|---|
| In Hindi | इनकोटर्म्स (अंतरराष्ट्रीय वाणिज्यिक शर्तें) |
| Area | Business |
| Search phrase | incoterms |
| Try it | Letter of credit |
इनकोटर्म्स (अंतरराष्ट्रीय वाणिज्यिक शर्तें) — हिंदी में अर्थ
इनकोटर्म्स अंतरराष्ट्रीय वाणिज्य मंडल (ICC) द्वारा प्रकाशित मानक व्यापार शर्तें हैं, जो तय करती हैं कि माल की बिक्री में परिवहन, बीमा और कस्टम का प्रबंध और भुगतान कौन करेगा, और जोखिम विक्रेता से खरीदार को किस बिंदु पर जाता है।
The 11 Incoterms 2020 rules
Any mode of transport: EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), DDP (Delivered Duty Paid). Sea and inland waterway only: FAS (Free Alongside Ship), FOB (Free on Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight).
Always name the place with the term — 'FOB Mundra', 'CIF Jebel Ali', 'EXW Rajkot factory' — and the version, 'Incoterms 2020'.
The four most used
EXW: the buyer collects from your premises and handles everything, even export clearance — risky for Indian exporters, since you still need the shipping bill for GST refunds. FOB: you clear export and load on the vessel at the named port; risk passes once goods are on board. CIF: you also pay freight and minimum insurance to the destination port, but risk still passes at loading. DDP: you deliver to the buyer's door with import duty paid — maximum cost and risk for the seller.
FCA is often better than FOB for container cargo handed over at an inland depot, and CIP requires broader insurance cover than CIF.
Example
A Coimbatore pump exporter quotes 'FOB Chennai, Incoterms 2020': it pays trucking, export clearance and loading charges; the buyer in Dubai pays ocean freight, insurance and import duty, and bears the risk once the pumps are on board.
Related tools and guides
Frequently asked questions
What is the full form of Incoterms?
International Commercial Terms, published by the International Chamber of Commerce.
What is the difference between FOB and CIF?
Under FOB the buyer pays sea freight and insurance; under CIF the seller does. In both, risk passes when goods are loaded on the vessel.
How many Incoterms are there?
Eleven in Incoterms 2020 — seven for any mode and four for sea and inland waterway.
Do Incoterms decide when ownership passes?
No. They cover costs, risk and delivery. Transfer of title and payment are set by the sales contract.
Related terms
- Capex vs opexCapex (capital expenditure) is money spent on long-term assets such as machinery or buildings; it is capitalised and depreciated. Opex (operating expenditure) is the day-to-day cost of running the business — wages, power, rent — and is charged to profit in the year.
- Letter of credit (LC)A letter of credit (LC) is a bank's written undertaking, issued on behalf of a buyer, to pay the seller a stated amount once the seller presents documents that comply exactly with the LC's terms within the time allowed.
- MSME (Micro, Small and Medium Enterprises)MSME stands for Micro, Small and Medium Enterprises. From 1 April 2025 an enterprise is micro up to ₹2.5 crore investment and ₹10 crore turnover, small up to ₹25 crore and ₹100 crore, and medium up to ₹125 crore and ₹500 crore.