In this article, Miguel Angel Bustamante Morales discusses the key differences between the Incoterms® rules in the“C” and “D” groups.
Miguel is an ICC certified trainer on the Incoterms® 2020 Rules and an active participant in the last three revisions of the Incoterms® Rules: 2000, 2010, and 2020.
The views and opinions expressed in this article are those of our authors and do not necessarily reflect the official policy or position of the ICC Academy or ICC.
Incoterms® 2020: A practical guide to “C” and “D” rules
Created by the International Chamber of Commerce in 1936, the Incoterms® rules are a set of trade rules that are periodically updated, with the latest one being Incoterms® 2020.
These rules standardise key terms in international B2B sales of goods, clarifying (among other things) the place of delivery and when the risk of loss or damage to the goods transfers from seller to buyer.
Each of the eleven rules clarifies:
- Delivery point and transfer of risk: The exact place and point at which the goods are delivered, and risk passes from seller to buyer.
- Allocation of costs: Which costs are borne by the seller and which by the buyer
- Transport arrangements and security: Who is responsible for arranging carriage and complying with any security requirements.
- Insurance responsibilities: In 2 of the 11 rules, whether, and by whom, insurance for the goods is arranged.
- Export and import formalities: Who handles customs clearance, duties, and any procedures for transit countries.
- Packaging, marking, and certifications: Who is accountable for packaging and marking the goods and obtaining any quality or weight certificates.
In this article we will focus on two Incoterms® rule families: “C” and “D”, including when each of them should be used and their key differences.
Explore our Incoterms® rules knowledge hub, find content related to the different rules and insightful use cases.
Incoterms® 2020 Certificate
Incoterms® 2020 “C” terms: CPT, CIP, CFR, and CIF
The Incoterms® 2020 “C” group comprises CPT, CIP, CFR and CIF.
Although each “C” term is always followed by the named place of destination, for example: CIF Port of Antwerp, Belgium, Incoterms® 2020 these terms mean the seller delivers the goods and transfers the risk of loss or damage to the buyer when the goods are handed to the carrier contracted by the seller at the designated place or when the goods are loaded on board the vessel at the port of shipment.
This means that the risk does not transfer upon arrival of the goods at the named place or port of destination.
Accordingly, under “C” terms the place of delivery and the place of destination have different meanings. The place of delivery (and the place where risk passes from seller to buyer) is where the seller hands the goods to the carrier – e.g., the seller’s premises, the airport or rail terminal of departure, or the port of shipment – typically in the seller’s country or export location.
By contrast, the place of destination is where the goods are to be received – e.g., a land border, airport, rail terminal, or seaport near the buyer or in the buyer’s country – and, critically, the place to which the seller has an obligation to arrange transport of the goods. Thus, with “C” terms, delivery and destination are distinct and play different roles in the sales transaction.
Expanding on the earlier example – CIF Port of Antwerp, Belgium, Incoterms® 2020 – delivery of the goods (and transfer of risk) occurs at the export port, for instance at the Port of Valparaiso, Chile, precisely when the goods are loaded on board the vessel at that port.
Additionally, and quite importantly, under A10, the seller must notify the buyer that delivery has occurred. However, delivery and the transfer of risk take place regardless of when this notification is given. Consequently, the buyer may be unaware of the exact timing and location of ‘delivery’ and risk passage for some time after they have occurred. (see CIF Incoterms® 2020, A2, A3, A10).
Why, then, do ‘C’ terms always cite the destination if delivery and risk transfer occur at the place or port of shipment?
Under all ‘C’ terms, the seller must arrange and pay for transportation to the specified destination. Additionally, in CIF and CIP, the seller must obtain, at its own cost, cargo insurance, covering the goods up to the named place or port of destination.
Therefore, under “C” terms, delivery and transfer of risk occur at origin, while the seller includes transportation (and, for CIP/CIF, insurance) to the named destination place or port.
If the parties want delivery, risk transfer, and costs to be included up to the named place or port of destination as the seller’s obligation and responsibility, then the “D” terms from the Incoterms® 2020 rules is more appropriate.
Seller and buyer obligations under Incoterms® 2020 “C” terms
- All “C” terms oblige the seller to deliver the goods to the carrier at the designated place or port of shipment.
- All “C” terms make the seller responsible for contracting and paying for transport up to the named place or port of destination.
- Under CIF and CIP, the seller must arrange and pay insurance up to the named place or port of destination. The insurance must enable the buyer (or any party with an insurable interest) to claim directly from the insurer.
