The Impact of Incoterms ® 2020 on Global Trade Explained
The impact of Incoterms® 2020 on global trade comes down to three things: clearer cost allocation, added security requirements, and a rename of one rule (DAT became DPU). If you’re shipping into or out of the UAE, the practical takeaway is simpler still — the term you choose in your sales contract decides who pays for freight, who arranges insurance, and exactly where risk shifts from seller to buyer. Get it wrong, and you can end up covering costs or losses you never expected to carry.
Understanding the incoterms is essential if you are shipping goods. These are the rules of commercial trade established by the International Chamber of Commerce (ICC) to be used in the sales contract. They are accepted by the governments and legal authorities around the globe. The latest version of the incoterms was published in 2020, coming in effect from January 1st, 2020. Whether you are working with a freight forwarding company in Dubai or coordinating directly with overseas buyers, these terms play a vital role in determining who pays what, and who bears the risk at every stage of the journey.
This guide breaks down what changed in the 2020 update, defines all 11 current Incoterms® rules, and gives you a practical way to pick the right one for your next shipment.
What are Incoterms and Why Were They Updated in 2020?
Freight Incoterms® are standardized trade terms published by the International Chamber of Commerce (ICC) that define how cost, risk, and delivery responsibilities are split between a buyer and a seller in an international sale.The Incoterms rules allocate transport, costs, and risk in international sales through eleven clauses; they do not govern ownership, payment, liability, or choice of law. They’ve been in use since the ICC first introduced them in 1936, and today they appear in around 90 percent of all international sales contracts.
The ICC reviews and revises the rules roughly every ten years to keep pace with how trade actually works. The Incoterms® 2020 revision addresses, among other things, increased security requirements, improved clarity on cost allocation, and insurance concerns raised by users of the previous 2010 edition. Incoterms® 2020 was released on 10 September 2019 and took effect from 1 January 2020, developed with input from a large international drafting group and thousands of comments gathered from trade practitioners.
One point worth flagging: your existing contracts aren’t automatically affected. Each contract is governed by the version of Incoterms rules referred to within it — if a contract only says “Incoterms” without a year, the version in force at the time of contracting typically applies in a dispute. Best practice going forward is to always specify “Incoterms® 2020” explicitly.
What Changed in Incoterms® 2020 vs. 2010?
This is the part most guides skip — and it’s the actual “impact” behind the keyword. Here’s what’s genuinely new:
1. FCA gained an on-board bill of lading option
Many exporters kept using FOB for container shipments purely because their bank’s letter of credit required an on-board bill of lading, even though FOB isn’t the right term once a container is involved. Incoterms® 2020 changed FCA to let buyer and seller agree that the seller can obtain an on-board bill of lading, closing that gap and making FCA a workable substitute for FOB in container trade.
2. CIF and CIP now require different insurance levels
CIF keeps the same insurance requirement as under the 2010 rules, while CIP now requires the seller to obtain a higher level of insurance coverage, reflecting that CIF is more commonly used for bulk commodity trades and CIP for manufactured goods, which typically need broader protection. If your contracts reference CIP, it’s worth checking whether your current insurance arrangement still meets the updated standard.
3. DAT was renamed DPU
DAT (Delivered at Terminal) has been replaced by DPU (Delivered at Place Unloaded). Because DAT limited delivery to a terminal, the 2020 revision generalized the term so delivery can occur at any named place, not just a terminal. If you’re still using “DAT” in contracts or documentation, it needs to be updated to DPU.
4. Security requirements were built into the rules
Transport security requirements have become more common in international trade, and Incoterms® 2020 reflects this by detailing security-related obligations for each rule, for example, CPT now includes a specific requirement that the seller comply with transport security rules to the destination. Examples of the kind of requirements now addressed include the International Ship and Port Facility Security Code, the U.S. Importer Security Filing, the Container Security Initiative, and similar frameworks. These add cost and potential delay if a party doesn’t comply.
5. Parties can now use their own transport, not just a third-party carrier
Incoterms® 2020 recognizes that sellers or buyers increasingly arrange carriage using their own means of transport rather than contracting a third party, and this option was built into the FCA, DAP, DPU, and DDP rules.
The 11 Incoterms® 2020 Rules, Grouped by Category
The 11 rules split into four categories based on when and where the seller’s responsibility ends.
Category E (Departure)
Category E includes only one term, i.e.,
1. EXW (Ex Works or Ex Warehouse)
Under EXW, the seller places goods at the buyer’s disposal at their own premises or at another specified location such as a warehouse in Dubai used for staging export cargo. The seller is neither responsible for loading the goods onto any vehicle nor for clearing them for export.
The seller makes the goods available at their own premises (or another named place, such as a warehouse used for staging export cargo) and isn’t responsible for loading them or clearing them for export. This is the lowest level of seller responsibility across all 11 rules, the buyer effectively arranges the entire shipment from pickup onward.
