What Are Incoterms? The 2020 List of All 11 Terms and Their Link to Export Control

Hello, this is Ryuta Hamamoto from TIMEWELL. When I take questions about export control, I often find people tripping up in an unexpected place. One of the most common is confusing Incoterms with export control. "We went with EXW (ex works), so the buyer will handle the export license." People ship goods believing exactly that, and then go pale afterward. This misunderstanding is anything but rare.

Incoterms are the shared language of trade practice. But what they settle is the allocation of costs and risk between seller and buyer, not your obligations as an exporter under the Foreign Exchange and Foreign Trade Act (FEFTA, or gaitame-ho). Mistake one for the other, and a quiet hole opens up in your compliance.

Let's first pin down all 11 terms of Incoterms 2020 in a single list, confirm what changed from the 2010 version, and then trace where trade terms and export control intersect and where they never do, working from primary sources throughout. If you are worried that your company's export control setup is being dragged along by how you choose trade terms, our free export control readiness check lets you spot the gaps in three minutes.

Incoterms 2020 is not a law, but a set of voluntary rules

Incoterms 2020 (Incoterms® 2020) are the rules for interpreting trade terms published by the ICC (International Chamber of Commerce) ¹. They were released in 2019 and took effect on January 1, 2020. Let me clear up a misconception right away: Incoterms are neither a law nor an international treaty. They are fundamentally different in nature from statutes that a state enacts to bind everyone by force. They are simply voluntary rules assembled by the ICC, a private body, and they take effect for a transaction only once you write something like "This contract is governed by FOB under Incoterms® 2020" into the sales contract.

"Incoterms" is a registered trademark of the ICC. The correct form of citation is "Incoterms® 2020," with the circled R and the year ¹. This may seem like a fine detail, but if you fail to state the version in the contract, it becomes unclear which year's interpretation you agreed to, and that ambiguity becomes tinder for later disputes. Always state the version. This is an iron rule of practice.

Each rule is composed of ten obligations on each side. A1 through A10 are the seller's obligations, and B1 through B10 are the buyer's ¹. Points such as delivery, transfer of risk, carriage, insurance, customs clearance, and allocation of costs are organized within these ten items. It helps to think of it this way: whichever term you choose shifts the center of gravity of these seller and buyer obligations to the left or the right.

What often gets overlooked is that the ICC clearly defines what Incoterms do not cover. According to the ICC's official introduction, the Incoterms rules do not deal with the transfer of ownership (property rights), the price, sanctions, tariffs, prohibitions on export or import, force majeure or hardship, intellectual property rights, or the method, venue, or governing law of dispute resolution ². In other words, the Incoterms rules alone do not complete a sales contract. And it is precisely within this "not covered" territory that the export control obligation resides in full. I will come back to this in detail later.

The list of all 11 terms: start with the quick-reference table

Incoterms 2020 consists of 11 rules in total. These fall into two broad groups ¹. One is "rules for any mode or modes of transport": EXW, FCA, CPT, CIP, DAP, DPU, and DDP — seven in all. The other is "rules for sea and inland waterway transport": FAS, FOB, CFR, and CIF — four in all. The latter presuppose transactions in which goods are loaded onto a vessel, so they do not sit well with containers or air freight. This classification itself is the first fork in the road when choosing a term.

Laying out where risk transfers to the buyer and who handles export and import clearance gives the following table.

Group	Code	Name	Point of risk transfer	Export clearance	Import clearance
Any mode of transport	EXW	Ex Works	When placed at the buyer's disposal at the seller's premises, etc. (before loading)	Buyer	Buyer
Any mode of transport	FCA	Free Carrier	When handed to the carrier nominated by the buyer at the named place	Seller	Buyer
Any mode of transport	CPT	Carriage Paid To	When handed to the first carrier (seller pays carriage to destination)	Seller	Buyer
Any mode of transport	CIP	Carriage and Insurance Paid To	When handed to the first carrier (seller insures at the high ICC(A)-equivalent level)	Seller	Buyer
Any mode of transport	DAP	Delivered at Place	When placed at the buyer's disposal ready for unloading at the destination (before unloading)	Seller	Buyer
Any mode of transport	DPU	Delivered at Place Unloaded	When placed at the buyer's disposal after unloading at the destination (the only rule where the seller unloads)	Seller	Buyer
Any mode of transport	DDP	Delivered Duty Paid	When placed at the buyer's disposal, import-cleared and ready for unloading at the destination (maximum seller obligation)	Seller	Seller
Sea and inland waterway	FAS	Free Alongside Ship	When placed alongside the vessel at the port of shipment	Seller	Buyer
Sea and inland waterway	FOB	Free On Board	When placed on board the vessel at the port of shipment	Seller	Buyer
Sea and inland waterway	CFR	Cost and Freight	When placed on board the vessel at the port of shipment (seller pays freight to the destination port)	Seller	Buyer
Sea and inland waterway	CIF	Cost, Insurance and Freight	When placed on board the vessel at the port of shipment (seller insures at the minimum ICC(C)-equivalent level)	Seller	Buyer

