The short answer
Choose the rule by who will actually perform each task, not by which three letters look cheapest. EXW leaves loading and export clearance to you; FCA or FOB hands the goods to your carrier at origin; CIF and CIP add seller-booked carriage and seller-bought insurance; DAP delivers to your named place without import clearance; DDP also makes the seller clear import and pay duty and import taxes. Write the rule, a precise named place and “Incoterms® 2020” in the quotation and purchase order.
An Incoterms® rule allocates tasks, costs and risk; it does not set quality, payment or ownership.
FOB, CFR and CIF are for goods loaded onto a vessel; containerized and air cargo fit FCA, CPT or CIP.
DDP puts import clearance, duty and import taxes on the seller—confirm who will act as importer first.
What does an Incoterms® rule decide in an activewear order?
An Incoterms® rule—the name is short for international commercial terms—decides four things: who arranges carriage and insurance, who clears the goods for export and import, where the goods count as delivered (the point where risk of loss or damage passes to the buyer) and which costs each side pays. The International Chamber of Commerce (ICC) maintains eleven such rules for domestic as well as international sale contracts, with the stated aim of avoiding costly misunderstandings about tasks, costs and risks.
What the rule leaves out matters as much. ICC’s introduction to Incoterms® 2020 says the rules do not deal with the specification of the goods, payment timing or method, remedies for breach, the imposition of tariffs, intellectual property or transfer of ownership. “FOB” therefore says nothing about fit approval, fabric substitutions, a deposit schedule or pattern ownership; the checklist on what to verify before paying a deposit covers those terms.
ICC also warns that the rules are often treated purely as price labels, when one of their main tasks is to fix the delivery point. An EXW price that looks lower is not cheaper if you then pay separately for the loading and export formalities that FCA would have included.
EXW, FCA, FOB, CIF, DAP or DDP: who does what?
FAS, the fourth sea rule, is omitted; it delivers goods alongside the vessel rather than on board.
| Rule and transport | Seller delivers, and risk passes | Main carriage booked by | Export clearance / import clearance and duty | Seller insures for the buyer |
|---|---|---|---|---|
| EXW (any mode) | At the named place, such as the factory, not loaded | Buyer | Buyer / buyer | No |
| FCA (any mode) | Loaded onto the buyer’s vehicle at the seller’s premises, or ready for unloading to the buyer’s carrier elsewhere | Buyer | Seller / buyer | No |
| FOB (sea and inland waterway) | On board the buyer’s vessel at the named port of shipment | Buyer | Seller / buyer | No |
| CFR or CIF (sea and inland waterway) | On board at the port of shipment; the seller pays carriage to the named destination port | Seller | Seller / buyer | CIF only: Institute Cargo Clauses (C) by default |
| CPT or CIP (any mode) | Handed to the seller’s carrier; the seller pays carriage to the named destination | Seller | Seller / buyer | CIP only: Institute Cargo Clauses (A) |
| DAP (any mode) | At the named destination, on the arriving vehicle, ready for unloading | Seller | Seller / buyer | No |
| DPU (any mode) | At the named destination, unloaded by the seller | Seller | Seller / buyer | No |
| DDP (any mode) | At the named destination, cleared for import, ready for unloading | Seller | Seller / seller, including duty and import taxes | No |
ICC’s 2025 tariff guidance confirms that DDP is the only rule under which the seller pays the tariff.
Which rule should an activewear buyer ask for?
Start from what your team can actually do. If you already work with a freight forwarder and customs broker, FCA at the factory or an origin warehouse, or FOB at the named port when cartons go straight onto a ship, keeps booking, routing and insurance in your hands. If the supplier books the voyage under CIF or CIP, risk still passes at origin, so check that the insurance level is enough.
EXW looks simple but asks the most of the buyer. ICC’s explanatory notes say the seller need not load the goods or clear them for export, and they point buyers who expect trouble with either task toward FCA. EXW suits a genuine collection by your forwarder or a domestic sale.
