Incoterms 2020 — and T1, T2, NCTS
All eleven trade rules, each with the moment risk transfers and a worked example — plus the customs transit documents that move goods under seal. Incoterms divide the commercial deal; T1/T2 arrange the customs route. A shipment usually needs both.
Incoterms are the ICC’s rules, not law: they bind you because your contract says so. Write the rule plus the named place (“FCA, seller’s warehouse, Shenzhen”), because a term without a place is half a term.
The eleven rules — any mode
EXW — Ex Works
Risk transfers the moment the goods are placed at your disposal at the seller's premises. The seller does not even load the vehicle.
Source: You buy machine parts in Ningbo EXW: your forwarder collects at the factory gate, and from that moment every cost, delay and damage is yours — including export clearance, which technically the buyer arranges in the seller's country. Checked: 4 September 2026.
FCA — Free Carrier
Risk transfers when the goods are handed to the carrier you nominate, at the seller's premises or a named place. The practical default for container freight.
Source: FCA Shenzhen warehouse: the factory loads your truck; once the carrier has the goods, damage in transit is your problem — while the seller still handles export clearance. Checked: 4 September 2026.
FOB — Free On Board (sea only)
Risk transfers when the goods are on board the vessel at the port of shipment. Seller pays until loading; the ocean and everything after is yours.
Source: FOB Shanghai: crates crack on the quayside after loading — that is your claim, not the seller's. Anything before the rail goes over the ship's side is theirs. Checked: 4 September 2026.
FAS — Free Alongside Ship (sea only)
Risk transfers when the goods lie alongside the vessel at the port of shipment — the gap between the quay and the ship's side belongs to the buyer.
Source: FAS Rotterdam for export: once the barge parks the goods next to the ocean vessel, the buyer owns the loading crane's mistakes. Checked: 4 September 2026.
CFR — Cost and Freight (sea only)
The seller pays the ocean freight to the destination port, but risk already transferred when the goods went on board at origin — cost and risk split at different moments, which surprises people.
Source: CFR Hamburg: cargo damaged mid-Atlantic is your loss even though the seller booked and paid the vessel. You claim on your insurance, at your cost. Checked: 4 September 2026.
CIF — Cost, Insurance and Freight (sea only)
As CFR, plus the seller must provide marine insurance — but only minimum cover. The 2020 rules tightened CIP to all-risk; CIF stayed at minimum.
Source: CIF Antwerp on a €80,000 consignment: the seller's one-page certificate with minimum cover is not the protection most buyers assume — top it up yourself. Checked: 4 September 2026.
CPT — Carriage Paid To (any mode)
Seller pays transport to the named destination, but risk transfers at hand-over to the first carrier. The inland leg at destination is where the gap bites.
Source: CPT Munich by rail from China: the seller pays through to Munich, yet damage in the last-kilometre truck is yours — risk moved at the first carrier, thousands of kilometres earlier. Checked: 4 September 2026.
CIP — Carriage and Insurance Paid (any mode)
As CPT, plus seller-arranged insurance — and under 2020, all-risk (ICC A) cover, not minimum. The mirror of CIF for containers and multi-modal.
Source: CIP Rotterdam by rail: your goods travel with high-grade insurance the seller had to buy — but the destination terminal handling is still your cost and risk. Checked: 4 September 2026.
DAP — Delivered At Place
Risk transfers when the goods are placed at your disposal at the named destination, ready for unloading. Import clearance is the buyer's.
Source: DAP your warehouse, Utrecht: the truck arrives, you unload and you clear customs — the seller carried the cost and the risk of the whole journey to your door. Checked: 4 September 2026.
DPU — Delivered at Place Unloaded
The only term where the seller unloads at destination. Risk transfers after unloading at the named place.
ICC Incoterms 2020, DPU (replaced DAT)
Source: DPU a Rotterdam bonded warehouse: the seller pays the container stripping and pallet placement; damage during that unloading is still the seller's problem. Checked: 4 September 2026.
DDP — Delivered Duty Paid
Maximum seller obligation: goods delivered, cleared for import, duties and taxes paid. The seller becomes the importer of record in the buyer's country — with VAT recovery problems that make many sellers refuse it.
Source: DDP Germany from China: the seller clears German customs, pays 19% import VAT it cannot reclaim, and registers the responsible person — the reason DDP quotes are either high or a trap. Checked: 4 September 2026.
T1, T2 and transit — moving goods under customs seal
T1 — transit for non-Union goods
Goods from outside the EU (not in free circulation) move under customs transit from office to office without paying duty or import VAT en route: duties are suspended until the goods reach the customs office of destination where they are cleared.
Common Transit Convention; EU Customs Code
Source: A container lands in Rotterdam bound for Warsaw. Instead of clearing (and paying) in the Netherlands, the forwarder opens a T1 via NCTS: the goods move under seal to Poland, where you clear them — duty point and paperwork stay where the sale is. Checked: 4 September 2026.
T2 — transit preserving Union status
Union goods (in free circulation) move through non-EU territory — or between parts of the customs union — without losing Union status, so no re-import duties arise on arrival.
Common Transit Convention
Source: Machines sold from Rotterdam to Zurich: under T2 they cross Swiss territory and re-enter the EU side as Union goods — no new import clearance, because they never stopped being Union goods. Checked: 4 September 2026.
T2L and T2LF — proof of Union status
T2L proves Union status for sea or air movements where no transit document runs; T2LF covers movements to and from special fiscal territories such as the Canary Islands.
Union Customs Code, Article 227ff
Source: Goods flown from Amsterdam to Bonaire carry a T2L so the Caribbean customs sees proof they are Union goods — without it, the shipment is treated as non-Union and taxed accordingly. Checked: 4 September 2026.
NCTS — the system behind T1/T2
The New Computerised Transit System: the electronic customs network through which every T1/T2 declaration is filed, tracked and closed, from office of departure to office of destination, across the EU and the common-transit countries (UK, Switzerland, Norway, Iceland and more).
European Commission, NCTS
Source: Your forwarder's T1 to Warsaw is an NCTS message sequence: opened in Rotterdam, monitored at the external EU border if applicable, closed on arrival in Poland — on paper this took days, digitally it takes the transit's own travel time. Checked: 4 September 2026.
How Incoterms and T1/T2 fit together
Incoterms divide cost and risk between buyer and seller; T1/T2 arrange the customs logistics underneath. They answer different questions and both appear on the same shipment.
ICC Incoterms 2020; Union Customs Code
Source: A DDP seller in Shenzhen shipping to Munich may open a T1 at Rotterdam to move the goods to Germany before clearing them — the commercial deal says who ultimately pays; the transit document says how the goods legally travel. Checked: 4 September 2026.