Scanning the table from left to right, you can see the seller's burden growing steadily heavier. EXW carries the smallest seller obligation of all 11 rules ³. The seller only has to place the goods at the buyer's disposal at its own factory or warehouse, and it does not even bear the obligation of export clearance. At the opposite end sits DDP, the term with the largest obligation, where the seller takes on even import clearance and import duties ³.

One thing to watch is that the point where risk transfers and the endpoint where costs are borne do not always coincide. Under the so-called C-group — CPT, CIP, CFR, and CIF — the seller pays freight and insurance all the way to the destination or destination port. Yet risk transfers to the buyer much earlier, at the point of delivery. The seller pays the freight, but if the goods are damaged in transit, the risk is the buyer's. This "separation of cost and risk" is probably where beginners in trade practice get most confused. When reading the table, get into the habit of following the clearance columns and the risk-transfer column separately, and you will lose your way less often. If you want a more leisurely refresher on the basic terminology, see our companion piece, the beginner's guide to Incoterms 2020.

Seven points that changed from the 2010 version

Incoterms have been revised roughly once a decade. According to JETRO's summary, there are seven main points that changed in the 2020 version compared with 2010 ¹. Let's go through them in order.

The first is the accommodation of bills of lading with an on-board notation under the FCA rule. When trading under FCA, a mechanism was put in place so that, if the parties agree, they can instruct the carrier to issue a bill of lading confirming that the goods have been loaded, allowing the seller to obtain it via the buyer's carrier. The second is the consolidated listing of costs. The costs arising under each term are now gathered in A9 and B9 of each rule, so you can confirm in one place which party bears which cost. The third is the difference in insurance cover between CIF and CIP, which ties directly to how you choose a term, so I will treat it on its own in the next section.

The fourth is that FCA, DAP, DPU, and DDP now expressly cover cases where the seller or buyer carries the goods using its own means of transport rather than a third-party carrier. Transactions where you bring the goods in with your own truck were added to the scope. The fifth, and the most famous change, is the renaming of DAT to DPU. The old DAT (Delivered at Terminal) was abolished and replaced by DPU (Delivered at Place Unloaded) ¹. DPU is the only rule where the seller bears responsibility all the way through unloading the goods at the destination ⁴. The closely related DAP differs in that, even when the goods arrive at the destination, they are not unloaded; they are placed at the buyer's disposal ready for unloading. Who performs the unloading is the single point that separates DAP from DPU.

The sixth is the addition of security-related requirements to transport obligations and costs. Reflecting the reality that each country's security requirements have tightened for counter-terrorism and similar reasons, the location of obligations and costs relating to security was clarified. The seventh is the expansion of the explanatory notes for users. Each rule now opens with substantial notes explaining the situations in which it should be used, with the aim of reducing wrong choices. Note that to confirm in full the fine points of cost allocation in A9 and B9 and the precise wording of each rule's risk transfer, you need to consult the original text published by the ICC. The key points in this article are based on information published by JETRO and the ICC, but for contractual practice you should verify the wording in the original source. The seven changes took effect on January 1, 2020.

How to choose among CIP, CIF, and FOB: decide by insurance and mode of transport

The first thing practitioners hesitate over when choosing a term is how to distinguish between CIP and CIF, which involve insurance, and FOB, the classic term for sea transport. There are many misunderstandings here, so let me untangle them carefully.

CIP and CIF are both terms under which the seller arranges cargo insurance, but the 2020 version drew a clear distinction in cover levels. CIP defaults to a high level of cover, equivalent to Institute Cargo Clauses ICC(A) (the so-called all-risk type). CIF, on the other hand, defaults to the minimum level of cover, equivalent to ICC(C), which was carried over unchanged from the 2010 version ⁵. Many people have the image that "CIF is generous because it includes both freight and insurance," but in terms of insurance content it is the reverse. The generous one is CIP. That said, under either term the parties can agree to raise the cover to a higher level. If you handle fragile cargo or high-value goods, the safe move is not to leave it at CIF but to explicitly raise the scope of cover in the contract.