- All “C” terms require the seller to complete export formalities.
- All “C” terms require the seller to bear the cost of the checking the good’s quality, measuring, weighing, counting, and providing suitable packaging (unless the goods, by their nature, do not require packaging)
- In all “C” terms, the seller must pay any charges for unloading the goods at the agreed place or port of destination, but only if the contract of carriage stipulates that these charges are the seller´s responsibility. Otherwise, they will be the buyer´s responsibility.
- All “C” terms make the buyer responsible for taking delivery once the goods have been handed to the carrier designated by the seller. This occurs at the place or port of shipment – not at the named destination. Accordingly, risk transfers to the buyer at the delivery point/port of shipment, not at destination.
- All “C” terms require the buyer to complete import formalities, and, if applicable, the transit customs procedures.
So, when is it appropriate to use “C” terms?
Using one of the “C” terms in a transaction depends on several factors, including:
- The seller can deliver the goods at the designated place or port of shipment on the agreed date or within the agreed period.
- More specifically, for CPT/CIP, the seller will hand the goods to the carrier at the designated place; for CFR/CIF, the seller will load the goods on board at the designated port of shipment. In all cases, delivery occurs where the transport journey begins.
- The seller will notify the buyer of the delivery in a way that enables the buyer to receive the goods.
- The seller will transfer risk to the buyer upon delivery to the carrier or loading on board, typically at the designated place or port of shipment – not at the named place or port of destination.
- The seller will contract carriage and pay freight to the named place or port of destination.
- The seller will comply with any transport-related security requirements (and associated costs) for carriage to the named place or port of destination.
- The seller understands they must complete export formalities (and bear related costs).
- The seller is prepared to arrange insurance in the buyer’s favour (or for any party with an insurable interest) when using CIF or CIP.
- The seller will pay for quality checks and appropriate packaging for transport (unless not required by the goods’ nature).
- The buyer will accept delivery and risk once the goods are delivered to the carrier or loaded on board at the designated place or port of shipment and understands that from that moment – and during the onward journey – the risk of loss or damage lies within the buyer.
- The buyer understands they must complete import formalities and any transit customs (including related costs).
- Both parties understand that under “C” terms, the seller’s obligation is to ship at the place or port of shipment, not to deliver at the named destination.
Important note: Whether the goods actually arrive at the named destination is not, in itself, a seller’s risk under “C” terms, since delivery and risk transfer occur at the designated place or port of shipment (see points 1, 2, 4 and 10 above). It is the buyer who bears the risk during the transportation journey that the seller has arranged.
Practical examples of “C” terms under Incoterms® 2020
Case: CPT (Incoterms® 2020)
A seller in Mendoza, Argentina and a buyer in Santiago, Chile agree on CPT Incoterms® 2020 for soybean oil, stating: 10,000 litres of soybean oil, CPT Paso de Los Libertadores (land border between Argentina and Chile), Incoterms® 2020.
The seller contracts and pays for road transport from Mendoza to Paso de Los Libertadores. Export formalities are completed.
The seller delivers the soybean oil to the carrier in Mendoza within the agreed period and properly packages them for road transport.
In accordance with Articles A2 and A3 of CPT Incoterms® 2020, delivery takes place and risk passes to the buyer at the moment the seller hands the soybean oil over to the carrier in Mendoza Argentina. Under Article A10, the seller must then notify the buyer of the transport details so they can receive the goods at the named destination. This confirmation of delivery does not affect the time at which delivery and the transfer of risk occur.
Because risk has passed at Mendoza, the buyer is expected – at their discretion – to arrange insurance from that point on. Finally, as per Article B1 of CPT Incoterms® 2020 rules, the buyer pays the price as agreed in the sales contract.
Case: CIF (Incoterms® 2020)
A seller in Morocco and a buyer in the Netherlands agree on CIF Incoterms® 2020 for fresh fruit, stating: 200 tons of fresh fruit, CIF Rotterdam Port, Netherlands, Incoterms® 2020.
The seller contracts and pays for sea carriage with ABC Carrier to the Port of Rotterdam and completes export formalities.
The seller delivers by loading the goods on board at the Port of Tanger Med, Morocco, within the agreed period, using refrigerated containers as appropriate. The seller also arranges and pays for insurance up to Rotterdam (as per Article A5 of CIF Incoterms® 2020).
