There are 11 Incoterms 2020 rules. Seven work for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four are for sea and inland waterway transport only: FAS, FOB, CFR and CIF. Each rule sets three things, and only three: where the seller delivers, where risk passes to the buyer, and who pays for each leg.
This page is built to be scanned rather than read end to end. The two tables below cover risk and cost across all 11 rules, then each rule gets a short card with the detail that matters for a New Zealand shipment. If you want the background instead, start with our plain guide to Incoterms 2020 for New Zealand importers and exporters.
Incoterms 2020 is still the current edition. The International Chamber of Commerce has revised the rules roughly once a decade since 1936, and the 2020 edition has been in force since 1 January 2020. Nothing replaces it yet, so a contract signed today should cite 2020.
On this page
- All 11 rules: delivery, risk and insurance
- Who pays for what: the cost allocation table
- The seven any mode rules, one by one
- The four sea and inland waterway rules
- Which rules should I use for containers?
- Which rules require insurance?
- What each rule means for New Zealand customs and GST
- How to write an Incoterm in a contract
All 11 rules: delivery, risk and insurance
The single most useful thing to know about any rule is where risk passes, because that is the point after which a loss is your problem. Read the risk column first.
| Rule | Full name | Mode | Seller delivers when | Risk passes to buyer | Seller must insure |
|---|---|---|---|---|---|
| EXW | Ex Works | Any mode | Goods are placed at the buyer's disposal at the seller's premises, not loaded | At the seller's premises, before loading | No |
| FCA | Free Carrier | Any mode | Goods are handed to the carrier named by the buyer at the agreed place | At the named place, on handover to the carrier | No |
| CPT | Carriage Paid To | Any mode | Goods are handed to the first carrier, though the seller pays freight onward | At origin, on handover to the first carrier | No |
| CIP | Carriage and Insurance Paid To | Any mode | Goods are handed to the first carrier, though the seller pays freight onward | At origin, on handover to the first carrier | Yes, Clauses (A) minimum |
| DAP | Delivered at Place | Any mode | Goods arrive at the named destination ready for unloading | At the named destination, before unloading | No |
| DPU | Delivered at Place Unloaded | Any mode | Goods are unloaded at the named destination by the seller | At the named destination, after unloading | No |
| DDP | Delivered Duty Paid | Any mode | Goods arrive cleared for import, duty and GST paid, ready for unloading | At the named destination, before unloading | No |
| FAS | Free Alongside Ship | Sea only | Goods are placed alongside the vessel at the named port of shipment | Alongside the vessel at the port of shipment | No |
| FOB | Free on Board | Sea only | Goods are placed on board the vessel at the named port of shipment | On board the vessel at the port of shipment | No |
| CFR | Cost and Freight | Sea only | Goods are placed on board, though the seller pays freight to the destination port | On board the vessel at the port of shipment | No |
| CIF | Cost, Insurance and Freight | Sea only | Goods are placed on board, though the seller pays freight to the destination port | On board the vessel at the port of shipment | Yes, Clauses (C) minimum |
Under CPT, CIP, CFR and CIF the seller pays for carriage past the point where risk has already passed to the buyer. Paying the freight and carrying the risk are separate questions.
Who pays for what: the cost allocation table
The second table splits the journey into eight cost stages and shows which party bears each one under each rule. It answers the question people actually argue about when an invoice arrives.
| Rule | Export packing | Loading at origin | Inland carriage at origin | Export clearance | Main carriage | Cargo insurance | Import clearance, duty and GST | Carriage to final destination |
|---|---|---|---|---|---|---|---|---|
| EXW | Seller | Buyer | Buyer | Buyer | Buyer | Not required | Buyer | Buyer |
| FCA | Seller | Seller | Seller to named place | Seller | Buyer | Not required | Buyer | Buyer |
| CPT | Seller | Seller | Seller | Seller | Seller | Not required | Buyer | Seller to named place |
| CIP | Seller | Seller | Seller | Seller | Seller | Seller, Clauses (A) | Buyer | Seller to named place |
| DAP | Seller | Seller | Seller | Seller | Seller | Not required | Buyer | Seller, buyer unloads |
| DPU | Seller | Seller | Seller | Seller | Seller | Not required | Buyer | Seller, seller unloads |
| DDP | Seller | Seller | Seller | Seller | Seller | Not required | Seller | Seller, buyer unloads |
| FAS | Seller | Seller | Seller to quay | Seller | Buyer | Not required | Buyer | Buyer |
| FOB | Seller | Seller | Seller to vessel | Seller | Buyer | Not required | Buyer | Buyer |
| CFR | Seller | Seller | Seller | Seller | Seller | Not required | Buyer | Buyer |
| CIF | Seller | Seller | Seller | Seller | Seller | Seller, Clauses (C) | Buyer | Buyer |
"Not required" means no rule obliges either party to insure the cargo. Someone still carries the risk, so the party holding it should arrange its own cover. Terminal handling charges at origin and destination follow the contract of carriage, so agree them in writing rather than assuming.
