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Incoterms × Payment Terms Matrix
Which Incoterms rule works with which payment method. Best (gold) means the natural fit; poor (red) means the combination has a structural gap in either documents or risk allocation. Tap any cell for the reasoning.
ICC has started work on Incoterms 2030; Incoterms 2020 remains current.
The Incoterm sets who arranges and pays for logistics; the payment method sets who bears the credit risk. Choose them together - a good sales contract does both explicitly, in the same clause.
Legend:
Looking for DAT? DAT (Delivered at Terminal) was retired in the Incoterms 2020 revision and replaced by DPU (Delivered at Place Unloaded) - the only rule renamed between 2010 and 2020. This matrix covers all eleven 2020 rules, including CIP and DPU.
| Incoterm | Advance payment (T/T) | LC at sight | LC deferred / usance | Documentary collection D/P | Documentary collection D/A | Open account |
|---|---|---|---|---|---|---|
| EXW | ● good | ● poor | ● poor | ● poor | ● poor | ● poor |
| FCA | ● good | ● good | ● good | ● fair | ● fair | ● poor |
| FAS | ● good | ● fair | ● fair | ● fair | ● fair | ● poor |
| FOB | ● good | ● good | ● good | ● fair | ● fair | ● poor |
| CFR | ● good | ● good | ● good | ● fair | ● fair | ● poor |
| CIF | ● good | ● best | ● best | ● good | ● good | ● poor |
| CPT | ● good | ● good | ● good | ● fair | ● fair | ● poor |
| CIP | ● good | ● best | ● best | ● good | ● good | ● poor |
| DAP | ● good | ● fair | ● fair | ● fair | ● fair | ● fair |
| DPU | ● good | ● fair | ● fair | ● fair | ● fair | ● fair |
| DDP | ● good | ● poor | ● poor | ● poor | ● poor | ● fair |
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Overview & methodology
Why EXW × LC is a structural mismatch
Under EXW the seller is not responsible for export clearance or main carriage, so the seller cannot obtain a compliant on-board bill of lading. A documentary LC requires the seller to present a transport document as evidence of shipment. The two cannot both be true. Convert to FCA - Incoterms 2020 explicitly lets the buyer instruct the carrier to issue an on-board B/L to the seller, solving the presentation problem.
Method note: calculations run in your browser using the formulas and published rule books cited on this page. Results are free estimates for planning, with no login required, and should be confirmed with your bank, broker or the official source before you commit.
Frequently asked questions
Can I use LC with FOB?
Yes, but with complications. Under FOB, the buyer arranges freight and pays after shipment begins. If using LC, the LC must allow documents to be presented after shipment. Most banks prefer CFR or CIF with LC to simplify risk allocation.
Which Incoterm is safest for the seller?
DDP or DDU is safest-the seller retains control and responsibility until goods reach the buyer's location. However, buyers rarely accept these. CIF/CPT with LC at sight provides good seller protection: seller has control until shipment, payment is guaranteed on complying docs.
Why does Incoterm matter for Letter of Credit?
Incoterm defines who arranges freight and insurance, which determines what transport documents the seller must provide. LC at sight is compatible with CIF/CPT (seller insures); FOB is not (buyer insures). Mismatch causes document discrepancies and LC rejection.