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Logistics16 min read

Incoterms for Importers: Who Pays, Who Risks, and What to Enter in Landed Cost

Incoterms show which logistics costs and risks are already inside a supplier quote — and which ones you still need to add to landed cost.

A quote can look cheaper simply because it excludes freight, insurance, unloading, customs handling, or import duties. The three-letter Incoterm is the first clue, but the named place is just as important.

Key takeaways
  • Incoterms® 2020 has 11 current rules split by any-mode and sea/inland-waterway use.
  • The named place matters; the three-letter code alone is not enough for a quote or contract.
  • C-terms can split cost and risk: seller-paid carriage does not always mean seller-held risk.
  • CIF and CIP are the two rules with seller-procured cargo insurance, and CIP has broader cover than CIF.
  • For landed cost, do not double-count freight or insurance already included in the supplier quote.

Quick list of Incoterms® 2020

Any-mode terms

Used for road, air, rail, courier, containerised, and multimodal shipments.

Sea / inland-waterway terms

Used only for port-to-port sea or inland-waterway shipments. For container freight, prefer any-mode terms (FCA, CPT, CIP, DAP, DPU, DDP).

What Incoterms do and do not do

Incoterms define seller and buyer responsibilities for costs, risk, transport, insurance, documents, export clearance, import clearance, and other logistics tasks.

They do not by themselves decide selling price, margin, payment timing, transfer of title/ownership, breach remedies, or dispute resolution.

The named place matters

Never treat the three-letter code as enough. "FCA supplier warehouse", "FCA terminal", "DAP port", and "DAP buyer warehouse" can create different handover points and different landed-cost entries.

Insurance and C-term guardrails

CIF and CIP are the only two Incoterms® 2020 rules where seller-procured cargo insurance is part of the Incoterm. CIP has broader insurance than CIF under Incoterms® 2020.

For C-terms, seller may pay carriage further than the point where risk transfers. That cost/risk split is one of the easiest places to make a bad landed-cost assumption.

The mistake importers make

Supplier quotes can look cheaper simply because they include fewer logistics steps. An EXW quote can look low because almost nothing is included. A CIF quote can look higher because main freight and insurance may already be in the number. DAP and DDP can look expensive because the seller is carrying more logistics scope.

The job is to normalize supplier quotes to the same delivered point before comparing unit price.

Quote comparison example

Supplier A quotes EXW at €8.00/unit. Supplier B quotes CIF at €8.65/unit to the destination port. Supplier A may still need origin handling, export steps, freight, insurance, customs, VAT/duty, port charges, and final delivery added. The cheaper unit price is not necessarily the cheaper landed cost.

Do not double-count landed cost

If freight or insurance is already included in the supplier quote, do not enter it again in your landed-cost model. Use the Incoterm as a scope check first, then add only the missing costs.

Responsibilities chart

Use this as a practical scope map. It shows what is normally in the seller scope and what the buyer still needs to arrange, add, or verify before trusting landed cost.