This term showcases that the seller has the minimum responsibility. Particularly, the seller is required to deliver the goods to the buyer at a named place on agreed time (it usually s seller’s place of business, or could be other particular location, such as a warehouse).
If the delivery place is not specified in the contract or several places of delivery can be envisaged, the seller has the right to choose a choose a point that best suits them. The products under this category can be transported using any mode of transportation.
Before the goods are delivered to the named place in the sales contract, the seller is responsible for bearing the risk of damage and loss. After the delivery, the responsibility automatically shifts to the buyer. For importers and exporters, this translates to working with a freight forwarder who arranges the whole shipment, from pickup to delivery.
Below are some of the most frequently asked questions about the EXW incoterm:
- What does EXW in shipping terms mean?
In shipping terms, EXW means that the seller will deliver the product to a named place; however, the buyer is responsible for all the transportation costs.
- What is the difference between FOB and EXW?
The EX-Work requires the seller to make the products available to the designated place where the buyer incurs transportation cost; whereas in FOB, the seller is responsible for the goods until they are loaded on the vessel, and then the buyer is liable for everything.
- What is the EXW rule?
The Ex Works-rule means a shipping arrangement where seller will make a product available at a specific location, while buyers pay for transportation costs.
- What are the risks of EXW?
The main risk of EXW is for the buyer, who bears all costs and risks involved in transporting goods from the seller’s premises. This includes responsibilities for loading goods, arranging transport, and handling customs procedures, which can be complex if the buyer is unfamiliar with local regulations.
- Who pays for shipping on EXW?
Under EXW terms, the buyer is responsible for all shipping costs from the seller’s premises to the final destination.
- What are the benefits of EXW?
EXW offers simplicity for the seller, minimizing their risk and responsibility as they only need to make the goods available at their premises. This can reduce the seller’s logistics and administrative costs.
- Does EXW include customs?
No, EXW does not include customs clearance; the buyer must handle all duties, taxes, and customs procedures required for exporting and importing the goods.
- Can you use EXW for export?
Yes, EXW can be used for export, but it places significant responsibility on the buyer for arranging all export formalities, making it less common in international trade compared to other Incoterms.
- How do you calculate Ex Works price?
The Ex Works-price is calculated by adding up all costs associated with producing and making the goods ready for collection at the seller’s premises, excluding any costs involved in loading onto vehicles and subsequent transportation.
Category F (Main Carriage Unpaid)
This category includes the following terms:
2. Free Carrier (FCA)
The FCA term indicates that the seller is responsible for delivering the goods at the named place to the carrier; the place could be a warehouse or terminal. The supplier is also responsible for the packaging and transport at the origin. Once the seller hands over the goods to the carrier, risks transfer to the buyers. This incoterm is applicable for all the shipping modes.
The FCA incoterm requires the sellers to clear the goods for exports where applicable. However, they are not obliged to clear goods for import. Furthermore, no insurance responsibility is placed on the buyer or the seller.
Below are some of the most frequently asked questions about Free Carrier (FCA) :
- Who pays for FCA shipping?
In FCA (Free Carrier) shipping, the buyer is responsible for arranging and paying for the transportation of goods from the seller’s premises to the final destination. The seller delivers the goods to a carrier appointed by the buyer.
- Is FCA the same as DAP?
FCA (Free Carrier) is not the same as DAP (Delivered at Place). In FCA, the seller is responsible only for delivery to the carrier, while in DAP, the seller is responsible for delivering goods to the named place of destination and assumes all risks until the goods are ready for unloading by the buyer.
- Is FCA and EXW the same?
FCA and EXW (Ex Works) are not the same. Under EXW, the buyer assumes full responsibility and risk for transporting goods from the seller’s premises, whereas in FCA, the seller delivers the goods to a carrier chosen by the buyer, reducing some of the buyer’s logistical burdens.
- What is a FCA carrier?
An FCA carrier is the transporter chosen by the buyer in a Free Carrier agreement to receive goods from the seller and transport them to their final destination. The carrier takes responsibility for the goods after the seller has delivered them to a specified location.
- What are the disadvantages of FCA?
The disadvantages of FCA include potential confusion about the exact point of delivery, which can lead to disputes over who was responsible for the goods at what time. Additionally, the buyer has to manage international transportation and customs clearance, which can be complex and costly if they lack experience.
- Is FCA better than FOB?
Whether FCA is better than FOB (Free on Board) depends on the specifics of the transaction. FCA is generally more flexible for buyers, allowing them to choose the carrier and potentially reducing costs associated with loading goods at the origin. FOB, however, is better for buyers who prefer the seller to handle all risks and costs until the goods are loaded on board a vessel.
- Why is the Free Carrier important?
Free Carrier (FCA) is important because it offers flexibility in international trade by allowing the buyer to have control over the main carriage and choose their preferred carrier. This can optimize logistics and cost management, particularly for air and rail transport, where FOB terms are not applicable.
3. Free Alongside Ship (FAS)
Here the seller delivers the goods alongside the vessel at the named port of shipment and handles export clearance. Once the goods are alongside the ship, risk and further transport costs pass to the buyer. FAS is designed for sea and inland-waterway transport only.
