Master international trade terms and understand your cargo insurance responsibilities. This comprehensive guide covers all 11 Incoterms 2020 rules with practical examples and insurance implications for Southeast Asian trade.
Incoterms (short for “International Commercial Terms”) are standardized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international transactions. These terms clarify who pays the freight charges, who handles customs formalities, where risk transfers from seller to buyer, and who is responsible for insuring goods in transit. Incoterms were created to reduce confusion and disputes, so all parties are on the same page about shipping responsibilities.
Under EXW, the buyer shoulders almost every cost and risk from the seller’s door. The seller must only make the goods available at their premises; the rest, from pickup to export formalities, freight, insurance, and delivery, rest with the buyer.
The buyer bears the complete risk once the goods are made available at the seller’s premises. It is the buyer’s responsibility to arrange cargo insurance covering the entire journey—from pickup to the final destination. Any loss or damage during transit falls solely on the buyer.
The seller delivers the goods to a carrier or another party nominated by the buyer at a named place, usually the seller’s premises or another agreed location.
The seller is not responsible for arranging insurance. The buyer must handle insurance from the point the goods are handed over to the carrier.
Seller pays transport to named destination but risk transfers when goods are handed to first carrier.
Buyer responsible for insurance despite seller paying transport costs.
Seller pays transport and minimum insurance to destination. Risk transfers at first carrier.
Seller provides minimum coverage. Buyer should consider additional insurance for full protection.
Seller delivers goods ready for unloading at named destination. Buyer handles import clearance.
Seller bears risk but insurance not mandatory. Both parties should consider coverage.
Seller delivers and unloads goods at named destination. Risk transfers after unloading.
Seller responsible for insurance until goods are unloaded at destination.
Seller handles everything including import clearance and duties. Maximum seller responsibility.
Seller should arrange comprehensive insurance for entire journey to destination.
Seller delivers goods alongside vessel at named port. Used only for sea/inland waterway transport.
Buyer arranges all marine insurance from alongside ship to destination.
Seller delivers goods on board vessel at named port. Risk transfers when goods pass ship's rail.
Buyer must arrange marine cargo insurance from port of loading onwards.
Seller pays transport costs to destination port but risk transfers when goods are loaded on vessel.
Buyer arranges marine insurance despite seller paying freight costs.
Seller pays transport and minimum marine insurance to destination port. Most commonly used term.
Seller provides minimum coverage (110% of CIF value). Buyer should consider additional protection.
Quick reference guide showing insurance responsibilities for each Incoterm
See how responsibilities are shared in different insurance setups
Incoterm |
Seller Insurance |
Buyer Insurance |
Risk Transfer Point |
|---|---|---|---|
EXW - Ex Workse |
✗ Optional |
✓ Full Coverage |
Seller's premises |
FCA - Free Carrier |
✗ Optional |
✓ From Pickup |
Named place |
CPT - Carriage Paid To |
✗ Optional |
✓ Full Coverage |
First carrier |
CIP - Carriage Insurance Paid |
✓ Minimum |
✓ Additional |
First carrier |
DAP - Delivered At Place |
✗ Optional |
✗ Optional |
Named destination |
DPU - Delivered Place Unloaded |
✓ Recommended |
✗ Optional |
After unloading |
DDP - Delivered Duty Paid |
✓ Full Coverage |
✗ Optional |
Final destination |
FAS - Free Alongside Ship |
✗ Optional |
✓ Marine Only |
Alongside ship |
FOB - Free On Board |
✗ Optional |
✓ Marine Only |
Ship's rail |
CFR - Cost and Freight |
✗ Optional |
✓ Marine Only |
Ship's rail |
CIF - Cost Insurance Freight |
✓ Minimum |
✓ Additional |
Ship's rail |
Practical tools to help you choose the right Incoterm and understand insurance requirements
Calculate total costs including insurance premiums for different Incoterms based on your shipment details.
Evaluate cargo risks for your specific trade route and get personalized insurance recommendations.
Answer a few questions about your shipment and get the most suitable Incoterm recommendation.
Comprehensive checklist to ensure you have adequate cargo insurance coverage for your shipments.
Download our comprehensive 50-page Incoterms guide with practical examples, insurance requirements, and real-world case studies from Southeast Asian trade.
Protect your valuable shipments with comprehensive cargo insurance coverage. Expert protection for sea freight, air cargo, and land transport across 6 key markets.
