Incoterms 2020 Explained: The 11 Rules for UAE Traders

Agreeing the wrong delivery term on an international sale can erase your profit margin before the goods even leave the UAE. Incoterms are the global language of trade that prevents this, but only if you use them correctly. For UAE traders, the most common and costly mistakes come from using a sea-only rule for an air shipment or promising a delivery term without being able to handle customs at the destination.

This guide is the plain-English reference for UAE exporters and importers. It explains what each of the 11 Incoterms 2020 rules means, who pays for freight and clearance, and how to choose the right one for your shipment, whether it’s moving by express, air, or sea from Dubai, Abu Dhabi, or any other emirate.

What are Incoterms? The short answer

Incoterms are a set of 11 globally recognized rules published by the International Chamber of Commerce (ICC). They define the responsibilities of sellers and buyers for the delivery of goods under a sales contract. In short, they clarify who pays for what, and when risk transfers from the seller to the buyer.

The current version is Incoterms 2020. These rules are not law, but they become legally binding when they are included in a sales contract. For any UAE business trading internationally, understanding incoterms is essential for accurate pricing, risk management, and smooth logistics.

What Incoterms Do Not Cover: It's crucial to remember that Incoterms rules only deal with the allocation of costs, risks, and obligations related to the shipment. According to the ICC, they do not cover the transfer of ownership or title to the goods, the price payable, or the payment terms. These must be specified separately in your sales contract.

The 11 Incoterms 2020 rules at a glance

The 11 rules are split into two distinct groups: seven rules for any mode of transport (ideal for container, air, and express freight) and four rules for sea and inland waterway transport only (for bulk and non-containerized cargo). This incoterms 2020 chart provides a high-level overview.

Rule	Full Name	Transport Mode	Where Risk Passes	Who Pays Main Freight	Who Clears Import
EXW	Ex Works	Any Mode	At seller's premises, not loaded	Buyer	Buyer
FCA	Free Carrier	Any Mode	When goods are handed to buyer's carrier	Buyer	Buyer
CPT	Carriage Paid To	Any Mode	When goods are handed to first carrier at origin	Seller	Buyer
CIP	Carriage and Insurance Paid To	Any Mode	When goods are handed to first carrier at origin	Seller	Buyer
DAP	Delivered at Place	Any Mode	At named destination, ready for unloading	Seller	Buyer
DPU	Delivered at Place Unloaded	Any Mode	At named destination, after unloading	Seller	Buyer
DDP	Delivered Duty Paid	Any Mode	At named destination, import-cleared	Seller	Seller
FAS	Free Alongside Ship	Sea/Waterway Only	When goods are alongside the vessel at origin port	Buyer	Buyer
FOB	Free On Board	Sea/Waterway Only	When goods are on board the vessel at origin port	Buyer	Buyer
CFR	Cost and Freight	Sea/Waterway Only	When goods are on board the vessel at origin port	Seller	Buyer
CIF	Cost, Insurance and Freight	Sea/Waterway Only	When goods are on board the vessel at origin port	Seller	Buyer

Rules for any mode: EXW, FCA, CPT, CIP

The seven any-mode rules are the most flexible and should be your default choice for most modern freight, including containerized sea freight, air freight, and express courier shipments. This section covers the first four; DAP, DPU and DDP follow below.

EXW – Ex Works (...named place)

EXW represents the minimum obligation for the seller. The seller simply makes the goods available at their own premises (e.g., their factory or warehouse in Dubai Investment Park). The buyer is responsible for everything else: loading the goods, arranging all transport, and handling both export and import clearance. Risk transfers to the buyer when the goods are made available, before they are even loaded.

For UAE exporters, EXW can be problematic. The buyer is responsible for export clearance, but a foreign company may not be able to act as the exporter of record in the UAE. This is a key reason why the EXW vs FOB (or more accurately, EXW vs FCA) debate often favors FCA for international sales.

