# Incoterms 2020 for importers: FOB, FCA, CIF, DAP explained > Incoterms 2020 for buyers in India and China: all 11 rules, where risk passes, who pays freight and duty, and why FCA often beats FOB for containers. Source: https://sourcesquid.co/intelligence/incoterms-2020-for-importers/ [Logistics](https://sourcesquid.co/intelligence/?cat=logistics)7 min readUpdated 28 September 2026 # Incoterms 2020 for importers: which rule to use and why Incoterms® 2020 are the eleven ICC rules that say who arranges and pays for each step of delivery and where risk passes from seller to buyer. For most importers buying from India or China, FCA or FOB at the origin port gives the best control of freight and cost, while DAP or DDP suits buyers who want the supplier to handle everything to the door. **Anirudh** Founder and Director, SourceSquid · 15 years sourcing in India and China On this page 1. What Incoterms rules do, and what they don’t 2. The eleven rules at a glance 3. The “C” rules: cost and risk split 4. FOB or FCA for container shipments 5. EXW and DDP: use with care 6. Worked example: one order, four rules 7. Incoterms rules and your landed cost 8. Writing it into the contract Free · 48 hours Send us your part or product. We return costs, clusters and risks. [Get a free teardown](https://sourcesquid.co/start/?from=guide-incoterms) ## Key takeaways * Incoterms rules decide delivery, risk and costs. They do not decide ownership, payment or price. * Seven rules work for any mode (EXW, FCA, CPT, CIP, DAP, DPU, DDP); four are for sea and inland waterway only (FAS, FOB, CFR, CIF). * For containers, the ICC recommends FCA rather than FOB, because the seller hands the box to the carrier before it is loaded on the ship. * Under CFR and CIF, risk passes at the origin port even though the seller pays freight to your port. * Always name a precise place and the rule's version: "FCA Seller's factory, Pune, Incoterms® 2020". On this page8 sections 1. What Incoterms rules do, and what they don’t 2. The eleven rules at a glance 3. The “C” rules: cost and risk split 4. FOB or FCA for container shipments 5. EXW and DDP: use with care 6. Worked example: one order, four rules 7. Incoterms rules and your landed cost 8. Writing it into the contract ## What Incoterms rules do, and what they don’t Incoterms® rules are published by the International Chamber of Commerce. The 2020 edition has eleven rules. Each rule, written as three letters plus a named place, answers three questions: 1. **Delivery:** where the seller’s delivery obligation ends. 2. **Risk:** when the risk of loss or damage passes to the buyer. 3. **Costs and paperwork:** who arranges and pays for transport, insurance, and export and import clearance. They do **not** say when ownership passes, how or when you pay, or what happens if the goods are defective. Those belong in your purchase order and sales contract. The [purchase order generator](https://sourcesquid.co/tools/po-generator/) includes fields for all of them. ## The eleven rules at a glance Rule | Seller delivers, risk passes | Main carriage paid by | Insurance | Export / import clearance ---|---|---|---|--- **EXW** Ex Works | At seller’s premises, not loaded | Buyer | None required | Buyer / Buyer **FCA** Free Carrier | To buyer’s carrier at the named place | Buyer | None required | Seller / Buyer **CPT** Carriage Paid To | To the first carrier at origin | Seller | None required | Seller / Buyer **CIP** Carriage and Insurance Paid To | To the first carrier at origin | Seller | Seller, ICC (A) cover | Seller / Buyer **DAP** Delivered at Place | At the named destination, ready for unloading | Seller | None required | Seller / Buyer **DPU** Delivered at Place Unloaded | At the named destination, unloaded | Seller | None required | Seller / Buyer **DDP** Delivered Duty Paid | At the named destination, cleared for import | Seller | None required | Seller / Seller **FAS** Free Alongside Ship (sea) | Alongside the vessel at the origin port | Buyer | None required | Seller / Buyer **FOB** Free On Board (sea) | On board the vessel at the origin port | Buyer | None required | Seller / Buyer **CFR** Cost and Freight (sea) | On board the vessel at the origin port | Seller | None required | Seller / Buyer **CIF** Cost, Insurance and Freight (sea) | On board the vessel at the origin port | Seller | Seller, ICC (C) minimum | Seller / Buyer The first seven rules work for any mode of transport; the four marked “sea” are for sea and inland waterway only. “None required” means neither party owes the other insurance under the rule. You may still want it, and usually