DAP and DDP both give a delivered price; the difference is the border. Under DAP you clear the goods for import and pay the duty, and ICC notes that if nobody arranges import clearance, the goods are held at the port or terminal at the buyer’s risk. From the supplier’s side, ICC advises sellers to consider FCA instead of EXW, and DAP or DPU instead of DDP where import clearance in the buyer’s country would be difficult.
No rule is best for every order. Whatever the supplier takes on is built into its price, so compare offers on one basis with the landed-cost worksheet and the quote normalization guide.
What does a DDP quote include—and what can go wrong?
Under DDP the seller delivers the goods cleared for import, on the arriving vehicle and ready for unloading at your named place, and pays the duties, taxes and other costs of export, transit and import clearance. ICC describes it as the rule with the maximum level of obligation for the seller. It is door to door only if your address is the named place, and unloading stays with you unless agreed.
That is also where it can fail. Some DDP obligations can only be performed inside your country, and ICC cautions that import clearance may be physically or legally difficult for a foreign seller. In the United States, for example, the party qualifying as importer of record must use reasonable care when filing the declared value, classification and rate of duty. Before accepting a DDP offer, ask:
- Which company will appear as importer on the customs entry, and will you receive a copy?
- Which tariff classification, customs value and origin will be declared for each style?
- Are import VAT, GST or sales tax included, or only duty?
- Who pays for unloading and delivery into your warehouse?
- Who absorbs a tariff change between order and arrival?
DDP is a standard ICC rule, not a workaround, but its price only compares fairly once you know what duty and tax it contains. ICC’s tariff guidance adds that DAP avoids that seller exposure and that the rules can support renegotiation when rates change mid-contract, so write the mechanism into the order.
Which rules fit air freight, ocean containers or road?
Match the rule to where the goods leave the seller’s control. ICC reserves FAS, FOB, CFR and CIF for goods placed on board or alongside a vessel at a sea or river port; the other seven rules work with any mode, including air, road and rail.
Containerized cartons need particular care. ICC’s explanatory notes say FOB is not appropriate when goods are handed to the carrier at a container terminal before they are on board and suggest FCA instead, just as CPT and CIP replace CFR and CIF. ICC also observes that an FOB contract naming an airport or inland warehouse makes little sense.
For air freight, use an any-mode rule: FCA at the origin airport or warehouse, CPT, CIP, DAP or DDP. For a truck collection at the factory, FCA at the seller’s premises obliges the seller to load your vehicle. At destination, only DPU makes the seller unload. Insurance follows the rule as well: CIF and CIP are the only rules that require the seller to insure the goods for the buyer, each for at least the contract price plus 10%, so under the other nine rules agree who insures which leg.
How should the term appear in the quote and purchase order?
Use ICC’s recommended form: the rule, the named place or port, and the edition, for example “FCA [factory address], Incoterms® 2020” or “DAP [your warehouse address], Incoterms® 2020.” ICC notes that leaving out the year can cause problems that are difficult to resolve, and that naming the place as precisely as possible makes the delivery point, and with it risk and cost, clear.
You may vary a rule, but ICC warns that the effect of any variation must be spelled out; if you move a cost, also say whether the delivery and risk point moves.
Keep look-alike terms apart. Under the U.S. Uniform Commercial Code, “F.O.B. the place of destination” obliges the seller to transport the goods to that place at its own expense and risk, unlike ICC’s FOB, which delivers on board a vessel at the port of shipment. Freight-billing phrases such as prepaid, collect or prepaid-and-add belong to the carriage arrangement, and ICC notes that what its rules say about carriage does not bind the carrier.