The seven any mode rules, one by one
These seven cover sea, air, road, rail and multimodal movements. Between them they handle almost every New Zealand shipment.
EXW, Ex Works
Any mode · minimum seller obligation- Delivery point
- The seller's premises, with the goods made available but not loaded.
- Risk passes
- At the seller's premises, before loading.
- Seller pays to
- Nothing beyond packing the goods.
- Insurance
- Not required of either party.
- Use it when
- Domestic sales, or where the buyer has a strong local agent at origin and wants total control.
- Watch for
- Export clearance sits with the buyer. In most countries only a locally registered entity can lodge the export declaration, so a New Zealand buyer usually cannot do it. FCA at the seller's premises solves this.
FCA, Free Carrier
Any mode · the container replacement for FOB- Delivery point
- The named place, on handover to the carrier the buyer has nominated.
- Risk passes
- At that handover. If the named place is the seller's premises, the seller must load. If it is anywhere else, the seller delivers ready for unloading.
- Seller pays to
- The named place, plus export clearance.
- Insurance
- Not required of either party.
- Use it when
- You are buying containerised cargo and want to control the main carriage through your own forwarder.
- Watch for
- Name the place precisely. FCA at the seller's factory and FCA at the container terminal are different deals with different risk points.
CPT, Carriage Paid To
Any mode · seller pays freight, buyer carries risk- Delivery point
- Handover to the first carrier at origin.
- Risk passes
- At origin, on that handover, even though the seller keeps paying the freight.
- Seller pays to
- The named place of destination, plus export clearance.
- Insurance
- Not required of either party.
- Use it when
- The seller has better freight rates and you are comfortable arranging your own cargo cover.
- Watch for
- The split between cost and risk. Your goods can be lost mid voyage on freight the seller paid for, and the claim is still yours.
CIP, Carriage and Insurance Paid To
Any mode · the only rule with all risks cover built in- Delivery point
- Handover to the first carrier at origin.
- Risk passes
- At origin, on that handover.
- Seller pays to
- The named place of destination, plus export clearance and insurance.
- Insurance
- Compulsory, minimum Institute Cargo Clauses (A), which is all risks cover for at least 110 percent of the contract value.
- Use it when
- You want the seller to carry both the freight and a broad insurance obligation, and you still want to be importer of record in New Zealand.
- Watch for
- Check the policy actually names you as the party able to claim, and that cover runs to the destination you care about.
DAP, Delivered at Place
Any mode · the workhorse for New Zealand imports- Delivery point
- The named destination in New Zealand, on the arriving vehicle, ready for unloading.
- Risk passes
- At the named destination, before unloading.
- Seller pays to
- The named destination, excluding import clearance, duty and GST.
- Insurance
- Not required, though the seller carries the risk to destination so normally insures its own exposure.
- Use it when
- You want a delivered price but need to stay importer of record so your business keeps the GST input credit.
- Watch for
- Unloading is yours. Agree who provides the forklift or hiab before the truck arrives.
DPU, Delivered at Place Unloaded
Any mode · the only rule where the seller unloads- Delivery point
- The named destination, once the seller has unloaded the goods.
- Risk passes
- After unloading at the named destination.
- Seller pays to
- The named destination including unloading, excluding import clearance, duty and GST.
- Insurance
- Not required of either party.
- Use it when
- The cargo needs specialist unloading the seller is better placed to organise, such as heavy plant or project freight.
- Watch for
- DPU replaced DAT from the 2010 edition. Contracts that still say DAT are citing a superseded term.
DDP, Delivered Duty Paid
Any mode · maximum seller obligation- Delivery point
- The named destination, cleared for import, ready for unloading.
- Risk passes
- At the named destination, before unloading.
- Seller pays to
- Everything, including New Zealand import clearance, duty and GST.
- Insurance
- Not required of either party.
- Use it when
- Low value consumer e commerce, or where the seller already has a New Zealand entity or a properly appointed agent.
- Watch for
- The GST input credit belongs to the importer of record, so under DDP it goes to the seller. A GST registered New Zealand buyer loses a credit it would otherwise have claimed.
The four sea and inland waterway rules
These four apply only where goods are loaded directly onto a vessel. They were written for bulk and break bulk cargo, and they predate the container.