should. ## The “C” rules: cost and risk split The most misunderstood point in Incoterms rules is that under **CPT, CIP, CFR and CIF** the seller pays freight to your destination, but **risk passes at origin** , when the goods are handed to the carrier or loaded on board. If the container is lost at sea on a CIF shipment, it is your loss; you claim on the insurance the seller bought for you. Two consequences follow. Check the insurance cover the seller buys: CIF needs only the minimum Institute Cargo Clauses (C), while CIP requires the broader clauses (A). And remember that destination charges, such as terminal handling and delivery order fees, often fall on you even when the seller “paid the freight”. ## FOB or FCA for container shipments FOB was written for goods loaded over the ship’s rail. With containers, the seller usually hands the sealed box to the carrier at a container freight station or terminal days before it is loaded. Under FOB, the seller still carries the risk during that period, while having no control over the box. The ICC recommends FCA for containerised goods for this reason. FCA 2020 also solves the old banking problem with FCA: the parties can agree that the buyer instructs its carrier to issue an on-board bill of lading to the seller, which the seller may need for a letter of credit. In practice, FOB is still widely used for containers from Indian and Chinese ports and works well when both sides understand it. FCA at the seller’s factory is often the cleaner choice: the seller loads the container at its premises and clears it for export, and your forwarder takes it from there. ## EXW and DDP: use with care **EXW** looks simple but puts export clearance on the buyer. In India and China, export formalities are normally handled by the exporter, and a foreign buyer cannot easily act as exporter. EXW also leaves loading at the buyer’s risk. FCA seller’s premises gives nearly the same result without these problems. **DDP** requires the seller to clear goods for import and pay duty and taxes in your country. Few Asian manufacturers can act as importer of record abroad, and the duty and VAT they pay end up in their price with a margin. DAP, with you clearing import, is usually the better “door-to-door” option. ## Worked example: one order, four rules A German buyer orders 5,000 kitchen storage sets from a moulder near Pune, shipping through Nhava Sheva (JNPT) to Hamburg in a 20-foot container. The supplier quotes four ways. All figures are illustrative. Rule and named place | Supplier price | Buyer arranges and pays | Where risk passes ---|---|---|--- EXW Seller’s factory, Pune | €38,500 | Loading, export clearance, inland haulage, ocean freight, insurance, import | At the factory, before loading FCA Seller’s factory, Pune | €38,800 | Inland haulage, ocean freight, insurance, import | When loaded on the buyer’s truck at the factory FOB Nhava Sheva | €40,000 | Ocean freight, insurance, import | When on board at Nhava Sheva DAP Buyer’s warehouse, Hamburg | €44,600 | Unloading, import clearance, duty and VAT | At the warehouse, ready for unloading **Choice.** FCA seller’s factory. The buyer’s forwarder books both the truck and the ocean freight, the seller handles export clearance, and risk passes at a point the seller controls: loading at its own dock. The buyer compares the four options on landed cost with the [landed cost calculator](https://sourcesquid.co/tools/landed-cost/), not on the supplier price alone. ## Incoterms rules and your landed cost The rule you choose moves costs between the supplier’s invoice and your own bills; it does not make them disappear. Two effects are easy to miss: * **Duty base.** In the EU and UK, duty is charged on the customs value including freight and insurance to the border, whatever rule you use. With a DAP or DDP price, transport after the goods enter the EU can be left out of the customs value if it is shown separately on the invoice. In the US, duty is charged on the transaction value, which excludes international freight, so you may need a freight breakdown on the invoice. * **Hidden margin.** On CIF, CIP, DAP and DDP, the supplier books freight and may add a margin to it. On FCA and FOB you see the real freight cost and can tender it. Compare quotes on the same basis with the [landed cost guide](https://sourcesquid.co/intelligence/landed-cost-guide/) method before you compare prices. ## Writing it into the contract * **Name the place precisely.** “FOB China” is not enough. “FOB Ningbo, Incoterms® 2020” or “FCA Seller’s warehouse, Plot 12, Chakan MIDC, Pune, Incoterms® 2020”. * **Name the version.