Trade terms answer only three questions: who books the space, who pays, and at what moment risk transfers. Remembering the 11 terms by group is far more useful than memorising the names.
Remember the version first, then the terms
The current version is Incoterms 2020, published by the International Chamber of Commerce (ICC) and effective from 1 January 2020.
There is no Incoterms 2026. The next revision is expected around 2030.
The contract must state the version number, for example "FOB Shanghai, Incoterms 2020".
Without a version, any dispute raises the question of which edition applies, and the allocation of responsibility shifts with it.
Remember the 11 terms in two groups
The first group applies to any mode of transport, 7 terms in total; the second applies only to sea and inland waterway transport, 4 terms in total.
| Applicable Mode of Transport | Term | Key Point in Chinese |
|---|---|---|
| Any mode of transport (7 terms) | EXW | Ex Works |
| Any mode of transport (7 terms) | FCA | Free Carrier |
| Any mode of transport (7 terms) | CPT | Carriage Paid To |
| Any mode of transport (7 terms) | CIP | Carriage and Insurance Paid To |
| Any mode of transport (7 terms) | DAP | Delivered at Place |
| Any mode of transport (7 terms) | DPU | Delivered at Place Unloaded |
| Any mode of transport (7 terms) | DDP | Delivered Duty Paid |
| Sea and inland waterway only (4 terms) | FAS | Free Alongside Ship |
| Sea and inland waterway only (4 terms) | FOB | Free on Board |
| Sea and inland waterway only (4 terms) | CFR | Cost and Freight |
| Sea and inland waterway only (4 terms) | CIF | Cost, Insurance and Freight |
One thread links all 11: the point of risk transfer
EXW completes delivery at the seller's factory, the earliest risk transfer.
FCA, CPT and CIP transfer when the goods are handed to the carrier.
FAS transfers alongside the ship; FOB, CFR and CIF transfer when the goods are loaded on board.
DAP, DPU and DDP transfer only on delivery at destination, so the seller carries responsibility the longest.
FOB, CFR and CIF have exactly the same point of risk transfer; the only difference is who pays the costs.
Who pays: the letters are enough
| Term | Point of Risk Transfer | Who Pays Main Freight | Who Buys Insurance |
|---|---|---|---|
| EXW | Seller's factory | Buyer | Buyer |
| FCA | Handed to carrier | Buyer | Buyer |
| FOB | Loaded on board at port of shipment | Buyer | Buyer |
| CFR | Loaded on board at port of shipment | Seller | Buyer |
| CIF | Loaded on board at port of shipment | Seller | Seller (mandatory) |
| CIP | Handed to carrier | Seller | Seller (mandatory) |
| DDP | Delivery at destination | Seller | Seller |
Only two terms require mandatory insurance
CIP and CIF are the only two terms that require the seller to insure.
CIP requires ICC(A) all-risks cover, the broadest protection.
CIF requires only ICC(C) minimum cover, the narrowest protection.
The other 9 terms do not mandate insurance; whether to buy and how much is agreed by both parties in the contract.
Why FCA is recommended over FOB for containerised cargo
The point of risk transfer under FOB is "goods loaded on board", a line designed for the breakbulk era.
Containerised cargo is generally delivered at the container yard, and at the moment the container is handed over the goods are no longer in the seller's hands.
But under FOB the seller remains liable until loading, and if something goes wrong in that gap, responsibility is easily disputed.
The ICC therefore recommends FCA for containerised cargo, so that delivery and risk transfer align.
Three current changes in practice
DDP is harder to operate in the United States: the US tariff structure is complex, and sellers often have to re-quote frequently.
The carrier's scope of liability under FCA has tightened, so the clauses need to be read closely.
Cyber event exclusions have become a common feature of cargo insurance, so confirm whether they are included when insuring.
Four pitfalls that are easy to fall into
Writing only FOB, without the port of shipment and version number, amounts to no agreement at all.
Treating DDP as "delivered and done", ignoring destination customs clearance and duty costs.
Assuming CIF covers all risks, when in fact it only covers ICC(C) at minimum.
Using FOB for containerised cargo, where operations and risk are out of step, making it hard to pursue liability when something goes wrong.