FAS, Free Alongside Ship
Sea and inland waterway only- Delivery point
- Alongside the vessel at the named port of shipment, on the quay or on a barge.
- Risk passes
- Once the goods are alongside the vessel.
- Seller pays to
- The quay at the named port, plus export clearance.
- Insurance
- Not required of either party.
- Use it when
- Bulk commodities and heavy lift cargo where the buyer controls the vessel and the loading.
- Watch for
- Loading is entirely yours. Any delay at the berth sits on your account.
FOB, Free on Board
Sea and inland waterway only- Delivery point
- On board the vessel at the named port of shipment.
- Risk passes
- Once the goods are on board.
- Seller pays to
- Loading on board, plus export clearance.
- Insurance
- Not required of either party.
- Use it when
- Bulk and break bulk cargo loaded straight from the quay.
- Watch for
- With a container, the seller loses control at the terminal gate but keeps the risk until loading days later. Use FCA instead.
CFR, Cost and Freight
Sea and inland waterway only- Delivery point
- On board the vessel at the port of shipment.
- Risk passes
- Once the goods are on board at origin.
- Seller pays to
- The named destination port, plus export clearance.
- Insurance
- Not required of either party, which surprises buyers who assume paid freight means covered cargo.
- Use it when
- Bulk cargo where the seller has the better ocean rate and you insure separately.
- Watch for
- The voyage is uninsured unless you arrange cover from the moment of loading at origin.
CIF, Cost, Insurance and Freight
Sea and inland waterway only- Delivery point
- On board the vessel at the port of shipment.
- Risk passes
- Once the goods are on board at origin, not on arrival in New Zealand.
- Seller pays to
- The named destination port, plus export clearance and insurance.
- Insurance
- Compulsory, but only Institute Cargo Clauses (C), a named perils cover that may exclude ordinary handling damage.
- Use it when
- Bulk commodity trades and letter of credit work where CIF remains the market convention.
- Watch for
- CIF stops at the destination port. Terminal handling, import clearance and inland delivery in New Zealand are all yours.
Which rules should I use for containers?
Use an any mode rule. The four sea only rules assume the goods go straight from the quay onto the vessel, so risk transfers at loading. A container leaves the seller's control at the terminal gate and can sit in the yard for days before it is loaded, which opens a window where the seller carries risk over cargo it can no longer see. Swap FOB for FCA, CFR for CPT, and CIF for CIP.
Since the 2020 edition, FCA can also produce an on board bill of lading, so the old letter of credit reason for sticking with FOB has gone. Our article on the most common Incoterms mistakes that cost New Zealand businesses money works through what the terminal risk gap costs in practice.
Which rules require insurance?
Two of eleven. CIP requires Institute Cargo Clauses (A), broad all risks cover, for at least 110 percent of the contract value. CIF requires only Clauses (C), a named perils policy that covers events such as fire, stranding and collision, and typically excludes theft and ordinary handling damage. That gap between (A) and (C) is one of the more commercially significant differences in the whole set.
Under the other nine rules nobody is obliged to insure. Whoever holds the risk at a given moment should be the one holding the cover. Confirm with your broker that your marine cargo policy runs from the exact point of risk transfer in your contract, not from the arrival port.
What each rule means for New Zealand customs and GST
The Incoterm does not change what New Zealand Customs charges. It changes who has to deal with it.
Duty is charged on the customs value of the goods, which is based on the price paid or payable for them. Where goods are bought on CIF terms, the overseas freight and insurance are deducted to reach that value. GST at 15 percent sits on a wider base: the customs value, plus any duty, plus the international freight and insurance, which is the landed cost. Customs collects duty and GST at the border on consignments valued over NZ$1000, while the low value imported goods rules that took effect on 1 December 2019 put the GST collection obligation on registered overseas suppliers for lower value consignments.
Where the Incoterm bites is the importer of record. Under EXW, FCA, CPT, CIP, DAP, DPU, FAS, FOB, CFR and CIF, the New Zealand buyer is importer of record, lodges the entry, pays duty and GST, and if GST registered claims the GST back as an input credit. Under DDP the overseas seller or its appointed agent has to be importer of record, and the credit goes to them. Ten of the eleven rules keep the credit with you. One does not.
Import procedure sits under the Customs and Excise Act 2018, while the sale contract that carries the Incoterm, including when title passes, sits under the Contracts and Commercial Law Act 2017. Goods also have to satisfy Ministry for Primary Industries biosecurity requirements before they are released, and no Incoterm changes that. This is general information, not legal or tax advice. Confirm any specific transaction with New Zealand Customs, a licensed customs broker or a commercial lawyer.
