Incoterms 2020 Complete Guide for Iranian Traders

What Are Incoterms?

Incoterms, short for International Commercial Terms, are a globally recognized set of 11 standardized trade rules published by the International Chamber of Commerce (ICC). First introduced in 1936, these rules have been revised multiple times, with the latest version -- Incoterms 2020 -- taking effect on January 1, 2020. Incoterms define the responsibilities, costs, and risks assumed by sellers and buyers in international (and domestic) trade transactions. They specify who arranges and pays for transportation, insurance, customs clearance, and when the risk of loss or damage to goods transfers from the seller to the buyer.

It is critical to understand that Incoterms do NOT govern the transfer of ownership or title to goods, the price or payment terms, the consequences of breach of contract, or the applicable law and dispute resolution forum. These matters are covered by the sales contract and the applicable law.

Every international trade contract should explicitly state which Incoterm applies, the version year (e.g., "CIF Bandar Abbas Incoterms 2020"), and the named place or port.

All 11 Incoterms 2020 Rules Explained

Incoterms 2020 rules are divided into two categories based on the mode of transport: rules for any mode of transport (7 rules) and rules exclusively for sea and inland waterway transport (4 rules).

Rules for Any Mode of Transport

1. EXW (Ex Works) -- Named Place of Delivery

The seller makes the goods available at their premises (factory, warehouse). The buyer bears all costs and risks from that point forward, including export clearance, loading, transport, insurance, import clearance, and duties. This is the seller's minimum obligation.

Seller's obligations: Package goods, make them available at the named place
Buyer's obligations: All transport, export/import clearance, insurance, loading
Risk transfer point: At the seller's premises when goods are placed at the buyer's disposal
Iranian context: Rarely used in Iranian foreign trade because the buyer (often a foreign party) would need to handle Iranian export customs, which is impractical. Sometimes used in domestic transactions or when an Iranian buyer picks up goods directly from a foreign factory

2. FCA (Free Carrier) -- Named Place of Delivery

The seller delivers goods to the carrier or another person nominated by the buyer at the seller's premises or another named place. The seller handles export clearance. This is the most versatile Incoterm, suitable for containerized cargo, multimodal transport, and modern logistics.

Seller's obligations: Deliver goods to the carrier, export clearance, loading at seller's premises (if delivery is there)
Buyer's obligations: Main carriage, insurance, import clearance, duties
Risk transfer point: When goods are delivered to the carrier at the named place
Key Incoterms 2020 change: New option in FCA A6/B6 allows the buyer to instruct the carrier to issue an on-board bill of lading (B/L) to the seller -- solving the long-standing problem where sellers under FCA needed a B/L for letter of credit purposes but could not obtain one since they did not control the main carriage
Iranian context: Growing in use for containerized exports. Recommended as a modern alternative to FOB for container shipments

3. CPT (Carriage Paid To) -- Named Place of Destination

The seller pays for carriage to the named destination but risk transfers when goods are handed over to the first carrier. There is a critical split between the cost point (destination) and the risk point (first carrier).

Seller's obligations: Arrange and pay for transport to the destination, export clearance
Buyer's obligations: Insurance (optional but at buyer's risk), import clearance, duties, unloading at destination
Risk transfer point: When goods are delivered to the first carrier
Iranian context: Used for exports to landlocked Central Asian countries (Afghanistan, Turkmenistan, Uzbekistan) via road transport

4. CIP (Carriage and Insurance Paid To) -- Named Place of Destination

Same as CPT but the seller must also obtain cargo insurance. Under Incoterms 2020, the required minimum insurance for CIP was upgraded to Institute Cargo Clauses (A), which provides all-risks coverage -- a significant change from Incoterms 2010 which only required Clause (C) minimum coverage.