Seller = in seller scopeBuyer = buyer arranges or verifiesDepends = named place / contract decidesNot required by rule = no Incoterm insurance duty
Practical Incoterms responsibilities chart for importer landed cost checks
IdentificationOrigin / seller sideMain carriage / insuranceDestination / buyer sideRisk / notes
TermTransport modeExport clearanceMain carriageInsurance obligationDestination unloadingImport clearanceImport duty/taxesRisk passes atLanded-cost note
EXWAny-mode / multimodalBuyer; check carefullyBuyerBuyerBuyerBuyerBuyerWhen goods are made available at named placeAdd almost everything after supplier door
FCAAny-mode / multimodalSellerBuyerBuyerBuyerBuyerBuyerWhen goods are delivered to carrier/named placeGood buyer-control term for containers/multimodal
CPTAny-mode / multimodalSellerSeller pays to destinationBuyerDependsBuyerBuyerWhen goods are handed to the first carrier unless agreed more preciselyDo not confuse seller-paid freight with seller-held risk
CIPAny-mode / multimodalSellerSeller pays to destinationSeller — broader coverDependsBuyerBuyerWhen goods are handed to the first carrier unless agreed more preciselyFreight and insurance may already be in supplier quote
DAPAny-mode / multimodalSellerSellerNot required by ruleBuyerBuyerBuyerAt named destination, ready for unloadingAdd import clearance, duty/tax, unloading, and any uncovered local charges
DPUAny-mode / multimodalSellerSellerNot required by ruleSellerBuyerBuyerAfter unloading at named destinationCheck whether named place is port, terminal, warehouse, or final site
DDPAny-mode / multimodalSellerSellerNot required by ruleBuyer unless agreed otherwiseSellerSellerAt named destination, ready for unloadingDo not assume every local charge is covered; verify VAT, unloading, and delivery point
FASSea / inland-waterwaySellerBuyerBuyerBuyerBuyerBuyerAlongside vessel at named loading portNot for air, road, courier, parcel, or normal containers
FOBSea / inland-waterwaySellerBuyerBuyerBuyerBuyerBuyerOnce goods are on board vessel at named loading portDo not use as default for container freight
CFRSea / inland-waterwaySellerSeller pays to destination portBuyerDependsBuyerBuyerOnce goods are on board vessel at named loading portFreight may be included, but insurance is not
CIFSea / inland-waterwaySellerSeller pays to destination portSeller — minimum coverDependsBuyerBuyerOnce goods are on board vessel at named loading portFreight and insurance may be included, but destination/import costs still need checking
  • "Depends" means the named place and contract of carriage decide. Check the quote and freight contract.
  • "Insurance obligation" means who must arrange insurance under the Incoterm. It is not the same as who bears risk.
  • This table is a landed-cost scope checklist, not the official legal text.

Details by Incoterm

EXW - Ex Works

The seller makes the goods available at their premises or another named place. The buyer takes almost everything from there.

What the seller normally includes
  • Goods made available for pickup.
What the buyer still needs to add/check
  • Loading, origin pickup, export clearance, freight, insurance, import clearance, duty/taxes, destination handling, and final delivery.
Risk transfer point
At the named place when goods are made available.
Good for
Domestic or simple pickup situations where buyer controls logistics.
Be careful with
For cross-border shipments, EXW can create customs and export-control problems. Treat it as a high-buyer-responsibility option, not the international default.
Example wording
EXW supplier warehouse, [city/address], Incoterms® 2020

FCA - Free Carrier

Seller delivers the goods to the buyer's carrier at a named place and clears the goods for export.

What the seller normally includes
  • Delivery to the named place/carrier.
  • Export clearance.
What the buyer still needs to add/check
  • Main freight after handover.
  • Insurance unless separately agreed.
  • Import clearance, duties/taxes, and final delivery.
Risk transfer point
When goods are delivered to the carrier/named place.
Good for
Container freight and cross-border shipments where buyer controls the main freight.
Be careful with
The named place must be precise. FCA seller warehouse and FCA port terminal are operationally different.
Example wording
FCA supplier warehouse, [city/address], Incoterms® 2020
FCA [named export terminal], Incoterms® 2020

CPT - Carriage Paid To

Seller pays carriage to a named destination, but buyer risk starts earlier when the goods are handed to the carrier.

What the seller normally includes
  • Export clearance.
  • Carriage to the named destination.
What the buyer still needs to add/check
  • Cargo insurance.
  • Import clearance and duty/taxes.
  • Anything after the named destination.
Risk transfer point
Usually when goods are handed to the first carrier, unless a more precise delivery point is agreed.
Good for
Multimodal shipments where seller books freight but buyer understands risk transfers earlier.
Be careful with
Do not confuse seller-paid freight with seller-held risk. For C-terms, seller may pay carriage further than the point where risk transfers.
Example wording
CPT Trieste Port - Shanghai Port, Incoterms® 2020
In this setup, seller pays transport to Shanghai Port, but risk can transfer at Trieste when goods are delivered to the carrier or vessel.