In other words, The FAS incoterms means that the buyer is responsible for picking up the goods from the factory, clearing them for exports, and then delivering them to the departure location, which is usually the ship loading dock. Once the goods are placed alongside the ship, the risk transfers to the buyer, who is then responsible for the transit’s main leg and every other step in the delivery. The seller is responsible for the clearance of goods for export and not import.
Under the FAS Incoterm, the seller is not responsible for arranging or paying for the transportation of goods; these responsibilities fall on the buyer from the designated port of shipment. This term is not ideal for situations where goods are simply transferred to a carrier at a location like a container terminal. The seller is also required to clear the goods for export but does not need to handle import clearance or secure insurance.
Below are some of the most frequently asked questions about Free Alongside Ship (FAS):
- What does FAS stand for Free Alongside Ship?
FAS stands for “Free Alongside Ship,” an Incoterm where the seller delivers the goods to a designated port alongside a vessel chosen by the buyer. The seller is responsible for the cost and risk until the goods are placed alongside the ship.
- What is FAS in sea freight?
In sea freight, FAS requires the seller to deliver goods alongside the vessel at a specified port of shipment. The seller must clear the goods for export, meaning that all customs formalities and duties must be completed on the seller’s side before delivery.
- What does alongside mean in shipping terms?
“Alongside” in shipping terms means that the goods are placed within reach of the transport vessel’s loading equipment. This typically involves positioning the goods on the dock or within a designated area next to the vessel, ready for loading.
- Who pays freight on FAS?
Under FAS terms, the buyer pays for the cost of loading the goods onto the vessel and all subsequent transportation costs after the goods have been delivered alongside the ship.
- Why is FAS an incoterm?
FAS is an Incoterm to provide clarity and set standardized rules on the costs, risks, and responsibilities of buyers and sellers during the shipment of goods in maritime transport. It helps specifically in transactions where buyers prefer to control the shipping and insurance once goods reach the port.
- What is the difference between free on board and free alongside ship?
The primary difference between Free on Board (FOB) and Free Alongside Ship (FAS) concerns where responsibility and risk transfer from seller to buyer. In FOB, the risk transfers once the goods have been loaded onto the shipping vessel. In contrast, under FAS, the risk transfers when the goods are placed alongside the vessel at the port of shipment, before being loaded onto the vessel. This means in FAS, the buyer assumes risk and additional loading costs after the goods are alongside the ship, whereas in FOB, the seller bears all costs and risks until the goods are loaded onto the ship.
4. Free on Board (FOB)
FOB is one of the most widely used Incoterms in international trade, particularly for sea freight services in Dubai and other major GCC export hubs. FOB shows that the seller is responsible for packaging, pickup, and delivery of goods to the vessel at the shipment port. Once the goods are on-board on the vessel, the risk of every other step transfer to the buyers. The sellers have the responsibility of export clearance and not the import.
In short, The seller delivers the goods on board the vessel at the port of shipment and handles export clearance; risk transfers once the goods are loaded. FOB remains one of the most widely used terms for sea freight in the region, but it is not designed for container shipments, more on that below.
Under the FOB Incoterm, similar to the FSA Incoterm, the seller is not required to arrange or pay for the transportation of goods; these costs are the buyer’s responsibility from the specified port of shipment. Additionally, neither the seller nor the buyer is required to secure insurance.
Below are some of the most frequently asked questions about Free on Board (FOB):
- What does FOB stand for free on board?
FOB stands for “Free on Board,” an Incoterm where the seller delivers goods on board a ship chosen by the buyer. The risk and responsibility transfer from the seller to the buyer as soon as the goods pass the ship’s rail at the shipment port.
- What are the free on-board FOB prices?
Free On Board (FOB) prices refer to the cost of goods sold that includes all expenses up to the point where the goods are loaded onto the shipping vessel at the port of departure. This price excludes any further transportation or insurance costs beyond the initial loading.
- What do the terms FOB free on-board shipping point mean?
FOB shipping point, also known as FOB origin, means that the buyer takes responsibility for the goods once they are shipped, bearing all the transport costs and risks of loss from that point forward. The seller’s responsibility ends once the goods are transferred to the carrier.
- What does the term FOB free on board include?
The term FOB includes the seller’s responsibility to get the goods to the port of departure and load them onto the specified vessel. It covers all costs (including export fees and duties) and risks up to the point the goods are loaded on board the ship.
- Is CIF better than free on board FOB?
Whether CIF (Cost, Insurance, and Freight) is better than FOB depends on the needs of the buyer and seller. CIF can be more convenient for the buyer as it includes shipping costs, insurance, and freight to the destination port. However, FOB gives the buyer more control and possibly lower costs if they have better shipping arrangements or prefer to handle transit risks and insurance themselves.
- How do you calculate FOB value?