Decision map from this guide
| Decision area | What this guide establishes |
|---|---|
| You have your own forwarder and customs broker | Ask for FCA at the factory or origin warehouse, or FOB at the named port if cartons are loaded straight onto a ship. |
| Cartons travel in a container or by air | Use an any-mode rule such as FCA, CPT or CIP instead of FOB, CFR or CIF. |
| You want a delivered price but will clear import yourself | Ask for DAP at your warehouse and agree who unloads. |
| The supplier offers DDP | Confirm the importer, declared classification and value, and whether VAT or GST is included. |
| The supplier quotes EXW | Check who loads the goods and handles export clearance; ICC points buyers toward FCA. |
| Tariffs may change before arrival | Write who absorbs a change; under DDP the seller pays the tariff. |
Sources and scope
ICC’s Incoterms® pages, its Incoterms® 2020 introduction and explanatory notes in the ICC Digital Library, its 2025 tariff guidance note and 2026 work plan support the rule descriptions; the Uniform Commercial Code and U.S. customs statute text support the two U.S. examples. The rule choices, table layout and checklists are MOTIONFORM editorial guidance, not legal or customs advice. Incoterms® is a trademark of the International Chamber of Commerce; its use here does not imply association with, approval of or sponsorship by ICC. Sources reviewed 27 September 2026.
- ICC: Incoterms® rules overview and current edition (reviewed 27 September 2026)
- ICC Digital Library: Incoterms® 2020 introduction — what the rules do and do not do (reviewed 27 September 2026)
- ICC Digital Library: Incoterms® 2020 rules for any mode of transport, explanatory notes (reviewed 27 September 2026)
- ICC Digital Library: Incoterms® 2020 rules for sea and inland waterway transport (reviewed 27 September 2026)
- ICC guidance note: Using the Incoterms® 2020 rules to manage tariff risk, April 2025 (reviewed 27 September 2026)
- ICC: Global Policy Commissions Workplan 2026 — Incoterms® revision groundwork (reviewed 27 September 2026)
- Cornell LII: Uniform Commercial Code § 2-319, F.O.B. and F.A.S. terms (reviewed 27 September 2026)
- Cornell LII: 19 U.S.C. § 1484, entry of merchandise and importer of record (reviewed 27 September 2026)
Buyer questions
Which Incoterms® rule is best for a buyer?
The best rule gives each task to the party able to perform it. A buyer with its own forwarder gets most control from FCA, or FOB for direct vessel loading; a buyer who wants delivery but can clear imports can use DAP. Compare the resulting offers on landed cost, not on the headline unit price.
Are Incoterms® rules legally binding or mandatory?
They are voluntary and bind the parties only when the sale contract incorporates them, usually by naming the rule, the place and the edition. ICC stresses that the rules are not a contract of sale and do not supply its governing law. Carriers, insurers and banks are not bound by them either.
Do Incoterms® rules decide when title to the goods passes?
No. ICC states that the rules do not deal with transfer of property, title or ownership, and they do not set payment terms either. Risk can pass at the delivery point while ownership passes later under your contract, for example on payment. Write title, payment and retention terms separately in the purchase order.
Does a DDP price include import VAT or GST?
It should unless the contract says otherwise. ICC’s tariff guidance describes the DDP seller as responsible for all duties, taxes and import formalities in the destination country. If a supplier’s DDP offer leaves out VAT, GST or sales tax, treat it as a variant: write the exclusion explicitly and confirm who pays that tax.
What is the difference between DAP and DDP?
Both deliver to your named place on the arriving vehicle, ready for unloading, with the seller carrying the transit risk until then. The difference is import clearance: under DAP you clear the goods and pay duty and import taxes, while under DDP the seller does both. DPU is the rule in which the seller also unloads at destination.
Can Incoterms® rules be used for domestic shipments?
Yes. ICC describes the rules as standards for both international and domestic sale contracts, and its notes say EXW may suit domestic trades where no export is intended. The clearance obligations apply only where formalities exist, so a domestic order still benefits from naming the rule, the precise delivery place and the edition.
Is Incoterms® 2020 still the latest version?
Yes. As of 27 September 2026, ICC lists Incoterms® 2020, in force since 1 January 2020, as its most recent version. ICC’s 2026 work plan says it will begin the revision that lays the groundwork for Incoterms® 2030, so check for a new edition before signing long-term agreements and keep naming the year.
How many Incoterms® rules are there?
There are eleven. Seven can be used with any mode of transport—EXW, FCA, CPT, CIP, DAP, DPU and DDP—and four are for sea and inland waterway transport only: FAS, FOB, CFR and CIF. ICC first published them in 1936 and revises them to reflect developments in commercial practice.