Seller's obligations: Arrange and pay for transport and insurance (Clause A minimum) to destination, export clearance
Buyer's obligations: Import clearance, duties, unloading
Risk transfer point: When goods are delivered to the first carrier (same as CPT -- risk transfers before destination)
Iranian context: The insurance upgrade to Clause (A) makes this term more protective for buyers. However, due to sanctions, Iranian sellers may have difficulty obtaining international insurance coverage

5. DAP (Delivered at Place) -- Named Place of Destination

The seller delivers goods at the named destination, ready for unloading from the arriving vehicle. The seller bears all risks and costs up to the destination, except for import clearance and duties.

Seller's obligations: All transport, export clearance, delivery to the destination point
Buyer's obligations: Unloading, import clearance, duties
Risk transfer point: At the named destination, before unloading
Iranian context: Occasionally used when Iranian exporters sell to neighboring countries (Iraq, Afghanistan) and deliver to the buyer's city or border crossing

6. DPU (Delivered at Place Unloaded) -- Named Place of Destination

Formerly DAT (Delivered at Terminal) in Incoterms 2010, renamed and expanded in 2020. The seller delivers goods unloaded at the named place of destination. This is the only Incoterm that requires the seller to unload goods at destination. The name change from DAT to DPU was made to clarify that the destination does not have to be a "terminal" -- it can be any place.

Seller's obligations: All transport, export clearance, unloading at destination
Buyer's obligations: Import clearance, duties
Risk transfer point: When goods are unloaded at the named destination
Iranian context: Used when the seller agrees to deliver and unload at a specific warehouse or facility in the destination country

7. DDP (Delivered Duty Paid) -- Named Place of Destination

The seller's maximum obligation. The seller delivers goods cleared for import at the named destination, bearing all costs including import duties and taxes. The buyer only needs to unload the goods.

Seller's obligations: All transport, export and import clearance, all duties and taxes, delivery to destination
Buyer's obligations: Only unloading at the final destination
Risk transfer point: At the named destination
Iranian context: Rarely used for imports INTO Iran because foreign sellers typically cannot navigate Iranian customs procedures, NTSW registration, and Rial-based duty payments. Occasionally used by large Iranian exporters selling to Iraq or Afghanistan where they have local customs capability

Rules for Sea and Inland Waterway Transport Only

8. FAS (Free Alongside Ship) -- Named Port of Shipment

The seller delivers goods alongside the vessel at the named port of shipment. The seller handles export clearance.

Seller's obligations: Deliver goods alongside the vessel, export clearance
Buyer's obligations: Loading onto vessel, main carriage, insurance, import clearance
Risk transfer point: When goods are placed alongside the ship at the port of shipment
Iranian context: Used occasionally for bulk cargo exports (minerals, aggregates) at Iranian ports like Bandar Abbas

9. FOB (Free On Board) -- Named Port of Shipment

The seller delivers goods on board the vessel at the named port of shipment. This is one of the most widely used Incoterms globally and in Iranian trade.

Seller's obligations: Deliver goods on board the vessel, export clearance, loading
Buyer's obligations: Main carriage (ocean freight), insurance, import clearance, duties
Risk transfer point: When goods pass the ship's rail and are on board the vessel
Iranian context: The dominant Incoterm for Iranian exports, especially petrochemical products, minerals, steel, and other bulk commodities. Iranian exporters prefer FOB because they only need to deliver to the Iranian port and the foreign buyer handles shipping and insurance -- which avoids the problem of international insurers refusing to cover Iranian-origin cargo due to sanctions

10. CFR (Cost and Freight) -- Named Port of Destination

The seller pays for ocean freight to the destination port but risk transfers when goods are loaded on board at the origin port. Similar to FOB but the seller additionally arranges and pays for the main sea carriage.

Seller's obligations: Deliver goods on board, pay freight to destination, export clearance
Buyer's obligations: Insurance, import clearance, duties, unloading
Risk transfer point: When goods are on board the vessel at the port of shipment (NOT at destination)
Iranian context: Used by some Iranian importers who want to handle their own insurance but have the foreign supplier arrange shipping

11. CIF (Cost, Insurance, and Freight) -- Named Port of Destination

The seller pays for ocean freight and minimum insurance (Institute Cargo Clauses C under Incoterms 2020 -- note that unlike CIP, CIF still requires only Clause C minimum) to the destination port. Risk still transfers at the port of shipment.