The other axis is the mode of transport. The rules for sea and inland waterway transport — FAS, FOB, CFR, and CIF — assume the goods are loaded onto a vessel and set risk transfer at "when placed on board the vessel." But container cargo is actually handed to the carrier at the container yard and only loaded onto the vessel afterward. Using FOB or CIF here creates an ambiguous window between handing over the container and it being loaded on board, during which the location of risk is unclear. That is why, for container transport or multimodal transport that spans several modes, it is proper to use FCA, CPT, or CIP, which suit any mode of transport. The genuine role of FOB, CFR, and CIF is transactions like loading bulk cargo directly onto a conventional vessel.

Personally, whenever I see a contract that reflexively picks FOB or CIF for a container transaction, I first suggest switching to FCA or CPT. The transactions that run on habit are exactly the ones where nobody notices the risk-transfer gap and it continues for years. Trade terms are not something to choose because "this is how we've always done it"; they are something to re-select to match the reality of the transport.

Incoterms and export control are separate matters: the EXW and DDP pitfalls

Now to the main point. Let me build out, with supporting evidence, the claim I raised at the outset: choosing a trade term does not transfer the export control obligation.

Recall that the ICC explicitly listed sanctions, tariffs, and prohibitions on export or import among the things Incoterms do not cover ². Export control falls squarely into this "not covered" territory. Japan's export control rests on the Foreign Exchange and Foreign Trade Act, and under Article 48(1) of that Act, a person who exports specified kinds of goods to specified destinations must obtain the permission of the Minister of Economy, Trade and Industry ⁶⁷⁸. The regulation is two-layered. There are list controls, which focus on the specifications of the goods or technology (items 1 through 15 of Appended Table 1 of the Export Trade Control Order), and catch-all controls (complementary controls), which focus on the end use or the end user ⁹. Both obligations remain with the exporter who actually ships the goods out of Japan, regardless of which Incoterm you chose.

What is more, this responsibility cannot be outsourced. According to the explanation by CISTEC (the Center for Information on Security Trade Control), legal responsibility for FEFTA violations such as unlicensed export lies with the exporter (or, for technology, the provider), and even if you commission the export procedures to a customs broker, it is the party that commissioned the work who is held responsible ⁹. "We handed everything to the customs broker, so we're fine" does not fly. This connects to the product side of what we do: the point of using an export control AI agent like TRAFEED to manage classification and whether a license is required in advance is precisely to keep this "non-transferable responsibility" under your own control. For details, see our TRAFEED service overview. That said, the final classification decision still rests with your company's export control manager.

Viewed from the customs side, export control is also built to be impossible to slip past. When processing an export declaration, customs verifies permits and approvals required under "other laws" such as the FEFTA. Article 67 of the Customs Act provides for export permission, and Article 70 provides for proof or confirmation; without the permits required under other laws, export permission will not be granted ¹⁰. However you structure your trade terms, goods lacking the license required under the FEFTA will be stopped at customs.

On top of that, the terms that are especially dangerous in practice are EXW and DDP. EXW carries the smallest seller obligation and does not include the obligation of export clearance. All the seller can do is assist the buyer in obtaining the documents and information needed for export ³. In theory, export clearance is the buyer's job. But a non-resident buyer cannot file an export declaration directly in Japan. It must appoint a customs administrator (Article 95 of the Customs Act), such as a customs broker resident in Japan and licensed by the Director-General of Customs, and file the declaration in the buyer's name ¹¹. This arrangement is cumbersome, and in the end the Japanese seller often has no choice but to get involved in the practical work, which tends to blur where responsibility for list controls and catch-all controls under the FEFTA actually lies. EXW looks at first glance like an easy term for the seller, but from an export control perspective it is actually the higher-risk choice. That is how I see it.

DDP, by contrast, is the maximum-obligation term, under which the seller takes on even import clearance and duty payment ³. The seller ends up shouldering the destination country's import regulations and tariffs, so here the management burden falls heavily on the import side. EXW tends to blur responsibility; DDP takes on too much of it. Because both are extremes, either one is a term you should choose only with your eyes open.

