Incoterms 2025: A Practical Guide for U.S. Importers

November 3, 2025

1. What are Incoterms and why do they matter for U.S. importers

Incoterms are internationally recognized rules that define who (seller or buyer) is responsible for key tasks in a cross-border sale of goods: supplying the goods, arranging carriage, insurance, export and import formalities, and when risk transfers from seller to buyer. Trade.gov+2Guided Imports+2
They do not cover everything. For example, they do not determine which party pays for the goods, how or when title passes, or address many aspects of payment terms. Trade.gov+1
For a U.S. importer, using the correct Incoterm helps you understand what you (as buyer) are responsible for, including import customs clearance, duties/taxes, insurance (if applicable), risk of loss or damage, and transportation costs. Because misunderstandings over these responsibilities can lead to delays, hidden costs or disputes.
The official version in effect is Incoterms 2020 (to be clear: the next revision has not yet taken effect as of 2025). IncoDocs+2iccwbo.org+2
When you quote or approve contracts, you must specify the term and the version: for example “FOB Shanghai Incoterms 2020”. Failure to specify the version can lead to ambiguity which version applies. IncoDocs

2. The 11 Incoterms you should know (2020 version)

Here is a breakdown of the 11 terms in Incoterms 2020, grouped by transport mode (any mode vs sea/inland waterways only). Knowing which apply to your shipment mode is critical. Trade.gov.

Terms for any mode of transport (7 terms)

EXW – Ex Works (named place): The seller makes the goods available at their premises (or other named place). From that point the buyer bears all costs and risks of transport, export and import.
FCA – Free Carrier (named place): Seller delivers goods cleared for export to a carrier or other person nominated by buyer at a named place. Buyer takes risk from that point.
CPT – Carriage Paid To (named place of destination): Seller pays for carriage to the destination, but risk transfers to buyer once the goods are delivered to the first carrier.
CIP – Carriage and Insurance Paid To (named place of destination): Like CPT but seller also arranges and pays for insurance (minimum cover) to destination.
DAP – Delivered At Place (named place of destination): Seller delivers goods, ready for unloading, at the agreed place in destination country; buyer unloads and handles import clearance.
DPU – Delivered At Place Unloaded (named place of destination): Seller delivers and unloads goods at agreed place; buyer handles import clearance and any further transport. This replaces the old DAT (Delivered At Terminal). averitt.com+1
DDP – Delivered Duty Paid (named place of destination): Seller bears all costs and risks of bringing goods to destination, cleared for import, ready for unloading. From a buyer’s perspective this is the “maximum seller responsibility” term.

Terms for sea and inland waterway transport only (4 terms)

FAS – Free Alongside Ship (named port of shipment): Seller delivers when goods are placed alongside vessel at port. Buyer bears all costs and risk once goods are alongside.
FOB – Free On Board (named port of shipment): Seller delivers goods on board the vessel. Buyer assumes risk and costs from that point.
CFR – Cost and Freight (named port of destination): Seller pays cost & freight to bring goods to destination port, but risk transfers to buyer once goods are on board the vessel at origin.
CIF – Cost, Insurance and Freight (named port of destination): Like CFR but seller also provides minimum insurance cover for buyer’s risk during transport.

3. Key changes in Incoterms 2020 you should watch as a U.S. importer

Since you may encounter older contracts or suppliers referencing older terms, here are some practical updates to be aware of.

The term DPU replaces DAT. This provides clearer language especially when unloading occurs at a place other than a terminal. averitt.com+1
Under CIP, the required insurance level has been increased compared with prior version: seller must obtain insurance complying with Institute Cargo Clause A (a higher insurance cover) rather than Clause C. IncoDocs+1
Greater clarity now around cost allocation (sections A9/B9 in official text) and security obligations (who bears container screening, export permits, etc). This is relevant for U.S. imports because U.S. customs security filings may be involved. IncoDocs+1
The recognition that transport may be by seller’s own means (e.g., seller uses their own truck) under certain terms (FCA, DAP, DPU, DDP) — important if your supplier is doing part of the transport themselves. averitt.com
For containerised shipments under FCA, the rules clarify how the “on board” bill of lading can be dealt with, which may affect financing (LCs) and documentation. IncoDocs+1