FOB value is calculated by adding up all costs associated with getting the goods ready for shipment and loading them onto the vessel at the port of departure. This includes manufacturing costs, packing, local transportation, and loading charges. It does not include international shipping costs, insurance, or any costs beyond the point of loading.
5. Category C (Main Carriage Paid)
The following terms comes under this category:
Carriage Paid to (CPT)
The Carriage Paid to (CPT) term indicates the responsibility of the seller to bear the cost of transporting goods to the destination. After the product’s delivery, the responsibility shifts to the buyer. This contract does not impact on the transfer of risk from the seller to the buyer at the point of delivery. However, if there is an obligation to bear costs relating to the unloading of goods at the point of delivery in the contract, the seller will be responsible for it, unless otherwise good.
This term also requires that the seller clear goods for export, where needed, and takes responsibility for all related risks. However, the seller is neither obliged for import clearance nor for concluding an insurance contract.
Below are some of the most frequently asked questions about Carriage Paid to (CPT) :
- What is CPT carriage paid to Incoterm?
CPT (Carriage Paid To) is an Incoterm where the seller pays for the transportation of goods to a specified destination, but the risk transfers to the buyer once the goods have been handed over to the first carrier.
- Who pays duty on CPT Incoterms?
Under CPT Incoterms, the buyer is responsible for paying any duties, taxes, and other charges when the goods arrive at the destination country.
- What are carriage charges in Incoterms?
Carriage charges in Incoterms refer to the costs associated with the transportation of goods from the seller to the agreed destination, which are borne by the seller in terms such as CPT and CIF.
- What is CPT Incoterms 2020 insurance?
Under CPT Incoterms 2020, insurance is not explicitly required for the seller to procure; the obligation to insure the goods falls on the buyer, unlike CIF where the seller must provide insurance up to the destination port.
- What is the CPT Incoterm rule?
The CPT Incoterm rule stipulates that the seller delivers the goods to a carrier or another person nominated by the seller at an agreed place. The seller must contract for and pay the costs of carriage necessary to bring the goods to the named destination.
- What is the difference between CIF and CPT?
The difference between CIF (Cost, Insurance, and Freight) and CPT is that in CIF, the seller also has to arrange and pay for insurance against the buyer’s risk of loss or damage to the goods during transit, which is not a requirement in CPT.
- What is an example of Carriage Paid To?
An example of Carriage Paid To (CPT) could be a scenario where a German machinery manufacturer agrees to sell and transport equipment to a buyer in Canada. The seller arranges and pays for shipping to Toronto, but the risk passes to the buyer when the goods are handed over to the first carrier in Germany.
- What is Carriage Paid To in terms of trade?
Carriage Paid To (CPT) in terms of trade means that the seller delivers the goods and pays the freight to bring the goods to a specified destination. Risk transfers to the buyer once the goods are handed over to the first carrier.
6. Carriage and Insurance Paid to (CIP)
This incoterm is similar to CPT with a slight difference that in CIP, the seller also arranges and pays for insurance coverage in case of any loss or damage to the goods during transit to the point of delivery.
The insurance details should be made with the compliance to Clause A of the Institue Cargo Clauses, or similar ones, and shall cover at least contractual price + 10%. Before the incoterms update in 2020, only minimum insurance coverage was applicable according to Clause C of the Institue Cargo Clauses. However, the parties can still agree on lower coverage, if needed. The seller has also an obligation to provide insurance policy or certificate to the buyer.
CIP applies to all modes of transport, making it a versatile choice for multimodal shipments including air freight services movements where comprehensive cover is especially important.
Clause A of the Institue Cargo Clauses
Clause (A) of the Institute Cargo Clauses offers comprehensive “All Risks” coverage for cargo, insuring against all loss or damage during transit, except for explicitly excluded risks.
Clause C of the Institue Cargo Clauses
Clause (C) of the Institute Cargo Clauses provides basic coverage for cargo against major perils like fire and collision, offering minimal protection compared to Clauses (A) and (B).
Below are some of the most frequently asked questions about Carriage and Insurance Paid to (CIP):
- Who claims insurance in CIP?
In CIP (Carriage and Insurance Paid to) Incoterms, the buyer is typically the party who claims insurance since the seller is required to obtain insurance only up to the named place of destination. After delivery, any insurance claims arising from transport risks during the remainder of the journey to the final destination are generally filed by the buyer.
- Who pays for insurance in Incoterms?
Who pays for insurance in Incoterms depends on the specific term agreed upon. For example, under CIF (Cost, Insurance, and Freight) and CIP terms, the seller pays for insurance covering transportation to the destination. In other terms like FOB or EXW, the buyer is typically responsible for arranging and paying for insurance.
- What is a CIP in insurance?
A CIP in insurance refers to the Incoterm “Carriage and Insurance Paid to” where the seller pays for both the transport and minimum insurance cover to the named place of destination, while the risk transfers to the buyer once the goods are handed over to the first carrier.
- What is the carriage paid to in Incoterms?