The seller then notifies the buyer of the shipment details (Article A10 of CIF Incoterms® 2020), enabling the buyer to receive the goods at the agreed destination. According to Articles A2 and A3 of CIF Incoterms® 2020, the goods were deemed delivered and the risk deemed transferred to the buyer when they were loaded on board the vessel at the Port of Tanger Med; the notification does not constitute delivery. According to Article B1 of CIF Incoterms® 2020, the buyer must pay the agreed price.
Related reading – Comparing “C” rules with each other
Incoterms® 2020 “D” terms: DAP, DPU, and DDP
The Incoterms® 2020 “D” group comprises DAP, DPU and DDP.
All three terms are always followed by the named place of destination, for example: DAP Port of Shanghai, China, Incoterms® 2020.
Under “D” terms, the seller delivers the goods and transfers the risk of loss or damage to the buyer at the named place of destination, by placing the goods at the buyer’s disposal.
Accordingly, under “D” terms, the place of delivery and place of destination are the same. This is typically where the goods are received: a land border, airport, rail terminal, seaport of destination, or even the buyer’s premises.
For example, DAP Port of Shanghai, China, Incoterms® 2020:
Regardless of where the goods were first handed to the carrier or where the transport began, delivery (and risk transfer) occurs at the named place or port of destination, here the Port of Shanghai China, once the goods are ready for unloading and at the buyer’s disposal. Seller must give the buyer any notice required to enable the buyer to receive the goods (see articles A2, A3 and A10, of DAP Incoterms® 2020 rules).
Unlike the “C” terms, with “D” terms, both delivery and risk transfer occur at destination. Consequently, both the costs and risks for transportation up to the named destination are borne by the seller.
Seller and buyer obligations under Incoterms® 2020 “D” terms
- Delivery at destination: All “D” terms oblige the seller to deliver the goods to the buyer at the named place or port of destination.
- Carriage (freight): In all “D” terms, the seller contracts and pays for transport up to the named place or port of destination.
- Insurance: None of the “D” terms obliges the seller to arrange insurance for the buyer. Since the risk up to the destination lies with the seller, arranging for insurance to protect the seller’s own interest is the seller’s decision.
- Customs formalities:
DAP and DPU: The seller carries out export formalities and any transit customs, if applicable.
DDP: The seller carries out all customs formalities – export, import, and any transit.
- Checking & packaging: All “D” terms oblige the seller to pay for quality checks (measuring, weighing, counting) and to provide suitable packaging for the intended transport (unless the goods, by their nature, do not require packaging).
- Unloading costs at destination:
DAP and DDP: The seller must pay any charges for unloading the goods at the agreed place or port of destination, but only if the contract of carriage stipulates that these charges are the seller´s responsibility. Otherwise, they will be the buyer´s responsibility.
DPU: The seller must pay any charges for unloading the goods at the agreed place or port of destination.
- DDP: The seller carries out all customs formalities – export, import, and any transit.
- Taking delivery & risk transfer: The buyer takes delivery at the named destination. Risk transfers from the seller to the buyer at that point.
- Import formalities:
DAP and DPU: The buyer carries out import formalities.
DDP: The seller carries out all customs formalities, including import.
- Modes of transport: All “D” terms may be used for any mode of transport, including multimodal shipments.
So, when is it appropriate to use “D” terms?
Choosing a “D” term depends on several factors, including whether:
- The seller can deliver at the named destination on the agreed date or within agreed period.
- More precisely:
DAP/DDP: Delivery occurs when the goods arrive, ready for unloading, and are at the buyer’s disposal at the named destination.
DPU: Delivery occurs after when the goods have been unloaded from the arriving means of transport at the named place or port of destination.
In all 3, delivery occurs when the seller’s arranged transport has concluded. - The seller will notify the buyer to enable receipt of the goods.
- The seller will transfer risk to the buyer by placing the goods at the buyer’s disposal at destination.
- The seller will contract carriage and pay freight to the named place or port of destination.
- The seller will comply with any transport-related security requirements (and associated costs) up to destination.
- Customs obligations:
Under DAP and DPU, the seller carries out export formalities and any transit customs;
Under DDP, the seller carries out all customs formalities – export, import, and any transit customs. - The seller understands they must pay for quality checks and appropriate (unless unnecessary by the goods’ nature).
- The buyer will take delivery and risk once the goods arrive at the named destination.
- Import formalities:
DAP/DPU: The buyer handles import formalities (including costs).
DDP: The seller handles import formalities; the buyer has no import obligation. Note that in some destination countries, there may be barriers – or even an outright prohibition – that make it difficult for a foreign seller to handle import formalities.
