Which Incoterm Should You Know? A 2025 Guide for Importers
If you’re in the middle of sourcing a product, planning your next order, or expanding into a new market, there’s one question that quietly shapes everything from pricing to delivery timelines: Who’s responsible for what once your goods start moving?
That’s where Incoterms come in.
They’re often mentioned in passing, part of the paperwork, part of the quote. But in 2025, getting them right is critical. These terms define not just your shipping responsibilities, but how risk, cost, and control are shared between you and your supplier.
If you’ve ever felt unsure about where your job ends and your supplier’s begins, or if freight issues have ever caught you off guard, this guide is here to clear things up.
What Are Incoterms?
Incoterms (short for International Commercial Terms) are standard rules published by the International Chamber of Commerce. They spell out who handles what in an international shipment, from export duties and loading to insurance, customs, and final delivery.
There are 11 official terms in the 2020 update, and while the rules themselves haven’t changed since release, the world around them has. With tighter customs enforcement, ESG reporting, and unpredictable logistics costs, understanding your Incoterms is more important than ever.
There are 11 official terms in the 2020 update, and while the rules themselves haven’t changed since release, the world around them has. With tighter customs enforcement, ESG reporting, and unpredictable logistics costs, understanding your Incoterms is more important than ever.
Why Incoterms Still Matter in 2025
Think of your Incoterm as the blueprint for every shipment you make. It tells everyone, your supplier, your freight partner, your warehouse team, who’s taking care of what.
Used correctly, it helps prevent delays, missed paperwork, and surprise costs. Used vaguely or not at all, it’s one of the easiest ways to lose control of your margins.
At The Sourcing Co., we’ve helped hundreds of clients navigate cross-border freight, and Incoterms are often the first thing we help them clarify, especially when coordinating multiple supplier relationships in China or managing split shipments across borders.
Used correctly, it helps prevent delays, missed paperwork, and surprise costs. Used vaguely or not at all, it’s one of the easiest ways to lose control of your margins.
At The Sourcing Co., we’ve helped hundreds of clients navigate cross-border freight, and Incoterms are often the first thing we help them clarify, especially when coordinating multiple supplier relationships in China or managing split shipments across borders.
The 11 Incoterms in Use Today
Incoterms are grouped by the type of transport involved:
For all transport types:
EXW, FCA, CPT, CIP, DPU, DAP, DDPF
sea and inland waterways only:
FAS, FOB, CFR, CIF
Let’s walk through them in plain language and help you spot which might fit your next shipment.
For all transport types:
EXW, FCA, CPT, CIP, DPU, DAP, DDPF
sea and inland waterways only:
FAS, FOB, CFR, CIF
Let’s walk through them in plain language and help you spot which might fit your next shipment.
Buyer-Friendly Terms
1 DDP (Delivered Duty Paid)
The seller handles everything, including duties, shipping, customs, and delivery. You simply receive the goods. DDP is a great option if you want a frictionless experience or are still building your internal logistics capabilities. It pairs well with a streamlined order process when time and clarity are key.
2 DAP (Delivered at Place)
The seller handles all logistics up to delivery, while you take care of import duties. It gives you flexibility at the border without managing the full freight journey.
3 DPU (Delivered at Place Unloaded)
This one goes a step further. The seller unloads the goods at your premises. If your team doesn’t have unloading equipment or if you’re working with remote or shared warehouses, DPU removes friction at the final stage.
The seller handles everything, including duties, shipping, customs, and delivery. You simply receive the goods. DDP is a great option if you want a frictionless experience or are still building your internal logistics capabilities. It pairs well with a streamlined order process when time and clarity are key.
2 DAP (Delivered at Place)
The seller handles all logistics up to delivery, while you take care of import duties. It gives you flexibility at the border without managing the full freight journey.
3 DPU (Delivered at Place Unloaded)
This one goes a step further. The seller unloads the goods at your premises. If your team doesn’t have unloading equipment or if you’re working with remote or shared warehouses, DPU removes friction at the final stage.
Balanced-Responsibility Terms
1 FOB (Free On Board)
Ideal for sea freight. The seller loads the goods onto the vessel. From there, the buyer takes responsibility. It’s clear-cut, widely used, and gives you control over freight without dealing with origin logistics.
2 IF (Cost, Insurance and Freight)
The seller covers transport and basic insurance to your port. Risk transfers when the goods are loaded on the ship. Great for sea freight when you want fewer upfront decisions.
3 CIP (Carriage and Insurance Paid To)
Applies to all transport types and includes more robust insurance, as per the 2020 update. It’s helpful when you’re shipping higher-value goods or private label products.