Seller's obligations: Deliver goods on board, pay freight and insurance to destination, export clearance
Buyer's obligations: Import clearance, duties, unloading
Risk transfer point: When goods are on board the vessel at the port of shipment
Iranian context: The most important Incoterm for Iranian imports. IRICA (Iran Customs Administration) calculates ALL import duties and taxes based on the CIF value, regardless of which Incoterm the actual contract uses. If goods are purchased FOB or CFR, customs will calculate a notional CIF value by adding estimated freight and insurance costs

Key Changes from Incoterms 2010 to Incoterms 2020

1. DAT Renamed to DPU

Delivered at Terminal (DAT) was renamed to Delivered at Place Unloaded (DPU). The word "terminal" was removed because it caused confusion -- many traders thought delivery had to be at a port terminal. The new name DPU clarifies that the delivery/unloading can happen at any agreed place.

2. CIP Insurance Upgraded to Clause (A)

Under Incoterms 2010, both CIF and CIP required minimum Institute Cargo Clauses (C) insurance. Incoterms 2020 upgraded CIP to require Clause (A) -- all-risks coverage -- while CIF remains at Clause (C). This change reflects that CIP is often used for manufactured goods (higher value, more varied risks) while CIF is used for bulk maritime commodities.

3. FCA Bill of Lading Option

A new provision 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 after loading. This solves a practical problem: banks processing letters of credit often require an on-board B/L, but under FCA the seller loses control once goods are with the carrier.

4. Transport Security Costs

Incoterms 2020 more clearly allocates security-related transport costs (X-ray scanning, container sealing, etc.) between seller and buyer in each rule.

5. Own Transport Arrangements

Incoterms 2020 explicitly allows for situations where the seller or buyer uses their own transport vehicles rather than hiring a third-party carrier -- relevant for FCA, DAP, DPU, and DDP.

Most Used Incoterms in Iranian Trade

For Imports into Iran

CIF -- The dominant term. Since IRICA calculates all duties on CIF value anyway, most importers prefer buying CIF to have the actual CIF price match the customs valuation, avoiding disputes over notional freight/insurance values
CFR -- Used when the importer wants to arrange insurance domestically through Iranian insurers (Iran Insurance, Asia Insurance, etc.) which may be cheaper or required by regulations
FOB -- Used by experienced importers who want full control over shipping logistics and can negotiate better freight rates

For Exports from Iran

FOB -- By far the most common. Iranian exporters prefer FOB because: (a) international marine insurers often refuse to cover Iranian-origin cargo due to US/EU sanctions, (b) arranging international shipping from Iran can be difficult and expensive, (c) buyers in China, India, and other major destinations have their own established shipping networks
FCA -- Growing for containerized exports, especially to neighboring countries via road/rail
EXW -- Sometimes used when foreign buyers send their own trucks to pick up goods, particularly in border trade with Iraq, Turkey, and Afghanistan

Sanctions Impact on Incoterm Selection

International sanctions have fundamentally altered how Iranian traders choose Incoterms:

Iranian exporters overwhelmingly use FOB or EXW because securing international marine insurance and booking vessel space is extremely difficult under sanctions
Iran-China trade (Iran's largest trade partner) is conducted mostly on FOB basis, with Chinese buyers arranging their own vessels
Iranian importers often buy CIF because the foreign seller can more easily arrange insurance and shipping in their own country
Some Iranian companies have resorted to using intermediary countries (UAE, Oman, Turkey) to arrange shipping and insurance

IRICA Customs Valuation and Incoterms

Regardless of which Incoterm your contract uses, the Iran Customs Administration (IRICA) always values imported goods on a CIF basis for calculating duties and taxes. This means:

If you buy FOB, customs will add estimated freight and insurance to arrive at a CIF value
If you buy EXW, customs will add all costs (inland transport, freight, insurance) to get CIF
If you buy DDP, customs will still separately calculate the CIF component
The CIF value used by customs may differ from your actual costs, leading to disputes

Practical tip: When importing under any term other than CIF, keep detailed records of actual freight and insurance costs to present to customs, as their estimated values may be higher than your actual costs.