** Incoterms 2010 rules are still used and differ in places. Write “Incoterms® 2020”. * **Match it to payment.** If you pay by letter of credit, choose a rule and documents that the bank will accept. See [payment terms with Asian suppliers](https://sourcesquid.co/intelligence/payment-terms-with-asian-suppliers/). * **Say who loads and who pays origin charges.** Terminal handling at origin is a frequent argument under FOB. * **Agree insurance explicitly** if you rely on the seller’s cover. The [Incoterms advisor](https://sourcesquid.co/tools/incoterms-advisor/) recommends a rule from your answers about mode, control and paperwork, and explains the trade-offs. ## Free tools for this guide * [Logistics**Incoterms® 2020 advisor**](https://sourcesquid.co/tools/incoterms-advisor/) * [ Cost**Landed cost calculator**](https://sourcesquid.co/tools/landed-cost/) * [ Logistics**FCL vs LCL calculator**](https://sourcesquid.co/tools/fcl-vs-lcl/) * [ Logistics**CBM calculator**](https://sourcesquid.co/tools/cbm/) * [ Suppliers**Purchase order generator**](https://sourcesquid.co/tools/po-generator/) ## Sources 1. [International Chamber of Commerce: Incoterms® 2020](https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/)iccwbo.org/business-solutions/incoterms-rules/incoterms-2020 Checked on 28 September 2026. Rules and rates change: confirm against the official text before you act. This guide is general information, not legal or tax advice. Written by [Anirudh](https://sourcesquid.co/principals/) 15 years in sourcing, vendor development and quality across India and China. MBA in Operations and Supply Chain Management and Lean Six Sigma Black Belt. Founder of SourceSquid, with offices in Bengaluru and Ningbo. Incoterms 2020: questions ## Straight answers. Anything else, ask us directly. A principal replies, not a bot. [anirudh@sourcesquid.co](mailto:anirudh@sourcesquid.co) ### What is the best Incoterms rule for importing from China or India? For most importers, FCA at the seller's premises or FOB at the port of loading. You then book the main freight, see the real cost and choose the forwarder. Buyers without a forwarder often use CIF or DAP, but pay for the convenience inside the supplier's price. ### What is the difference between FOB and FCA? Under FOB, the seller delivers when the goods are on board the vessel at the named port. Under FCA, the seller delivers to the carrier at a named place, such as its factory or a container freight station. FCA fits container shipping, where the seller hands the box over before loading. ### Who pays import duty under DDP? Under DDP the seller clears the goods for import and pays import duty and taxes. It needs a seller who can act as importer of record in your country, which many Asian suppliers cannot do, so DAP is more common. ### Does CIF insurance cover my goods fully? CIF requires only minimum cover, Institute Cargo Clauses (C) or similar, for 110% of the contract price. CIP requires the broader Institute Cargo Clauses (A). If you need broader cover under CIF, agree it in the contract or insure yourself. ### Do Incoterms rules say when ownership of the goods passes? No. Incoterms rules cover delivery, risk and costs. Transfer of title, payment and remedies for breach are set by your sales contract and the applicable law. ## Keep reading [All guides](https://sourcesquid.co/intelligence/) * [Costing · 7 min**Landed cost: how to calculate what an import really costs** How to calculate landed cost per unit: EU and UK duty on CIF value, US duty on transaction value, FY2026 MPF and HMF, import VAT and a worked example.](https://sourcesquid.co/intelligence/landed-cost-guide/) * [Sourcing · 6 min**Payment terms with Asian suppliers: how to balance risk on both sides** Payment terms for buying from India, China and Vietnam: 30/70 deposits, balance after inspection, letters of credit, collections, escrow and open account.](https://sourcesquid.co/intelligence/payment-terms-with-asian-suppliers/) * [Compliance · 6 min**HS codes explained: how to classify a product correctly** HS codes explained for importers: the 6-digit Harmonized System, national digits in the EU, US, UK and India, the interpretative rules and a worked example.](https://sourcesquid.co/intelligence/hs-codes-explained/) Free sourcing teardown ## Choose the right rule for your next order. Tell us the product, origin and destination. We recommend the Incoterms rule, the named place and a landed-cost check, free. [Get a free teardown in 48 hours](https://sourcesquid.co/start/?from=guide-incoterms)[Talk to a principal](https://sourcesquid.co/contact/)