What an incoterm settles — and what it does not
An incoterm allocates three things between seller and buyer: costs, the organisation of transport and formalities, and the exact moment risk transfers. It does not settle transfer of title, applicable law or payment terms — those are separate contractual points that are regularly forgotten.
Risk transfer is the least understood point. Under EXW, risk passes to the buyer as soon as the goods are placed at their disposal at the seller’s premises, including during loading. If your carrier damages the goods on the supplier’s dock, that is your problem.
EXW and FCA: you control the freight
EXW is the most seller-friendly and most treacherous incoterm for a buyer: the seller is not even obliged to load the truck or complete export formalities. For an inexperienced buyer, it is a low price that turns into a series of unforeseen costs.
FCA fixes the essentials: the seller loads, handles export formalities and hands the goods to the carrier you nominate. It is the right choice if you have negotiated freight agreements and enough volume to move rates. The International Chamber of Commerce in fact recommends FCA over EXW in almost every case.
DAP, DPU and DDP: the supplier delivers to you
DAP places the goods at destination, not unloaded, cleared for export but not for import. DPU is the only incoterm where the seller unloads. DDP goes as far as import clearance and paying duties: simplest for you, and almost always the most expensive, because the supplier prices the risk they take.
The real trap in DDP is VAT. A foreign supplier clearing goods for import in your country must be tax-registered there, which they often are not. The goods then sit blocked, or the VAT is paid in a way that gives you no right of deduction.
How to decide in practice
Three questions are enough. Do you have negotiated freight rates better than your supplier’s? Then take FCA. Is your volume too small to move freight pricing? Take DAP. Are you importing from outside the EU with no customs capability? Consider DDP, but check the seller’s tax registration first.
And in every case, impose the incoterm in the RFQ, with the precise place. "DAP" alone means nothing: it is "DAP, receiving dock, 4 rue X, postcode, city, Incoterms 2020" that is enforceable.