Carriage Paid To (CPT) in Incoterms means the seller pays for transporting goods to a specified destination. The seller is responsible for arranging and paying for carriage, but risk transfers to the buyer as soon as the goods are handed over to the first carrier.
- What insurance coverage is required under CIF or CIP Incoterms rules?
Under CIF or CIP Incoterms rules, the seller is required to provide insurance coverage against the buyer’s risk of loss or damage to the goods during the transportation. CIF requires a minimum of Clause C insurance, and CIP requires a minimum of Clause A (All Risks) insurance, according to Incoterms 2020.
- Which Transport Types Qualify for CIP?
All types of transport qualify for CIP Incoterms, making it versatile for various shipping methods including road, rail, sea, and air transport. This universality is part of what makes CIP a popular choice for international trade agreements where multiple modes of transport might be involved.
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7. Cost and Freight (CFR)
This incoterm specifies the seller’s responsibility for transportation at the port of origin and for goods loading onto the vessel. It also puts responsibility for transportation to the destination port; however, they are not liable for this portion of the journey, as the risk transfers to the buyers when goods are loaded at the port of origin.
Despite the transfer of risk at the port of delivery, the seller must arrange and pay for transportation to the port of destination and cover any unloading costs at that port, unless otherwise agreed. The seller is also responsible for export clearance of the goods but not for import clearance. Neither the seller nor the buyer is required to obtain insurance.
Simply, the seller pays for transport to the destination port and loading, but risk transfers to the buyer once the goods are loaded onto the vessel at the port of origin, well before arrival. No insurance obligation applies to either party.
Below are some of the most frequently asked questions about CFR (Cost and Freight):
- Who pays freight under CFR?
Under CFR (Cost and Freight), the seller is responsible for paying the costs and freight necessary to bring the goods to the named port of destination. However, the risk is transferred to the buyer once the goods are loaded onto the shipping vessel at the port of departure.
- What does the CFR Incoterms rule mean Cost and Freight?
CFR, or Cost and Freight, is an Incoterm where the seller must cover the costs, freight, and insurance necessary to ship the goods to a specified port of destination. However, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the goods have been delivered onboard the vessel, are transferred from the seller to the buyer.
- What does CFR mean in cargo?
In cargo shipping, CFR means that the seller pays the freight charges to transport goods to the destination port. The seller arranges and pays for transportation but does not cover the risk of loss or damage once the goods are onboard the ship.
- Is CFR cheaper than CIF?
Whether CFR is cheaper than CIF depends on the specific circumstances and the cost of insurance. CFR excludes insurance, which is a required component of CIF (Cost, Insurance, and Freight). Therefore, CFR can be cheaper since the buyer may opt to arrange their own insurance, potentially at a lower cost or with different coverage than what the seller would provide under CIF.
- What is the CFR price?
The CFR price includes the cost of the goods and the freight charges to transport the goods to a named overseas port. It does not include insurance costs, import duties, and other expenses at the destination port. This price typically reflects the total cost the seller must bear to ensure the goods are transported to the destination port.
8. Cost, Insurance, and Freight (CIF)
This incoterm is Identical to CFR, except the seller also arranges insurance to the destination port. Risk still transfers when goods are loaded at the port of shipment, even though the seller is paying freight and insurance to the destination.
The seller is responsible for all costs associated with unloading the goods at the destination port as stipulated by the carriage contract, unless otherwise agreed upon. Additionally, the seller must handle the export clearance of the goods, but not the import clearance.
Below are some of the most frequently asked questions about CIF:
- What is the meaning of CIF cost insurance and freight?
CIF stands for “Cost, Insurance, and Freight,” an Incoterm where the seller is responsible for covering the costs, insurance, and freight of shipping goods to a named port of destination. The seller’s responsibilities include not only transporting the goods but also insuring them until they are unloaded at the destination port.
- What is cost insurance and freight CIF value?
The CIF value includes the total price paid for the goods, the cost of transportation to the named destination port, and the cost of insurance during transportation. This value is crucial for determining duties and taxes at the destination, as it encompasses all costs up to the point of unloading at the destination port.
- What is the CIF value of insurance?
The CIF value of insurance typically involves a premium cost that is a percentage of the total value of the goods, often estimated at 110% of the CIF price to cover potential additional expenses in case of loss or damage. This insurance should be adequate to protect the value of the goods during their transit until they reach the destination port.
- What is the insurance coverage for CIF?
Insurance coverage under CIF terms generally needs to meet the minimum cover requirements set by the Institute Cargo Clauses (ICC). Typically, the seller provides coverage under the ICC (C) terms, which cover standard risks associated with sea freight. Buyers often opt for additional coverage to ensure more comprehensive protection against all risks, as ICC (C) covers only a limited range of potential damages.
Category D (Arrival)
The terms included in this category are:
9. Delivered at Place (DAP)
DAP means the seller is responsible for arranging the entire shipment till delivering the goods at the decided place. After the delivery, the risk will transfer to the buyer. The seller will take responsibility for export clearance, but the buyer takes responsibility for import customs, fees, taxes, and duties. Contrary to CIP and CPT incoterms, the place of delivery and destination is the same under the CAP agreement.