- Both parties clearly understand that under “D” terms, the seller’s obligation is to deliver at the named destination.
Important note: If the goods do not arrive at the named destination, or don’t arrive in sound condition, since the seller bears the transport risk under “D” terms, seller must provide buyer a remedy (e.g., reshipment). Otherwise, the seller would be in default of contractual obligations towards the buyer.
Incoterms® 2020 English
Practical examples of “D” terms under Incoterms® 2020 rules
Case: DPU (Incoterms® 2020)
A seller in Torslanda (Gothenburg Municipality, Västra Götaland County, Sweden) and a buyer in Asunción, Paraguay sign a sales contract under DPU Incoterms® 2020 for 250 hybrid vehicles, model XYZ, stated as: DPU Av. Gral. Jose Gervasio Artigas 1945, Asuncion 001202, Paraguay, Incoterms® 2020.
The seller contracts and pays for multimodal transport from the Torslanda plant to Asunción, with transshipment at the Port of Montevideo, Uruguay (Paraguay is landlocked).
Export formalities and documents are completed by the seller. The cars begin their journey at the seller’s plant in Torslanda, Sweden. The seller uses DFDS ro-ro vessels from the Port of Gothenburg to the Port of Montevideo. The vehicles are unloaded in Montevideo, where the seller completes transit customs formalities.
After clearance, the cars are loaded onto specialized trucks for road transport to Paraguay. At the Uruguay-Paraguay land border, the buyer carries out and pays for import formalities (as stated in article B7 of the Incoterms® 2020 rules). Once cleared, the trucks proceed to the named destination (Av. Gral. José Gervasio Artigas 1945, Asunción 001202, Paraguay) at the seller’s risk.
Upon arrival, the seller unloads the cars at the named place within the agreed period (as mandated in articles A2 and A3 of the Incoterms® 2020 rules). At that moment, the seller has fulfilled delivery and transferred risk to the buyer. Because the seller bears the risk up to the named destination, it is expected (but optional) that the seller arranges insurance for the entire journey. Finally, as per article B1 of DPU Incoterms® 2020 rules, the buyer pays the price as set out in the sales contract.
Case: DDP (Incoterms® 2020)
A seller in Dhaka, Bangladesh, and a buyer in Beaverton Oregon, USA sign a sales contract under DDP Incoterms® 2020 for two containers of XYZ Brand Sport Apparel, stated as: DDP One Bowerman Drive, Beaverton, Oregon, USA, Incoterms® 2020.
The seller contracts and pays for multimodal transport with MAB Carrier up to One Bowerman Drive. Export formalities in Bangladesh are completed and paid by the seller. The containers are loaded at the Port of Chittagong, arrive at the Port of Long Beach, California, and the seller carries out and pays the import formalities with U.S. Customs. If the seller does not have an entity or presence in the United States, seller may need to be established as a Foreign Importer of Record.
The containers are then moved by rail to Beaverton, unloaded at the rail terminal and loaded onto trucks for final delivery to the named place. The goods arrive within the agreed period and are at the buyer’s disposal, ready for unloading. The seller has fulfilled delivery at the named place.
Since the seller bears the risks up to the destination, the seller may choose to insure the goods for the entire journey. If unloading cost was not included in the transport contract, the buyer pays the carrier for unloading, and per article B2, B3 and B9 of DDP Incoterms® 2020, takes delivery upon arrival at the named destination; unloading is then performed at the buyer’s risk.
To conclude the trade transaction, per article B1 of DDP Incoterms® 2020, the buyer pays the price as provided in the sales contract.
Related reading – Comparing “D” rules with each other
Summary table
| Aspect | “C” terms | “D” terms |
|---|---|---|
| Delivery point | At the place/port of shipment. | At the named place/port of destination. |
| Risk transfer | At shipment (when handed to the carrier/loaded on board). | At destination (when at buyer’s disposal; for DPU, after unloading). |
| Delivery vs destination | Different concepts; delivery occurs at origin, destination is where carriage ends. | Same concepts; delivery and destination coincide. |
| Who bears risk during main carriage | Buyer (from delivery at shipment onward). | Seller (until delivery at destination) |
| Seller’s delivery obligation is fulfilled | When goods are delivered to the carrier/loaded on board at shipment. | When goods arrive at destination and are at buyer’s disposal (for DPU, after unloading). |
The “C” rules under Incoterms® 2020 are shipping terms, while “D” terms are delivery-at-destination terms.
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