4. What U.S. importers should look out for in practice

Here are practical checklist items for a U.S.-based importer to include when negotiating and managing international procurement contracts, shipment and customs clearance.

a) Contract language

Specify the Incoterm and version: Example “FOB Shanghai Incoterms 2020”.
Name the exact place or port: Instead of “FOB Shanghai”, better “FOB Shanghai Port Terminal X”. Vague named place can lead to ambiguity over when risk/cost shifts. IncoDocs
Check that the term applies to the mode of transport: If you are importing by sea, FAS/FOB/CFR/CIF are valid; if by air or multimodal then use one of the “any mode” terms (EXW, FCA, CPT, CIP, DAP, DPU, DDP). Guided Imports

b) Responsibility for import into U.S.

Make sure the contract clarifies who is responsible for U.S. import customs clearance, duties and taxes. If you as importer are handling import clearance you should ensure you have budget and documentation ready.
If the term is DDP (seller delivers duty paid), ensure the seller is competent to handle U.S. import formalities and you verify their obligations.
Insurance: If you are buying under terms that do not require the seller to provide insurance (many terms do not), decide whether you as buyer need to arrange your own cargo insurance.

c) Risk of loss or damage

Understand exactly when risk passes from seller to buyer. At that point you (or your insurer) are responsible for damage, loss or theft. Using the correct term and knowing when “delivery” occurs is vital.
Example: Under FOB, the risk transfers once goods are “on board” the vessel at origin port. If the supplier loads onto vessel and then some damage occurs during voyage, you (buyer) bear risk from that point.

d) Cost visibility

When quoting landed cost into the U.S., you must know: the contract price, freight, insurance (if applicable), import duties & taxes, port/terminal charges, inland U.S. transport to your warehouse. The chosen Incoterm will define which costs you pay vs seller pays.
Some hidden cost traps: unloading at destination, container handling charges, terminal fees , check whether contract term includes these or you are responsible. The clearer the contract the better.

e) Documentation and customs security filings

Especially for U.S. imports, make sure you coordinate export documentation from the seller, arrival documentation (bill of lading, air waybill), and U.S. customs entry requirements (importer security filing (ISF) for ocean shipments, etc).
Ask: according to the Incoterm chosen, who is responsible for submitting security filings, export customs clearance, import clearance, etc? If it’s you, ensure you are ready.

5. Example scenarios for U.S. importers

Here are two simplified examples to illustrate how choosing different Incoterms changes your role:

Scenario 1 — Supplier quotes “FOB Shenzhen Incoterms 2020”

You (U.S. importer) pay the supplier price + buyer-arranged transport from Shenzhen to U.S. You may appoint freight forwarder to pick up from supplier and load on board vessel.
Risk shifts to you once goods are on board the vessel at Shenzhen port. From that point you pay the main carriage, arrange insurance (if desired), handle import clearance in U.S., pay duties/taxes, arrival destination terminal handling, inland delivery.
Be sure your freight forwarder sends you the bill of lading, monitors arrival, and handles customs entry.

Scenario 2 — Supplier quotes “DAP Los Angeles Warehouse Incoterms 2020”

Supplier is responsible for delivering goods, cleared for export, to your U.S. warehouse in Los Angeles (named place). They bear the cost and risk up to the warehouse (except unloading costs may need checking).
Once goods arrive at your warehouse (and are ready for unloading) the risk passes to you. You then handle any unloading, internal transport, inventorying. You still handle duties/taxes unless the contract explicitly says “Delivered Duty Paid”.
For you this reduces coordination: you don’t have to pick up from port and arrange the overseas transport. But you may pay for a higher price for that service.

6. Practical tips and U.S.-specific considerations

Always verify whether the term you use is appropriate for your mode of transport (sea, air, multimodal).
Make sure you get a copy of the official Incoterms 2020 text (or a reliable summary) and refer to the correct version in your contracts.
Check with your freight forwarder and customs broker in the U.S. about whether they expect the Incoterm you’re using, and who is responsible for making the Importer Security Filing (ISF) for ocean shipments.
Consider purchasing cargo insurance cover even if the seller is arranging so-called “insurance” under CIP or CIF, check scope of cover.
When costs are quoted by your supplier, ask what is included: are terminal handling charges, unloading at port, inland transport in U.S., and import duties included or not?
Be aware of U.S. customs compliance: even though Incoterms handle delivery and risk, you must still comply with U.S. import regulations (tariff classification, valuation, preferential trade treatment, anti-dumping/countervailing duties, etc).
If using one of the sea-only terms (FAS/FOB/CFR/CIF), ensure the shipment is by sea or inland waterway , otherwise you may face complications if transported by air/truck.
If you are negotiating with a supplier, make sure you understand your “handover point” (when responsibility shifts) and ensure your internal logistics, insurance, customs and warehousing are aligned with that.