Risk Transfer Points Summary

| Incoterm | Risk Transfers At | Transport Mode | |----------|-------------------|---------------| | EXW | Seller's premises | Any | | FCA | Named place (carrier) | Any | | CPT | First carrier | Any | | CIP | First carrier | Any | | DAP | Destination (before unloading) | Any | | DPU | Destination (after unloading) | Any | | DDP | Destination | Any | | FAS | Alongside ship | Sea only | | FOB | On board vessel | Sea only | | CFR | On board vessel | Sea only | | CIF | On board vessel | Sea only |

Cost Comparison Overview

| Incoterm | Export Clearance | Loading | Main Transport | Insurance | Import Clearance | Unloading | |----------|-----------------|---------|----------------|-----------|-----------------|-----------| | EXW | Buyer | Buyer | Buyer | Buyer | Buyer | Buyer | | FCA | Seller | Depends* | Buyer | Buyer | Buyer | Buyer | | FAS | Seller | Buyer | Buyer | Buyer | Buyer | Buyer | | FOB | Seller | Seller | Buyer | Buyer | Buyer | Buyer | | CFR | Seller | Seller | Seller | Buyer | Buyer | Buyer | | CIF | Seller | Seller | Seller | Seller** | Buyer | Buyer | | CPT | Seller | Seller | Seller | Buyer | Buyer | Buyer | | CIP | Seller | Seller | Seller | Seller*** | Buyer | Buyer | | DAP | Seller | Seller | Seller | Seller**** | Buyer | Buyer | | DPU | Seller | Seller | Seller | Seller**** | Buyer | Seller | | DDP | Seller | Seller | Seller | Seller**** | Seller | Buyer |

*FCA: Seller loads if delivery at seller's premises; buyer loads if delivery elsewhere **CIF: Minimum Clause (C) insurance ***CIP: Minimum Clause (A) all-risks insurance (upgraded in 2020) ****DAP/DPU/DDP: Insurance not mandatory but seller bears the risk

Practical Tips for Iranian Traders

For Exporters

Use FOB or FCA as your default unless the buyer specifically requests otherwise
Always specify the port precisely (e.g., "FOB Bandar Abbas" not just "FOB Iran")
Include the Incoterms version year in your contract ("Incoterms 2020")
If you can arrange competitive shipping, consider offering CFR to increase your product's attractiveness
Keep documentation of all export clearance costs for accounting purposes

For Importers

Buying CIF simplifies customs valuation since it matches IRICA's calculation basis
If buying FOB or CFR, maintain detailed records of freight and insurance costs
Check whether your goods qualify for EAEU preferential tariffs that could reduce duties
Consider using FTZ imports (Kish, Qeshm, Chabahar) where duty exemptions may apply
Always verify your supplier's Incoterm understanding to avoid disputes

Common Mistakes to Avoid

Using maritime-only terms (FOB, CIF, CFR, FAS) for air freight or road transport -- use FCA, CPT, or CIP instead
Failing to specify the named place/port clearly
Not including the Incoterms version year (2020 vs 2010 rules differ)
Assuming CIF insurance covers all risks -- it only covers minimum Clause (C)
Using EXW for exports when you should handle export clearance (use FCA instead)
Confusing cost responsibility with risk responsibility -- under CIF and CFR, the seller pays for freight but risk transfers at the origin port

Source: ICC Incoterms 2020 Official Rules, Iran Chamber of Commerce (ICCIMA), Iran Customs Administration (IRICA) | Last Updated: February 2026