Although the seller is required to finalize a contract of carriage or organize transportation and export clearance for the goods at their own expense, they are not obligated to unload the goods at the destination. Furthermore, neither the seller nor the buyer is required to take out an insurance policy.
Below are some of the most frequently asked questions about Delivered at Place (DAP):
- What is DAP Delivered at Place Incoterms 2010?
DAP (Delivered at Place) under Incoterms 2010 is an agreement where the seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks and costs associated with delivering the goods to the specified location, excluding duties, taxes, and other official charges payable upon import.
- Is DAP Incoterm door to door?
DAP Incoterm can facilitate door-to-door delivery but does not necessarily imply it. The term specifies that the seller delivers the goods to a named destination, which can be any agreed point within the destination area, not strictly the buyer’s premises.
- Does DAP include customs clearance at destination?
DAP does not include customs clearance at the destination. The buyer is responsible for handling customs clearance, import duties, and other related administrative costs at the destination.
- What is the Incoterm basis of DAP?
The basis of DAP Incoterm is that the seller assumes all responsibilities, risks, and costs associated with transporting goods to a designated location near the destination. However, the risk transfers to the buyer once the goods are made available to the buyer on the arriving means of transport, ready for unloading at the named place.
10. Delivered at Place Unloaded (DPU)
The seller assumes responsibility for arranging the shipment and delivering the goods to the named place. They also take responsibility for unloading the goods. After the goods are unloaded, the risk transfers to the buyer. It is the only Incoterm that requires the seller to unload the goods at the destination.
The place of delivery and destination are the same under a DPU Incoterm; therefore, the seller bears the risk until the goods are delivered and unloaded at the named place. This term is particularly relevant when goods are moving through a distribution center in UAE, where unloading responsibilities and handover points must be precisely defined in the contract.
The seller commits to organizing and paying for the transportation and handles the export clearance of the goods, but not the import clearance. The buyer is required to assist the seller in obtaining any documents needed for export, with the seller covering these expenses.
Under the DPU Incoterm, unlike CIP, there is no requirement for either the seller or the buyer to purchase insurance.
Note: DPU replaced DAT (Delivered at Terminal) under Incoterms® 2020. The obligations are unchanged — only the name changed, and the destination no longer has to be a terminal.
Below are some of the most frequently asked questions about Delivered at Place Unloaded (DPU):
- What is the meaning of Delivered at Place Unloaded?
Delivered at Place Unloaded (DPU) — formerly Delivered at Terminal (DAT) — is an Incoterm where the seller delivers the goods, and transfers risk to the buyer, not just to a named destination but unloaded from the arriving means of transport. It is the only Incoterm that requires the seller to unload the goods at the destination.
- What is an example of Delivered at Place Unloaded (DPU)?
Imagine a Chinese manufacturer shipping furniture to a warehouse in Chicago, USA. Under DPU, the seller is responsible for all transport costs and risks, including unloading the furniture at the Chicago warehouse. Once the goods are unloaded at the designated warehouse, responsibility shifts to the buyer.
- What are DPU delivery terms?
Under DPU terms, the seller is responsible for arranging transport and all costs up to and including unloading the goods at the named place of destination. The seller bears all risk until the goods are unloaded, at which point the buyer assumes risk.
- What is the difference between DPU and DAP?
The key difference is unloading responsibility. Under DAP, goods are delivered to the named place, but the buyer is responsible for unloading. Under DPU, the seller must also manage and pay for unloading the goods at the destination.
- Who pays duty under DPU?
Under DPU terms, the buyer is responsible for paying import duties, taxes, and handling all customs formalities at the destination.
- Is DPU the same as DDP?
No. Under DPU, the buyer handles import duties and customs clearance. Under DDP (Delivered Duty Paid), the seller is responsible for delivering the goods and paying all costs, including import duty, and for completing all customs formalities.
11. Delivered Duty Paid (DDP)
The seller assumes the responsibility for the entire shipment, including the customs fees and clearance, and delivering goods to the buyer’s premises. This incoterm requires the most responsibility from a seller, as it is the only term that includes import clearance by the seller.
This term is commonly used in B2C and cross border ecommerce contexts, where end customers expect a seamless, fully landed price with no surprise charges on delivery.
Like other Incoterms, the DDP Incoterm mandates that the seller finalizes the transportation contract or organizes carriage at their own expense. However, neither the seller nor the buyer is required to secure an insurance contract.
Below are some of the most frequently asked questions about DDP (Delivered Duty Paid):
- What does delivered duty paid DDP mean?
Delivered Duty Paid (DDP) means that the seller delivers the goods to a named place in the destination country and is responsible for all costs and risks involved in bringing the goods to the destination, including transport, export and import duties, insurance, and any other expenses incurred during shipping.
- What is a DDP delivery charge?
