Incoterms 2020 on Invoices: Which Term to Use and Where
How to show Incoterms on an invoice: the 11 Incoterms 2020 rules, the correct format with a named place, which costs to bill, and a filled sample invoice.
Quick answer: Show Incoterms on an invoice as the three-letter rule, the named place and the edition, for example "FCA Savannah, GA, USA, Incoterms 2020", near the shipping details or totals of the commercial invoice. Use the term agreed in your sales contract, and list any freight and insurance the seller pays as separate lines.
Incoterms are the trade terms that tell buyer and seller who arranges transport, who pays which costs and at what point the risk of loss passes from one to the other. They are published by the International Chamber of Commerce (ICC), and the current edition is Incoterms 2020. Getting Incoterms on an invoice right matters more than it first appears: the term shapes the invoice total, the customs value and, if goods are lost in transit, who absorbs the loss.
This guide explains the 11 rules, shows exactly where and how to write the term on a commercial invoice, walks through a filled sample with the arithmetic, and lists the mistakes that most often cause border delays or disputes. It covers sales of physical goods; services do not use Incoterms.
What Incoterms do, and what they do not do
According to the ICC's Incoterms rules, each term sets out:
- Where and when the seller delivers the goods.
- When risk of loss or damage passes from seller to buyer.
- Which party pays for transport, insurance, loading and unloading.
- Which party handles export clearance and import clearance.
They do not set the price, the payment terms, the currency or when ownership (title) passes. Those belong in the sales contract. An invoice saying "CIF" does not by itself mean the buyer owns the goods once they are on board, and it does not change your payment terms. Keep those separate on the invoice too.
The 11 Incoterms 2020 rules
The rules fall into two groups: seven that work for any mode of transport, and four meant only for sea and inland waterway transport.
| Rule | Full name | Mode | Risk passes to buyer | Seller pays main carriage? |
|---|---|---|---|---|
| EXW | Ex Works | Any | When goods are made available at the seller's premises | No |
| FCA | Free Carrier | Any | On handover to the buyer's carrier at the named place | No |
| CPT | Carriage Paid To | Any | On handover to the first carrier | Yes |
| CIP | Carriage and Insurance Paid To | Any | On handover to the first carrier | Yes, plus insurance |
| DAP | Delivered at Place | Any | At the named destination, ready for unloading | Yes |
| DPU | Delivered at Place Unloaded | Any | At the named destination, once unloaded | Yes |
| DDP | Delivered Duty Paid | Any | At the named destination, import-cleared | Yes, plus import duties and taxes |
| FAS | Free Alongside Ship | Sea/inland water | Alongside the vessel at the port of shipment | No |
| FOB | Free on Board | Sea/inland water | Once on board the vessel | No |
| CFR | Cost and Freight | Sea/inland water | Once on board the vessel | Yes |
| CIF | Cost, Insurance and Freight | Sea/inland water | Once on board the vessel | Yes, plus insurance |
Two details from the 2020 edition catch people out. First, under CIP the seller must buy a higher level of insurance cover (broadly equivalent to Institute Cargo Clauses (A)), while CIF still requires only minimum cover (Clauses (C)) unless the parties agree otherwise. Second, DPU replaced the old DAT term, so "DAT" on a 2026 invoice is a sign someone copied an outdated template.
Where to put Incoterms on an invoice
There is no fixed box, but the term should be easy to find. Common placements are:
- A "Terms of delivery" or "Incoterms" field in the shipping block, next to the port of loading and port of discharge.
- A line directly above or below the totals, so readers can see which costs the total includes.
- The notes or terms area, if your template has no dedicated field.
Use the same wording on the proforma invoice, the final commercial invoice, the packing list and the sales contract. Banks checking documents under a letter of credit compare these closely, and mismatches can cause refusals; see our guide to the letter of credit invoice for how strict that check can be.
The correct format
Write: [rule] [named place, as precisely as possible], Incoterms 2020.
- Good: "FCA Seller's warehouse, 12 Harbor Road, Savannah, GA 31401, USA, Incoterms 2020".
- Good: "CIF Port of Rotterdam, Netherlands, Incoterms 2020".
- Weak: "FOB" (no place, no edition).
- Weak: "CIF Germany" (a country is not a place; which port?).
- Wrong: "FOB Destination" (a US domestic shipping term from the Uniform Commercial Code tradition, not an Incoterm).