Quick Reference Table for U.S. Importers

Final thoughts for your U.S. operations

For your importing operations into the United States, it is essential to treat Incoterms as a contractual tool that defines risk, cost and responsibility. They are not optional technicalities. A misunderstanding can lead to unexpected cost, delayed customs clearance, or liability for damage or shortage that you thought was someone else’s responsibility.

When negotiating with overseas suppliers, always include the exact term, version (2020), named place/port, and ensure all parties understand their obligations (export, transport, insurance, import, duties, unloading, etc). Work closely with your freight forwarder and U.S. customs broker to ensure your internal logistics and compliance match the term you are using.

References

Official and Primary Sources

International Chamber of Commerce (ICC) – Incoterms 2020 Official Publication (ICC Publication No. 723E)
https://iccwbo.org/resources-for-business/incoterms-rules
The only official and legally recognized source for the full text and definitions of each term.
U.S. Department of Commerce – International Trade Administration (Trade.gov)
https://www.trade.gov/know-your-incoterms
Explains each Incoterm, its application to U.S. importers and exporters, and common misconceptions.
U.S. Customs and Border Protection (CBP) – Importing into the United States: A Guide for Commercial Importers
https://www.cbp.gov/trade/basic-import-export/importing
Outlines importer responsibilities, documentation, and the relationship between commercial terms and customs obligations.
International Chamber of Commerce (ICC) – Incoterms 2020 Guidance Notes
https://iccwbo.org/news-publications/policies-reports/incoterms-2020-update/
Provides clarifications on 2020 updates: DPU replacing DAT, higher insurance under CIP, and clarifications for FCA shipping documents.

🧭 Industry and Educational References

IncoDocs – Complete Incoterms 2020 Guide
https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide
Practical examples and charts showing cost, risk, and responsibility distribution.
Averitt Express – Understanding Incoterms 2020 Changes
https://www.averitt.com/blog/incoterms-2020
Explains real-world updates for logistics managers, including FCA flexibility and new DPU term.
Guided Imports – What Are Incoterms? (Chart and Comparison Table)
https://guidedimports.com/blog/what-are-incoterms-chart
Simplified Incoterm comparison chart with seller vs. buyer cost and risk mapping.
Maersk Logistics – How Incoterms Affect Global Freight
https://www.maersk.com/learn/articles/incoterms-guide
Covers how freight forwarders interpret Incoterms in multimodal shipping operations.
Freightos Learning Center – Incoterms 2020 for Shippers
https://www.freightos.com/freight-resources/incoterms/
Describes the impact of Incoterms on total landed cost and international logistics.
DHL Global Forwarding – Understanding Incoterms in International Trade
https://www.dhl.com/discover/business/import-export-advice/incoterms
Practical explanation of each term with real-world examples for air, ocean, and road transport.

🧩 Additional Reading (for U.S. Importers)

National Customs Brokers & Forwarders Association of America (NCBFAA)
https://www.ncbfaa.org/
Professional association providing compliance education and guidance on using Incoterms in U.S. brokerage operations.
ICC Academy – Incoterms 2020 Online Training Course
https://icc.academy/incoterms-2020-training-course
Official online certification training explaining each term and how to apply it in real transactions.
World Shipping Council – Understanding Shipping Contracts
https://www.worldshipping.org/
Covers carrier responsibility, bills of lading, and risk transfer points under sea Incoterms.

Frequently Asked Questions (FAQ)

1. What are Incoterms and why are they important for importers?

Incoterms are standardized international trade terms published by the International Chamber of Commerce (ICC). They define who is responsible for shipping, insurance, documentation, customs clearance, and risk transfer in global trade. For U.S. importers, the correct Incoterm determines when you take ownership and risk of the shipment, and who pays for transport and duties.