This encompasses all costs associated with transporting the goods from the seller’s location to the buyer’s designated place, including shipping costs, export and import duties, taxes, and insurance. These charges are typically prepaid by the seller.
- Who pays for DDP shipments?
The seller pays for all the expenses including transport, insurance, and customs duties to bring the goods to the buyer’s specified location under DDP terms.
- Is DDP refundable?
Generally, DDP terms involve non-refundable costs as they are prepaid expenses. However, specific refund conditions, if any, would depend on the contractual agreement between the buyer and seller.
- Is DDP free shipping?
DDP is not synonymous with free shipping. While it does mean that the seller bears all costs, the price paid by the buyer typically includes these costs. The term “free shipping” usually refers to promotional offers where the shipping charge is waived, but it does not cover duties or taxes.
- Who clears customs for DDP?
Under DDP terms, the seller is responsible for clearing the goods through customs in the buyer’s country, including handling all legal and administrative procedures related to importation.
Quick-Reference Table
| Term | Mode of Transport | Where Risk Transfers | Who Arranges Insurance |
|---|---|---|---|
| EXW | Any | At seller’s premises, before loading | Neither party required |
| FCA | Any | On handover to the carrier | Neither party required |
| CPT | Any | On handover to the first carrier | Neither party required |
| CIP | Any | On handover to the first carrier | Seller (higher coverage, ICC Clauses A) |
| DAP | Any | At destination, before unloading | Neither party required |
| DPU | Any | At destination, after unloading | Neither party required |
| DDP | Any | At destination, before unloading | Neither party required |
| FAS | Sea/inland waterway only | Alongside the ship at port of shipment | Neither party required |
| FOB | Sea/inland waterway only | On board the ship at port of shipment | Neither party required |
| CFR | Sea/inland waterway only | On board the ship at port of shipment | Neither party required |
| CIF | Sea/inland waterway only | On board the ship at port of shipment | Seller (lower coverage, ICC Clauses C) |
Table compiled from ICC-published rule summaries. Always confirm current wording against the official Incoterms® 2020 text before finalizing a contract.
7 Key Advantages of Incoterms in International Trade
Understanding the advantages of Incoterms is essential for businesses involved in global shipping and cross-border transactions. The Impact of Incoterms ® 2020 is reflected in how these standardized rules simplify trade agreements, define responsibilities, and improve coordination between buyers and sellers.
1. Clear Definition of Buyer and Seller Responsibilities
One of the major advantages of Incoterms is that they clearly define the CPT responsibilities of buyer and seller and other obligations under different trade arrangements. These rules specify who is responsible for transportation costs, customs procedures, insurance, documentation, and delivery arrangements.
2. Better Risk Management and Reduced Disputes
Incoterms help businesses identify the exact point where risks transfer from the seller to the buyer. For example, understanding CPT risk transfer allows parties using CPT agreements to know that the seller pays for carriage, while the risk transfers to the buyer once goods are handed over to the first carrier.
3. Improved Cost Control and Shipping Planning
Another advantage of Incoterms is that they provide transparency regarding transportation expenses. Terms such as CPT freight, CIF, CFR, and FOB clearly outline which party is responsible for freight costs and related charges.
This makes it easier for businesses to calculate shipment expenses, compare different delivery options, and choose the most suitable Incoterm for their logistics requirements. Proper use of Supply chain Incoterms allows companies to improve budgeting and optimize their overall shipping strategy.
4. Simplified International Trade Operations
Incoterms create a universal framework that is recognized by businesses, logistics providers, and trade professionals worldwide. By using standardized rules, companies can simplify negotiations and create consistent processes across different markets.
5. Enhanced Supply Chain Efficiency
Modern supply chains involve multiple parties, including manufacturers, freight forwarders, carriers, and customs authorities. Selecting the right Incoterm improves coordination between these stakeholders and supports smoother movement of goods.
6. Greater Flexibility When Choosing Shipping Terms
Different businesses have different logistics needs, and Incoterms provide flexibility by offering multiple options for transportation and risk allocation. For example, companies can compare CPT vs CIF depending on whether they want the seller to arrange insurance or prefer to manage coverage independently.
7. Better Contract Negotiation and Business Relationships
Using clearly defined Incoterms improves contract negotiations by ensuring that buyers and sellers agree on delivery obligations before a shipment begins. This transparency builds trust and creates stronger international trade relationships.
By understanding the Impact of Incoterms ® 2020, businesses can select appropriate shipping terms, reduce uncertainty, and establish more efficient partnerships in global commerce.
Sea-Only vs. Any-Mode Terms — A Common Costly Mistake
FAS, FOB, CFR, and CIF are suitable only for sea and inland-waterway transport. For container shipments, the ICC recommends using FCA, CPT, or CIP instead. This matters because containers are typically handed to a carrier at a container yard or terminal well before they’re loaded onto a vessel — not “on board the ship” in the way FOB, CFR, and CIF assume. Using a sea-only term for a container shipment can create a mismatch between when risk is supposed to transfer on paper and what’s actually happening to the cargo, which is exactly the kind of gap that leads to disputes if something goes wrong in transit.