Note which place you name. For F-terms (FCA, FAS, FOB) and EXW, the named place is where delivery happens, near the seller. For C-terms (CPT, CIP, CFR, CIF), it is the destination to which the seller pays carriage, even though risk passed much earlier. For D-terms (DAP, DPU, DDP), it is the destination where delivery happens.
Sample commercial invoice with Incoterms
A US manufacturer sells 200 stainless steel water bottles to a retailer in Germany. The contract says CIP Hamburg, Incoterms 2020: the seller pays carriage and insurance to Hamburg, but risk passes when the goods are handed to the first carrier in the US.
| Field | Entry |
|---|---|
| Invoice number and date | EXP-2026-0087, October 28, 2026 |
| Seller | Example Bottle Co. LLC, Savannah, GA, USA |
| Buyer | Example Handel GmbH, Hamburg, Germany (VAT ID shown) |
| Terms of delivery | CIP Buyer's warehouse, Hamburg, Germany, Incoterms 2020 |
| Payment terms | Net 30, bank transfer, USD |
| Goods | 200 stainless steel vacuum bottles, 750 ml, HS code shown per line |
| Country of origin | USA |
The invoice lines and arithmetic:
- Goods: 200 × $14.50 = $2,900.00
- Export packing and loading: $60.00
- International freight to Hamburg: $420.00
- Cargo insurance premium quoted by the insurer: $10.20
- Invoice total: $2,900.00 + $60.00 + $420.00 + $10.20 = $3,390.20
The premium is invented for illustration. Under CIP and CIF the insured amount must be at least 110% of the price in the contract, so here the policy covers at least $3,390.20 × 1.10 = $3,729.22. Listing freight and insurance separately lets German customs see the elements of value: the EU includes transport and insurance costs up to the EU border in the customs value, so the broker needs these figures. If the same goods went to the US on a CIP basis, US customs would generally deduct the international freight and insurance from the dutiable value, which again requires them to be shown separately. Adding the HS code on the commercial invoice completes what customs needs to classify the goods.
Because the buyer handles import clearance under CIP, German import VAT and any duty are the buyer's cost and do not appear on this invoice. Under DDP, by contrast, the seller would have to pay them and would need to price them in.
How the Incoterm changes what you invoice
The rule you agree decides which costs belong in your price and therefore on your invoice. The rules group neatly by their first letter:
| Group | Rules | Costs the seller typically invoices beyond the goods |
|---|---|---|
| E | EXW | Usually none; the buyer collects from the seller's premises |
| F | FCA, FAS, FOB | Export packing, export clearance and delivery to the carrier or port |
| C | CPT, CIP, CFR, CIF | As F, plus main carriage to the named destination, and insurance under CIP and CIF |
| D | DAP, DPU, DDP | As C, plus delivery to the destination, unloading under DPU, and import duties and taxes under DDP |
A quick way to sanity-check an invoice is to read the term, then ask whether each cost line belongs to the seller under it. A freight line on an FCA invoice, for example, suggests either a mistake or a separate agreement that the seller will arrange carriage at the buyer's cost, which should then be described as such.
Quotes and proformas deserve the same care. A quote of "$14.50 per unit" means little to an overseas buyer until it says "FCA Savannah" or "DAP Hamburg", because those two prices cover very different costs. Stating the term on the quote prevents the most common dispute: a buyer who assumed delivery was included and a seller who assumed it was not.
Choosing the right term
The invoice should reflect the contract, so the real decision happens when you negotiate. A few practical rules:
- Containers and parcels: prefer FCA, CPT or CIP over FOB, CFR or CIF. The sea-only terms tie risk to loading on the vessel, which happens out of your sight at a container terminal.
- Buyer has a strong forwarder: FCA lets the buyer control main carriage while the seller still handles export clearance.
- You want to quote a delivered price: DAP is usually safer than DDP, because DDP makes you responsible for import duties and taxes, and sometimes importer registrations, in the buyer's country.
- Avoid EXW for exports unless the buyer can genuinely handle export formalities in your country; in practice the seller often ends up involved anyway.
- Bulk commodities by sea: FOB, CFR and CIF remain the natural fit.
Checklist: Incoterms on an invoice
- The rule matches the signed sales contract or accepted purchase order.
- A precise named place, not just a country or "port".
- The edition stated: "Incoterms 2020".
- The same wording on the proforma, commercial invoice, packing list and any letter of credit.
- Freight, insurance and other seller-paid costs shown as separate lines.