FCA – Free Carrier (...named place)

FCA is a highly versatile rule and is widely used for containerized shipments in place of FOB. The seller delivers the goods to the carrier nominated by the buyer at a named place. This named place is critical:

• If the place is the seller's premises: Risk passes when the goods are loaded onto the buyer's collecting vehicle.
• If the place is elsewhere (e.g., a port or terminal): Risk passes when the goods are on the seller's truck, ready for unloading at that place.

The seller is responsible for UAE export clearance. A key change in Incoterms 2020 allows the buyer and seller to agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller, which can be essential for letter of credit transactions.

CPT – Carriage Paid To (...named place of destination)

Under CPT incoterms, the seller arranges and pays for carriage to a named destination. However, the risk transfer happens much earlier: when the goods are handed over to the first carrier in the transport chain. For a UAE exporter, this means if you ship CPT to London, you pay the freight to London, but your risk ends when the goods are handed to the freight forwarder in Dubai. The buyer is responsible for import clearance and any risks during the main transit.

CIP – Carriage and Insurance Paid To (...named place of destination)

CIP is similar to CPT, with one major addition: the seller must also purchase cargo insurance for the buyer's risk. A significant update in Incoterms 2020 is that CIP now requires a higher level of insurance cover: Institute Cargo Clauses (A), which is an "all-risks" policy. This is a much broader level of protection than the minimum cover required under the sea-only CIF rule.

Rules for any mode: DAP, DPU, DDP

These "D" rules involve the seller taking responsibility for delivering the goods all the way to the destination country. They are commonly used for door-to-door services.

DAP – Delivered at Place (...named place of destination)

With incoterms DAP, the seller arranges and pays for transport to a named destination (e.g., the buyer's warehouse) and handles UAE export clearance. The seller bears all risks until the goods arrive at the destination, ready for unloading. The buyer unloads the goods and handles and pays for import clearance, duties, and taxes.

DPU – Delivered at Place Unloaded (...named place of destination)

DPU is a new rule in Incoterms 2020, replacing the former DAT (Delivered at Terminal). It is the only Incoterm that requires the seller to unload the goods at the destination. The seller's responsibility and risk end once the goods are unloaded from the arriving transport and placed at the buyer's disposal. As with DAP, the buyer handles import clearance and duties.

DDP – Delivered Duty Paid (...named place of destination)

DDP incoterms represent the maximum obligation for the seller. The seller is responsible for everything: delivering the goods to the final destination, clearing them through customs in the buyer's country, and paying all applicable duties and taxes (like VAT). The buyer's only job is to unload the goods. While it offers a seamless experience for the buyer, DDP can be risky for sellers who are not equipped to handle customs and tax formalities in a foreign country.

Sea and inland waterway only: FAS, FOB, CFR, CIF

These four rules are for sea and inland waterway transport only. They fit best when goods are loaded straight onto the vessel, such as bulk commodities (oil, grain) or oversized items. Using them for container shipments is common, but it can leave gaps in risk and cost.

Why they don't fit container, air, or express shipments

The point of delivery and risk transfer for these rules is "alongside ship" (FAS) or "on board the vessel" (FOB, CFR, CIF). However, containerized goods are typically handed over to a carrier at a terminal or depot, often days before the vessel is loaded. If damage occurs in the terminal before loading, a seller using FOB could still carry the risk, even though they have lost control of the container. For this reason, FCA is usually the better choice for container shipments.

FAS – Free Alongside Ship (...named port of shipment)

The seller delivers when the goods are placed alongside the buyer's nominated vessel at the named port of shipment (e.g., on the quay at Jebel Ali Port). From that moment, the buyer bears all costs and risks.

FOB – Free On Board (...named port of shipment)

A classic trade term, FOB means the seller delivers the goods and transfers risk once they are loaded on board the vessel nominated by the buyer at the named port. The seller handles export clearance.

CFR – Cost and Freight (...named port of destination)

Under CFR, the seller pays for the cost and freight to bring the goods to the named destination port. However, risk transfers from seller to buyer once the goods are on board the vessel at the port of origin. The seller has no obligation to insure the goods for the buyer's risk.