Finally, let me note the relationship to customs value. The customs value of imported goods is, in principle, the CIF price (the price actually paid plus freight, insurance, and the like up to arrival at the port of import), as provided by Article 4 of the Customs Tariff Act ¹². Customs duty is levied on this CIF price, and consumption tax on the total of the CIF price plus the duty amount and so on. The export declaration value, on the other hand, is in principle the FOB price (the free-on-board price at the port of export in Japan). This follows from customs practice and the treatment in trade statistics ¹³. Quoted terms like CIF and FOB are about the payment, and at the same time they affect customs valuation and the calculation of the declaration value. Keeping this dual meaning in mind broadens your perspective when choosing a term. As for the level of penalties for FEFTA violations, I will avoid asserting figures here and leave it to a separate article. If you are interested, see Penalties and Cases for Foreign Exchange and Foreign Trade Act Violations. For the full picture of the documents you actually need to assemble for export clearance, see our export customs clearance document checklist.

Summary

Incoterms 2020 is an indispensable tool as the shared language of trade practice. Split all 11 terms into two groups and organize them by point of risk transfer and who is responsible for clearance, and you can see clearly which term imposes how much burden on whom. The seven changes from the 2010 version — especially the renaming from DAT to DPU and the increase in CIP's insurance level — have a direct bearing on contractual practice.

But what I most wanted to convey in this article is not the list of terms itself; it is the fact that agreeing on trade terms and export control compliance sit on entirely separate layers. Whether you choose EXW or DDP, the obligation to perform classification and obtain an export license under the FEFTA remains with the exporter in Japan. The fact that the ICC explicitly states it does not deal with sanctions or prohibitions on export or import is itself an expression of a design philosophy: those matters are to be protected by each country's own laws.

Trade terms are the entrance to a transaction; export control is the line a transaction must never cross. Whether you can build a structure that manages these two separately, yet simultaneously, makes a large difference to how safe your transactions are. Why not start by taking stock of exactly which goods you are currently sending, under which terms, and to which countries? If you would like concrete advice on how to run classification and license-necessity checks in-house, feel free to reach out through a TRAFEED consultation.

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References

Footnotes

1. JETRO Trade and Investment Q&A, "Incoterms 2020" https://www.jetro.go.jp/world/qa/J-200309.html ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶

2. ICC, "Incoterms 2020 Introduction" https://www.icc-switzerland.ch/images/723e_inco2020_eng_intro.pdf ↩ ↩²

3. JETRO, "Overview of the latest Incoterms 2020 version" (Tomoyuki Yoshida, Kansai University) https://www.jetro.go.jp/ext_images/jetro/japan/oita/magazine/back_number/132trade_y.pdf ↩ ↩² ↩³ ↩⁴

4. ICC, "Incoterms® 2020" https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/ ↩

5. ICC Academy, "Incoterms® 2020: CIP or CIF?" https://academy.iccwbo.org/incoterms/article/incoterms-2020-cip-or-cif/ ↩

6. Ministry of Economy, Trade and Industry, "About the Foreign Exchange and Foreign Trade Act" https://www.meti.go.jp/policy/external_economy/trade_control/01_seido/01_gaitame/gaiyou.html ↩

7. e-Gov Law Search, "Foreign Exchange and Foreign Trade Act" (Article 48) https://laws.e-gov.go.jp/law/324AC0000000228 ↩

8. e-Gov Law Search, "Export Trade Control Order" (Appended Table 1) https://laws.e-gov.go.jp/law/324CO0000000378 ↩

9. CISTEC (Center for Information on Security Trade Control), "Basics of Export Control (Security Overview)" https://www.cistec.or.jp/export/yukan_kiso/anpo_gaiyou/index.html ↩ ↩²

10. Japan Customs, Customs Answer, "5001 Overview of export clearance procedures" https://www.customs.go.jp/tetsuzuki/c-answer/extsukan/5001_jr.htm ↩

11. JETRO Trade and Investment Q&A, "Export and import procedures under EXW (ex works)" https://www.jetro.go.jp/world/qa/04C-070306.html ↩

12. Japan Customs, Customs Answer, "1104 Customs value" https://www.customs.go.jp/tetsuzuki/c-answer/imtsukan/1104_jr.htm ↩

13. e-Stat Official Statistics, Statistical Terms, "FOB PRICE (free-on-board price)" https://www.e-stat.go.jp/classifications/terms/90/00/0942 ↩