- Currency stated, and the conversion basis if you also show a second currency.
- Payment terms stated separately from delivery terms.
- Country of origin and HS codes shown for each line.
Common mistakes
- No named place. "FOB" alone is ambiguous and can mean different costs at different ports.
- Using sea terms for air or road freight. FOB has no meaning when goods never board a vessel.
- Outdated terms. DAT, DAF, DES and DEQ no longer exist in Incoterms 2020.
- Confusing Incoterms with payment terms. CIF is not a payment method, and "net 30" is not a delivery term.
- Bundling freight into unit prices. This hides costs customs may need to add or deduct, and can lead to duty on the wrong value.
- Agreeing DDP without checking the destination. Import VAT, duties and registration requirements can wipe out the margin.
Creating the invoice
Start from our commercial invoice template guide for the full list of export fields, and our article on foreign currency invoices if you bill in the buyer's currency. To produce the PDF, use the free invoice generator: type the Incoterm in the notes or terms area and add freight and insurance as their own line items. The generator only builds the document in your browser; your freight forwarder or customs broker handles bookings and declarations.
For more practical walk-throughs, browse the guides category.
Frequently asked questions
Do I have to show Incoterms on an invoice?
There is no single global rule requiring it, but for international sales of goods it is standard practice and many customs authorities, banks and buyers expect it. The commercial invoice should state the delivery terms agreed in the sales contract, because they affect who pays freight and insurance, when risk passes and how customs value is calculated. Leaving them off invites disputes and questions at the border.
What is the correct way to write an Incoterm on an invoice?
Write the three-letter rule, then the named place or port, then the edition, for example "FCA Seller's warehouse, 12 Harbor Road, Savannah, GA, USA, Incoterms 2020" or "CIF Rotterdam, Netherlands, Incoterms 2020". The named place should be as precise as possible. The edition matters because older versions of the rules, such as Incoterms 2010, are still sometimes chosen in contracts.
Are Incoterms 2020 still current in 2026?
Yes. Incoterms 2020, published by the International Chamber of Commerce, have applied since January 1, 2020 and remain the current edition. The ICC has signaled work toward a future revision, but no new edition was in force as of late 2026. Parties can still choose an older edition by naming it, so always state the year on contracts and invoices.
Which Incoterm should a small exporter use?
Many small exporters favor FCA or CPT for containerized or parcel shipments because they match how goods are actually handed to carriers. EXW looks simple but leaves the seller with export clearance problems in practice, and DDP makes the seller responsible for import duties and taxes in the buyer's country. The right choice depends on who can manage freight and customs more easily.
Should freight and insurance appear as separate lines on the invoice?
When the seller pays for them under the chosen rule, such as CPT, CIP, CFR, CIF, DAP, DPU or DDP, showing freight and insurance as separate lines is good practice. Customs authorities often need those amounts to calculate the dutiable value, and some countries treat freight and insurance differently. Under EXW or FCA, the buyer arranges main carriage, so it usually does not appear.
Can FOB and CIF be used for container shipments?
The ICC advises that FAS, FOB, CFR and CIF are intended for goods loaded onto a vessel, typically bulk or break-bulk cargo, and are not appropriate for goods handed to a carrier at a container terminal before loading. For containers, FCA, CPT and CIP fit better because risk passes when the goods are handed to the carrier, not when they are on board.
Do Incoterms decide when ownership of the goods transfers?
No. Incoterms rules cover delivery, the transfer of risk, the allocation of costs and responsibility for export and import clearance. They do not decide when title passes, the price, the payment method or what happens if the contract is breached. Those points belong in the sales contract itself, under the law that governs it.
Does the Incoterm affect the customs value on my invoice?
It can. Countries calculate the dutiable value differently. The United States generally excludes international freight and insurance from the transaction value, while the European Union and the UK include the costs of transport and insurance up to the point of entry. Showing the Incoterm and listing freight and insurance separately lets each customs authority apply its own rule correctly.
Can I add Incoterms with your invoice generator?
Yes, as text. Our free generator builds a PDF invoice in your browser, and you can type the Incoterm, named place and edition into the notes or terms area, and add freight and insurance as line items. It does not file customs declarations, book freight or check that your chosen term fits your contract, so confirm the terms with your buyer and forwarder.
Invoice Creator Editorial Team
Guides on invoicing, cash flow and small-business finance from Invoice Creator, operated by Next Software Development Company. Content is reviewed for accuracy against the fields our own invoice generator produces.
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