CIF – Cost, Insurance and Freight (...named port of destination)

Incoterms CIF is identical to CFR, but with the added obligation for the seller to purchase minimum-level marine insurance for the buyer's risk during carriage. This minimum cover is defined as Institute Cargo Clauses (C). CIF is for sea freight and inland waterway transport only, so never for air freight; for containers, CIP is usually the better fit.

CIP vs CIF: insurance and mode

The difference between CIP and CIF is a critical distinction in the incoterms 2020 rules and a frequent source of confusion. The choice has significant implications for both risk and cost.

Insurance Level: All Risks vs. Minimum Cover

The main difference is the level of insurance required.

• CIP requires the seller to obtain comprehensive, "all-risks" insurance cover equivalent to Institute Cargo Clauses (A). This protects the buyer against a wide range of potential losses during transit.
• CIF only obliges the seller to arrange for minimum insurance cover, equivalent to Institute Cargo Clauses (C). This covers only a limited list of specified major events like fire, explosion, or the vessel sinking.

Transport Mode: Any Mode vs. Sea Only

The second key difference is the mode of transport.

• CIP is a flexible rule designed for any mode of transport, including multimodal journeys that combine truck, rail, air, and sea.
• CIF is a traditional maritime term restricted to sea and inland waterway transport only.

In practice: if your goods are moving by air, use CIP, not CIF. For containers, CIP is usually the better fit too.

Which Incoterms suit express and air freight from the UAE

For time-sensitive worldwide express and air freight shipments from the UAE, you must use one of the seven "any mode" rules. The sea-only rules (FAS, FOB, CFR, CIF) are not appropriate.

The most common and suitable incoterms for air and express are:

• FCA (Free Carrier): Ideal when the buyer wants to control the freight and has their own account with a carrier like DHL, FedEx, or UPS. The UAE seller's job is to get the goods export-cleared and hand them over to the buyer's carrier at an agreed point in the UAE.
• CPT/CIP (Carriage/Carriage and Insurance Paid To): Use these when the UAE seller is arranging and paying for the air freight to the destination airport. Risk transfers to the buyer once the goods are with the first carrier in the UAE.
• DAP/DDP (Delivered at Place/Delivered Duty Paid): These are the go-to terms for door-to-door express services. The choice between them is critical.

DAP vs. DDP for Door-to-Door Express

When shipping door-to-door, the choice between incoterms DAP and DDP incoterms comes down to who handles import customs and pays the duties and taxes.

• DAP: The seller (via their logistics partner like Infinity) delivers to the buyer's door, but the buyer is the importer of record. The buyer is responsible for paying any import duties and VAT to the carrier upon arrival. This is the safer option for most sellers.
• DDP: The seller takes on all responsibility, including acting as the importer of record and paying all duties and taxes. This provides a "landed cost" for the buyer but is complex and risky for the seller, who must be compliant with the destination country's tax laws.

How to choose an Incoterm

Choosing the right Incoterm is a strategic decision that should be made before you agree on a price. Consider these four factors:

1. Who Can Best Handle Customs?

Who is better positioned to manage export and import clearance? The seller is usually best placed to handle export formalities in their own country (the UAE). The buyer is typically best placed to handle import formalities in their country. Avoid DDP unless you have a robust process for acting as an importer in the destination country.

2. Who Controls the Freight?

Do you want to control the choice of carrier, transit time, and freight cost? If so, as a seller, you should use a "C" or "D" rule (CPT, CIP, DAP, etc.). If you are a buyer and want control, you should use an "E" or "F" rule (EXW, FCA). As a business shipping from the UAE, Infinity Logistics can provide quotes for all options, allowing you to compare costs and make an informed decision.

3. How Much Risk Will You Accept?

Each Incoterm defines the exact point where the risk of loss or damage passes from seller to buyer. With "E" and "F" rules, risk passes early in the journey, at origin. With "D" rules, risk passes late, at the destination. With "C" rules (CPT, CIP, CFR, CIF), there is a critical split: the seller pays for carriage to the destination, but risk transfers to the buyer at origin. Be clear about how much risk you are willing to bear during transit.