2. What is the latest version of Incoterms?

The current official version is Incoterms 2020. While discussions about “Incoterms 2025” are ongoing, the ICC has not yet released a new edition as of November 2025. Always write the version in contracts, for example: “FOB Shanghai Incoterms 2020.”

3. Which Incoterms are most common for U.S. importers?

The most frequently used for imports into the United States are:

FOB (Free On Board) – for ocean freight when the buyer arranges transport.
CIF (Cost, Insurance & Freight) – seller covers ocean freight and minimal insurance.
DAP (Delivered At Place) – seller delivers goods to a named U.S. destination, buyer pays duties.
DDP (Delivered Duty Paid) – seller handles delivery, duties, and import clearance.

4. What’s the difference between CIF and CIP?

Both include insurance and freight paid by the seller, but:

CIF applies only to sea shipments, and requires minimal insurance (Clause C).
CIP applies to any transport mode, and requires higher insurance coverage (Clause A).

5. Can I use FOB for air shipments?

No. FOB applies only to sea or inland waterway transport. For air or multimodal shipments, use FCA (Free Carrier) instead. Misusing a sea-only term for air shipments can cause disputes and documentation issues.

6. What does DDP mean for a U.S. importer?

Delivered Duty Paid means the seller is responsible for all costs and risks up to delivery in the U.S., including import duties, taxes, and customs clearance.

⚠️ However, under U.S. law, only a U.S. entity with an IRS EIN can act as the official importer of record. Foreign sellers using DDP must appoint a U.S. customs broker or agent to comply with CBP regulations.

7. Who pays for insurance under Incoterms?

Only CIF and CIP require the seller to arrange insurance. For all other terms (EXW, FCA, CPT, DAP, DPU, etc.), it’s the buyer’s decision to insure. Many importers purchase cargo insurance even when it’s not mandatory to protect against loss or damage.

8. Do Incoterms affect U.S. Customs clearance?

Not directly. Incoterms define responsibilities between buyer and seller, while CBP regulations govern import documentation, valuation, and duties. However, the chosen term can affect who provides documents, pays duties, and files the Importer Security Filing (ISF).

9. What are the biggest mistakes importers make with Incoterms?

Common errors include:

Using the wrong term for the mode of transport (e.g., FOB for air).
Failing to specify the version (e.g., Incoterms 2020).
Misunderstanding who pays which cost (especially terminal handling and insurance).
Not identifying the named place or port, leading to unclear risk transfer.

10. How can Stile Associates help with Incoterms compliance?

Stile Associates provides complete customs brokerage, freight forwarding, and compliance consulting. Our experts help importers:

Choose the correct Incoterm for each shipment.
Avoid costly errors in contracts and shipping documents.
Ensure proper customs valuation and risk allocation.
Manage U.S. Customs clearance and Importer Security Filings (ISF).
Coordinate with suppliers and carriers for door-to-door visibility.

To learn more or get personalized guidance, visit www.stileintl.com or contact our compliance team.

Incoterm	Mode Applicable	Buyer (U.S. importer) Key Responsibilities	Key Risk Transfer Point
EXW	Any	Pick up from seller’s premises/export clearance/import & inland transport	When goods made available at seller’s premises
FCA	Any	Arrange main carriage, insurance (if desired), import clearance	When seller delivers to carrier at named place
CPT	Any	Arrange import clearance, duties, destination transport	When goods delivered to first carrier (even if seller pays carriage)
CIP	Any	As CPT + assess insurance cover	Same as CPT (but seller arranges insurance)
DAP	Any	Import clearance, duties, unloading	When goods delivered ready for unloading at named place
DPU	Any	Import clearance, duties	When goods delivered & unloaded at named place
DDP	Any	Unloading, internal transport	When goods delivered at named place, duties paid
FAS	Sea/Inland water	Arrange carriage, import clearance, duties	Goods placed alongside ship at loading port
FOB	Sea/Inland water	Main carriage, import clearance, duties	Goods on board vessel at loading port
CFR	Sea/Inland water	Import clearance, duties (seller pays freight)	Goods on board vessel at loading port
CIF	Sea/Inland water	Import clearance, duties (seller pays freight & insurance)	Goods on board vessel at loading port