CIP - Carriage and Insurance Paid To

Like CPT, but the seller must also procure cargo insurance.

What the seller normally includes
  • Export clearance.
  • Carriage to the named destination.
  • Cargo insurance.
What the buyer still needs to add/check
  • Import clearance and duty/taxes.
  • Destination-side costs after the named place.
  • Whether insurance is enough for the shipment.
Risk transfer point
Usually when goods are handed to the first carrier, unless contract defines a more precise point.
Good for
Multimodal shipments where buyer wants seller-arranged freight plus insurance.
Be careful with
Insurance does not mean seller keeps the risk until destination. Cost, insurance, and risk are different concepts.
Example wording
CIP London warehouse, United Kingdom, Incoterms® 2020

DAP - Delivered at Place

Seller delivers the goods to a named destination, ready for the buyer to unload. Buyer handles import.

What the seller normally includes
  • Export clearance.
  • Carriage to the named destination.
What the buyer still needs to add/check
  • Unloading.
  • Import clearance and duties/taxes.
  • Local charges not actually included in the quote.
Risk transfer point
At named place, ready for unloading.
Good for
Importers who want the seller to handle transport close to their destination but keep import under buyer/broker control.
Be careful with
DAP port, DAP warehouse, and DAP buyer premises are not the same. Named place matters.
Example wording
DAP buyer warehouse, Manchester, United Kingdom, Incoterms® 2020

DPU - Delivered at Place Unloaded

Seller delivers and unloads the goods at the named destination. Buyer handles import.

What the seller normally includes
  • Export clearance.
  • Carriage to named place.
  • Unloading at that named place.
What the buyer still needs to add/check
  • Import clearance and duties/taxes.
  • Any movement after the named place.
Risk transfer point
After unloading at the named destination.
Good for
Shipments where seller is responsible for unloading at the agreed destination.
Be careful with
Seller must be able to unload safely and practically at that destination.
Example wording
DPU named warehouse yard, [city/address], Incoterms® 2020

DDP - Delivered Duty Paid

Seller carries the most responsibility: delivery to the named place plus import clearance and duties/taxes.

What the seller normally includes
  • Export clearance.
  • Main carriage and destination delivery to named place.
  • Import clearance and import duty/taxes.
What the buyer still needs to add/check
  • Final unloading unless agreed otherwise.
  • Any destination charges not actually included in the contract.
Risk transfer point
At named destination, ready for unloading.
Good for
Buyer convenience when seller can legally and practically import into the destination country.
Be careful with
DDP can be dangerous for sellers if they cannot act as importer, recover VAT, or manage local customs obligations. Buyer should still verify what "DDP" covers in the actual quote.
Example wording
DDP buyer premises, [city/address], Incoterms® 2020

FAS - Free Alongside Ship

Seller places goods alongside the buyer's vessel at the named loading port.

What the seller normally includes
  • Export clearance.
  • Delivery alongside vessel.
What the buyer still needs to add/check
  • Loading onto vessel.
  • Sea freight and insurance.
  • Destination costs, import clearance, duties/taxes, and onward delivery.
Risk transfer point
When goods are alongside the vessel at the named loading port.
Good for
Specific sea/inland-waterway cargo setups.
Be careful with
Do not use for air, courier, road, rail, or normal multimodal container shipments.
Example wording
FAS [named loading port], Incoterms® 2020

FOB - Free On Board

Seller delivers goods on board the buyer's vessel at the named loading port.

What the seller normally includes
  • Export clearance.
  • Getting goods on board the vessel.
What the buyer still needs to add/check
  • Ocean freight and insurance.
  • Destination port costs.
  • Import clearance, duties/taxes, and final delivery.
Risk transfer point
Once goods are on board the vessel.
Good for
Appropriate sea/inland-waterway shipments, especially where onboard delivery is the real commercial handover.
Be careful with
Do not present FOB as the default for containerized cargo. For container shipments, FCA is often the cleaner choice.
Example wording
FOB [named loading port], Incoterms® 2020

CFR - Cost and Freight

Seller pays sea freight to the destination port, but buyer risk starts once goods are on board at the loading port.