4. Name the Place Precisely

An Incoterm is incomplete and ambiguous without a named place. Don't just write "FOB"; write "FOB Jebel Ali Port, UAE Incoterms 2020". Don't just write "DAP London"; write "DAP 123 Business Street, London, UK, EC1A 1AA Incoterms 2020". Precision prevents disputes.

Once you have agreed on the right term, Infinity Logistics can price the shipment for you. Get a quote to see how your chosen Incoterm affects your total logistics cost.

How Infinity works with your Incoterm

Whatever Incoterm you agree with your customer or supplier, Infinity Logistics has the services to execute it. As a WCA Inter Global member and the Highly Commended Express Logistics Company of the Year at the Logistics Middle East Awards 2022, we provide a single point of contact for all your UAE shipping needs.

Compare the Options Before You Agree a Term

The Incoterm you choose directly impacts your shipping costs. Our AI agents compare DHL, FedEx, and UPS in real time, so most enquiries get a quote in under 10 minutes. You can see the cost of shipping FCA versus DAP before you finalize your sale.

Express Shipping with Key Account Power

As the #2 DHL partner in the UAE, with Key Account status at DHL, FedEx and UPS at the same time, Infinity Logistics offers business express rates up to 65% below retail. When you agree to ship on CPT, CIP, DAP, or DDP terms, we price your door-to-door express shipment on those rates.

UAE Export Clearance

For any Incoterm where the seller handles export clearance (every rule except EXW), Infinity's customs clearance service takes care of the UAE export formalities. Our office is in Ajman Free Zone, with warehousing in Dubai Investment Park, JAFZA, and Al Quoz.

Frequently Asked Questions

How many Incoterms are there in 2026?

The current version is Incoterms 2020, published by the International Chamber of Commerce (ICC). It contains 11 official rules. Check the ICC's Incoterms page for any newer edition before you sign a contract, and always state the version you are using (for example, "Incoterms 2020").

Can I use FOB or CIF for air freight?

No, you should not. FOB (Free On Board) and CIF (Cost, Insurance and Freight) are rules designed exclusively for sea and inland waterway transport. Their risk transfer points are tied to the goods being loaded "on board a vessel." For air freight, container shipments, or express courier, you should use the "any mode" equivalents, such as FCA (instead of FOB) or CIP (instead of CIF).

What is the difference between DAP and DPU?

The only difference between DAP (Delivered at Place) and DPU (Delivered at Place Unloaded) is unloading. Under DAP, the seller delivers the goods to the destination, ready for unloading by the buyer. Under DPU, the seller is responsible for both delivering and unloading the goods at the destination. DPU is the only Incoterm that requires the seller to unload.

What insurance does CIP require?

Under the Incoterms 2020 rules, CIP (Carriage and Insurance Paid To) requires the seller to purchase a high level of insurance cover for the buyer's risk. The default level is Institute Cargo Clauses (A), which is a comprehensive "all-risks" policy. This is a higher level of cover than the minimum "named perils" insurance (Clauses C) required under the CIF rule.

Do Incoterms decide when ownership passes?

No, they do not. Incoterms rules only define the allocation of costs, risks, and responsibilities for the transport of goods. They do not deal with the transfer of title or ownership from the seller to the buyer. The point at which ownership passes must be specified separately in the contract of sale.

Which Incoterm means the seller pays import duty?

The only Incoterm where the seller is responsible for paying import duties and taxes in the destination country is DDP (Delivered Duty Paid). Under DDP, the seller handles all aspects of the shipment, including export clearance, transport, import clearance, and payment of all duties and taxes, delivering the goods to the buyer's premises ready for unloading.

Sources & References

Official and industry sources referenced in this guide:

1. Incoterms® rules - ICC - International Chamber of Commerce
2. Know Your Incoterms
3. Incoterms® 2020 English - eBook - ICC Academy
4. ICC Guide to Incoterms® 2020
5. Incoterms® 2020 Checklist and Flowcharts - library.iccwbo.org
6. [PDF] Customer Guide
7. Guides, References & Public Clarifications