4 FCA (Free Carrier
The seller delivers to a location you specify, usually a warehouse or port terminal. This term supports multimodal freight and can be adapted for containerised shipments with bills of lading, which is essential if you’re working with letters of credit.
Ideal for sea freight. The seller loads the goods onto the vessel. From there, the buyer takes responsibility. It’s clear-cut, widely used, and gives you control over freight without dealing with origin logistics.
2 IF (Cost, Insurance and Freight)
The seller covers transport and basic insurance to your port. Risk transfers when the goods are loaded on the ship. Great for sea freight when you want fewer upfront decisions.
3 CIP (Carriage and Insurance Paid To)
Applies to all transport types and includes more robust insurance, as per the 2020 update. It’s helpful when you’re shipping higher-value goods or private label products.
4 FCA (Free Carrier
The seller delivers to a location you specify, usually a warehouse or port terminal. This term supports multimodal freight and can be adapted for containerised shipments with bills of lading, which is essential if you’re working with letters of credit.
Buyer-Takes-Most Terms
1 EXW (Ex Works)
The goods are made available at the seller’s premises. You handle pickup, customs, freight, and everything else. EXW gives you full control, but if you're unfamiliar with the supplier’s country, it's a riskier option.
2 FAS (Free Alongside Ship)
The seller delivers the goods next to the vessel at the origin port. You manage loading and all transport from there. FAS is rare, but occasionally used for bulk cargo.
3 CFR (Cost and Freight)
The seller pays freight to the destination port, but risk passes once the goods are loaded. You’re on the hook for insurance and anything that happens after.
4 CPT (Carriage Paid To)
Similar to CFR but applies to all transport types. The seller arranges delivery to a location you choose, but you manage the risk once goods are handed off.
The goods are made available at the seller’s premises. You handle pickup, customs, freight, and everything else. EXW gives you full control, but if you're unfamiliar with the supplier’s country, it's a riskier option.
2 FAS (Free Alongside Ship)
The seller delivers the goods next to the vessel at the origin port. You manage loading and all transport from there. FAS is rare, but occasionally used for bulk cargo.
3 CFR (Cost and Freight)
The seller pays freight to the destination port, but risk passes once the goods are loaded. You’re on the hook for insurance and anything that happens after.
4 CPT (Carriage Paid To)
Similar to CFR but applies to all transport types. The seller arranges delivery to a location you choose, but you manage the risk once goods are handed off.
What Changed in 2020 (and Why It Still Matters)
- DPU replaced DAT, allowing more delivery flexibility beyond just terminals
- CIP now mandates Clause A insurance, offering broader protection than the basic cover used in CIF
- FCA accommodates bills of lading, making it easier to work with bank-financed transactions
- Security and cost allocation are now more clearly defined in the A9/B9 sections of each term, helping businesses calculate landed costs with greater accuracy
So, Which Incoterm Should You Use?
That depends on what you’re shipping, where you're shipping it to, and how much responsibility you want to carry.
A small product launch with tight deadlines might lean toward DDP. A bulk container order? FOB or CIF might make more sense. If you’re managing inventory across multiple markets, your Incoterms should support the broader sourcing and manufacturing strategy behind it.
Still unsure? That’s normal. Incoterms aren’t something most business owners deal with every day, but they can shape everything from margin to customer satisfaction if misunderstood.
A small product launch with tight deadlines might lean toward DDP. A bulk container order? FOB or CIF might make more sense. If you’re managing inventory across multiple markets, your Incoterms should support the broader sourcing and manufacturing strategy behind it.
Still unsure? That’s normal. Incoterms aren’t something most business owners deal with every day, but they can shape everything from margin to customer satisfaction if misunderstood.
Know What You Need? What Next?
The right Incoterm gives you clarity, control, and confidence. It sets expectations early, reduces border friction, and strengthens the foundation of every international order.
At The Sourcing Co., we don’t just help you pick an Incoterm off a list. We work with you to choose terms that actually fit your business goals, not just the quote. With our multilingual team and boots-on-the-ground supplier relationships across Asia, we reduce sourcing risk where it matters most, before your goods ever leave the factory.
If you're ready to make shipping feel less like a gamble, get in touch with our team. We’ll help you align your Incoterms with a sourcing strategy that works from first quote to final delivery.
At The Sourcing Co., we don’t just help you pick an Incoterm off a list. We work with you to choose terms that actually fit your business goals, not just the quote. With our multilingual team and boots-on-the-ground supplier relationships across Asia, we reduce sourcing risk where it matters most, before your goods ever leave the factory.
If you're ready to make shipping feel less like a gamble, get in touch with our team. We’ll help you align your Incoterms with a sourcing strategy that works from first quote to final delivery.