How to write an Incoterm in a contract
Three components, every time: the code, a specific named place, and the edition year.
- Correct
- CIP Port of Tauranga, INCOTERMS 2020. FCA 12 Industrial Road Hamilton, INCOTERMS 2020. DAP 45 Kerrs Road Wiri Auckland, INCOTERMS 2020.
- Incomplete
- FOB. CIF Auckland. FCA China. Each of these leaves either the place or the edition open to interpretation.
- Then check the paperwork agrees
- The same term and place must appear on the contract, the commercial invoice, the bill of lading and, where relevant, the letter of credit and the insurance certificate. A bank checking a documentary credit rejects the presentation if they disagree.
The one line worth remembering
An Incoterm answers three questions: where the seller delivers, where risk passes, and who pays for each leg. It does not decide who owns the goods, when you get paid, or whether the goods are any good.
Pick the rule that matches your mode of transport, your ability to clear customs at each end, and who is genuinely better placed to arrange the freight. Then write it out in full.
An Incoterms course for New Zealand businesses is coming
Findlay and Co runs its training through Capability Solutions, our workplace training arm. We are building a practical Incoterms 2020 course written for New Zealand importers, exporters and freight and operations teams, with the cost and risk transfer points, the documents, and the New Zealand customs and GST detail worked through in plain language. Register your interest and we will let you know the moment it opens. New to the industry? Read our guide to what a freight forwarder actually does.
Register your interest See Capability Solutions Capability Solutions is the Findlay and Co training business. Existing courses are at train.capabilitysolutions.co.nz.Frequently asked questions
What are the 11 Incoterms 2020 rules?
The 11 rules are EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), DDP (Delivered Duty Paid), FAS (Free Alongside Ship), FOB (Free on Board), CFR (Cost and Freight) and CIF (Cost, Insurance and Freight). The first seven work for any mode of transport. The last four are for sea and inland waterway transport only.
Which Incoterms 2020 rules can be used for any mode of transport?
Seven rules work for any mode: EXW, FCA, CPT, CIP, DAP, DPU and DDP. They cover sea, air, road, rail and multimodal movements, which is why they fit almost every New Zealand shipment. The four sea and inland waterway rules, FAS, FOB, CFR and CIF, were designed for bulk and break bulk cargo loaded directly onto a vessel, and they suit containers poorly.
Which Incoterms require the seller to arrange insurance?
Only two. CIP requires the seller to insure the cargo to a minimum of Institute Cargo Clauses (A), which is all risks cover. CIF requires only Institute Cargo Clauses (C), a narrower named perils cover. Under the other nine rules, neither party is obliged to insure, so risk can pass to the buyer at origin with no cover in place unless the buyer arranges it separately.
Which Incoterm places the most responsibility on the seller?
DDP, Delivered Duty Paid. The seller carries cost and risk all the way to the named destination and also clears the goods for import, paying any duty and GST. EXW sits at the opposite end, where the seller only makes the goods available at its own premises. For a New Zealand import, DDP only works if the overseas seller can lawfully act as importer of record here, which many cannot.
What is the difference between DAP, DPU and DDP?
All three are delivered terms where the seller carries risk to the destination. Under DAP the goods arrive ready for unloading and the buyer unloads them. Under DPU the seller unloads them, which makes DPU the only rule that requires the seller to unload at destination. Under DDP the seller also clears the goods for import and pays the duty and GST. DPU replaced the old DAT rule from the 2010 edition.
What is the difference between FCA and FOB?
Both leave the main carriage to the buyer, but the delivery point differs. Under FOB the seller must place the goods on board the vessel, and risk passes at that point. Under FCA the seller delivers to the carrier at an agreed place, which for containers is normally the terminal or container yard, and risk passes there. FCA suits containerised cargo because the seller loses control of the container at the terminal, not at the ship's rail.
How do I write an Incoterm correctly in a contract?
Write three things every time: the three letter code, a specific named place, and the edition year. For example, CIP Port of Tauranga, INCOTERMS 2020, or FCA 12 Industrial Road Hamilton, INCOTERMS 2020. Leaving the place vague or the year off is what turns a clear rule into an argument, because different courts can read an incomplete term differently.
Which Incoterm suits a first time New Zealand importer?
For a first container import, DAP or CIP are usually the safest starting points. Both leave export clearance and the main carriage with the seller, and both leave you as importer of record, so a GST registered New Zealand buyer keeps the GST input credit. CIP adds all risks insurance as a seller obligation. Avoid EXW, which puts foreign export clearance on you, and avoid DDP, which hands your GST credit to the seller.