For general cargo moving by container — a common scenario for freight moving through GCC ports, and often quoted using the General Cargo Rate (GCR) — FCA, CPT, or CIP are the more precise choice.
What Incoterms® 2020 Does NOT Cover?
This is where a lot of shippers get caught out: Incoterms are not a full sales contract. They allocate transport, costs, and risk — they do not govern ownership, payment, liability, or choice of law. Specifically, your sales contract still needs to separately address:
- Transfer of title/ownership
- Payment terms and currency
- Warranty and product specifications
- Liability and limitation of liability
- Dispute resolution, governing law, and jurisdiction
- Force majeure
- Sanctions compliance and import/export restrictions
- Customs duties beyond what the chosen Incoterm assigns
Unclear, contradictory, or missing provisions on these points are a common source of disputes and litigation between trading parties, so treat your Incoterm selection as one clause in the contract, not the whole agreement.
It’s also worth noting that local regulations can create practical barriers to certain rules — for example, national mandates on transport insurance providers or import-clearance restrictions tied to local entities can complicate the use of CIP, CIF, or DDP, and similar country-specific limitations affect EXW and DDP too. Many businesses lean on dedicated customs compliance services to navigate this, though this is a general ICC observation rather than a UAE-specific finding (This is a general ICC observation, not a UAE-specific finding — always confirm current local applicability with your compliance or customs team before finalizing terms.)
How to Choose the Right Incoterm for Your UAE Shipment?
A practical way to narrow it down:
- Start with the transport mode. Container or multimodal shipment → use FCA, CPT, CIP, DAP, DPU, or DDP. Bulk/breakbulk sea cargo only → FAS, FOB, CFR, or CIF are viable.
- Decide who should control freight booking. If you want control over carrier selection and freight cost, favor an F-category term. If you’d rather the other party arranges and pays for transport, look at C or D terms.
- Check who needs insurance, and how much. CIF and CIP are the only terms requiring the seller to insure — and since 2020 they require different coverage levels, so confirm which one fits your cargo value and risk tolerance.
- Weigh DDP and EXW carefully. Despite being commonly used, EXW and DDP are, contrary to common assumption, only the best solution in exceptional cases — EXW places nearly all responsibility (and risk) on the buyer from the seller’s doorstep, while DDP places import clearance responsibility on a seller who may not always be legally able to complete it in the buyer’s country.
- Put it in writing precisely. State the Incoterm, the named place or port, and the year (“Incoterms® 2020”) explicitly in the contract to avoid ambiguity if a dispute arises. Before requesting an ocean freight quote, confirm which Incoterm applies so the freight cost you’re comparing actually reflects the same scope of responsibility.
If you’re unsure which term fits a specific shipment — sea, air, or multimodal — freight forwarding companies in UAE can review the shipment details and recommend the right term before the contract is signed, which is usually far cheaper than resolving a dispute after the fact.
Conclusion
Navigating the intricacies of international trade terms is essential for managing costs, avoiding disputes, and keeping shipments moving efficiently. Whether you are a manufacturer in the UAE exporting under FOB, an importer managing DDP arrivals, or a regional business working with 3PL companies in UAE to outsource your logistics operations, understanding where risk and cost transfer at each point in the journey gives you the clarity to negotiate better contracts and plan more confidently. Review your agreements carefully, align on the named places and obligations before signing, and ensure that insurance coverage is appropriate for the value and nature of the goods being moved.
Frequently Asked Questions (FAQs)
It depends on what the buyer and seller each want to control. CIF is more convenient for the buyer since it bundles shipping and insurance costs to the destination port. FOB gives the buyer more control over freight booking and possibly lower costs if they already have strong shipping arrangements.
The key difference is insurance. Under CIF, the seller must arrange insurance coverage for the transit. Under CPT, insurance is not a seller obligation at all.
Often yes, since CFR excludes the cost of insurance that CIF requires — though the actual savings depend on the insurance provider and coverage level the buyer would otherwise need to arrange separately.
Not necessarily. DAP means the seller delivers to a named destination, which can be any agreed point in the destination area — not automatically the buyer’s exact premises.
DPU (Delivered at Place Unloaded). The core obligation is the same — the seller unloads at the destination — but the 2020 rename removed the requirement that the place be a “terminal.”
The chosen Incoterm determines who pays for freight, insurance, and — for DDP specifically — import duties. For UAE-based importers and exporters, confirming the right term with a logistics partner before signing a contract helps avoid unexpected costs at customs.
The most frequent ones are using a sea-only term (FOB, CFR, CIF, FAS) for container shipments instead of FCA, CPT, or CIP; assuming DDP or EXW is always simplest without checking the practical burden it places on one party; and treating the Incoterm as if it covers the full contract, when it doesn’t address payment, title, or dispute resolution.
Our customer service team is happy to assist you with planing your next booking.
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