Select the rule for the transport mode and handover point
An Incoterms® 2020 rule becomes part of a sale contract only when buyer and seller incorporate it. State the exact rule, the precise named port, place or point, and the 2020 version, for example: “CIF [named port of destination], Incoterms® 2020.”
The transport mode and the actual handover determine which rule fits:
- FCA, CPT and CIP can be used for any mode, including containerized and multimodal movements. FCA often fits containerized cargo handed to a carrier or terminal before vessel loading more closely than FOB.
- FOB, CFR and CIF are for sea or inland-waterway transport where delivery occurs on board the vessel. They are commonly used for appropriate port-to-port bulk and breakbulk movements.
Under CFR and CIF, the seller contracts carriage to the named destination port, but risk transfers when the goods are delivered on board at the port of shipment. Under CPT and CIP, the seller contracts carriage to the named destination, but risk transfers when the goods are handed to the first carrier at the agreed point. The contract should make that distinction clear.
Name the port, place or point precisely
The named location performs different functions under different rules. Use the location required by the selected rule and identify the terminal, berth, warehouse, inland depot or other point where precision matters.
- For FOB, name the port of shipment.
- For CFR and CIF, name the port of destination.
- For FCA, CPT and CIP, name the relevant place or point and clarify the handover or destination point as the rule requires.
Commercial shorthand such as “CIF [destination region]” or “FOB [origin country]” is too broad for a final contract.
What the rules allocate
The selected Incoterms® 2020 rule allocates specified responsibilities between seller and buyer for:
- Delivery and the point where risk transfers
- Carriage arrangements and identified transport costs
- Insurance obligations where the selected rule requires them
- Export and import formalities assigned by the rule
- Transport and delivery documents described by the rule
The sale contract should clarify any loading, discharge, terminal, storage, demurrage or local-charge issue that the selected rule does not resolve with enough precision for the transaction.
What the rules do not govern
Incoterms® 2020 does not determine:
- Transfer of title or ownership
- Price, payment method or bank-instrument terms
- Product specification, quantity, quality or remedies for breach
- Sanctions legality, export-control permission or bank acceptance
- Governing law, dispute resolution or force majeure
- Every customs, tax, licence, inspection or destination requirement
Those matters belong in the sale contract, the selected payment or security instrument, applicable law, and the instructions of the appointed professional or authority.
Transaction checklist
Before finalising the rule, buyer and seller should align:
- Cargo type, packing and transport mode
- Physical handover point and risk-transfer point
- Exact named port, place or point
- Carriage and insurance arrangements
- Loading, discharge, terminal and local charges
- Required transport, inspection and destination documents
- Sale-contract wording and any documentary-credit requirements
Source and Sarpah's role
Use the current ICC Incoterms® 2020 materials and obtain contract, freight, insurance, customs and legal advice for the live shipment.
Sarpah can coordinate the commercial inputs needed to compare a proposed rule and named place. Buyer and seller select and incorporate the rule in their sale contract, while carriers, insurers, customs professionals and banks decide matters within their respective roles.