What the seller normally includes
  • Export clearance.
  • Onboard delivery.
  • Sea freight to named destination port.
What the buyer still needs to add/check
  • Insurance.
  • Destination port costs depending on contract.
  • Import clearance, duties/taxes, and inland delivery.
Risk transfer point
Once goods are on board the vessel at origin.
Good for
Sea/inland-waterway shipments where seller arranges freight but buyer handles insurance and import side.
Be careful with
Seller paying freight does not mean seller holds risk to destination.
Example wording
CFR [named destination port], Incoterms® 2020

CIF - Cost, Insurance and Freight

Like CFR, but seller also procures cargo insurance.

What the seller normally includes
  • Export clearance.
  • Onboard delivery.
  • Sea freight to named destination port.
  • Cargo insurance.
What the buyer still needs to add/check
  • Destination port costs depending on contract.
  • Import clearance, duties/taxes, and inland delivery.
  • Whether the insurance level is sufficient.
Risk transfer point
Once goods are on board the vessel at origin.
Good for
Sea/inland-waterway shipments where freight and insurance are included in the supplier quote.
Be careful with
CIF insurance may be minimum cover. Buyer should confirm whether extra cover is needed.
Example wording
CIF Felixstowe Port, United Kingdom, Incoterms® 2020

How to write the Incoterm in a quote

Always include three things:

  1. Three-letter Incoterm.
  2. Exact named place / port / terminal / address.
  3. Incoterms® 2020.
Practical examples
  • FCA supplier warehouse, Thessaloniki, Greece, Incoterms® 2020
  • CPT Piraeus Port - Felixstowe Port, Incoterms® 2020
  • CIP London warehouse, United Kingdom, Incoterms® 2020
  • DAP buyer warehouse, Manchester, United Kingdom, Incoterms® 2020
  • CIF Felixstowe Port, United Kingdom, Incoterms® 2020

What Incoterms do not settle

  • Product price or margin
  • Payment timing or payment method
  • Transfer of title / ownership
  • Quality disputes
  • Late delivery penalties
  • Sanctions clauses
  • Dispute resolution
  • Every local terminal or destination fee unless clearly included in the commercial agreement

Landed cost checklist

Before entering landed cost, ask:

  • Is supplier quote EXW, FCA, FOB, CIF, DAP, etc.?
  • What exact named place is written after the Incoterm?
  • Is main freight included?
  • Is cargo insurance included?
  • Who handles export clearance?
  • Who handles import clearance?
  • Who pays duty, tariffs, VAT, and local taxes?
  • Are destination port/terminal charges included?
  • Who pays final inland delivery?
  • Are you double-counting freight or insurance already included in the quote?

Practical disclaimer

This guide is a practical scope checklist, not legal, tax, customs, or freight advice. Confirm the exact contract wording with your freight forwarder, customs broker, accountant, or legal adviser.

Further reading

Frequently asked questions

Are FOB and CIF valid for air freight?

No. Use any-mode terms for air, courier, rail, road, and multimodal shipments.

Does CIF mean landed cost is finished?

No. CIF usually covers cost, insurance, and freight to the named destination port. Import clearance, duties/taxes, destination charges, and inland delivery often still need checking.

Does DDP mean the buyer has nothing to check?

No. DDP puts many obligations on the seller, but buyers should still confirm what local charges, VAT treatment, unloading, and delivery point are actually included.

Which Incoterm is best for importers?

There is no universal best. FCA gives control, CIP adds seller-arranged freight and insurance, DAP reduces logistics work for the buyer, and DDP can be convenient but must be checked carefully.

Why does the named place matter?

Because "FCA warehouse", "FCA terminal", "DAP port", and "DAP buyer warehouse" can allocate very different costs and handover points.

Disclaimer. These tools provide estimates for general informational purposes only. They are not financial, tax, customs, legal, or professional advice. Always verify calculations with your accountant, customs broker, freight forwarder, or relevant professional before making business decisions.