An Incoterm is three letters plus a named place, and both halves are load-bearing. "CIF" tells you nothing. "CIF Rotterdam" is a term you can quote against.
01The two questions every Incoterm answers
- Where does risk pass from seller to buyer?
- Who pays for what, and up to which point?
These are separate questions, and in the C-terms they have different answers — which is the single most misunderstood thing in international trade.
02The eleven rules, grouped
Group E — departure
- EXW (Ex Works) — buyer collects from the seller's door. Seller does almost nothing. Awkward in practice because the buyer cannot easily clear export customs in the seller's country.
Group F — main carriage unpaid by seller
- FCA (Free Carrier) — seller delivers to a carrier named by the buyer, cleared for export. The modern, flexible replacement for EXW and, for containers, for FOB.
- FAS (Free Alongside Ship) — alongside the vessel. Used for bulk and project cargo.
- FOB (Free On Board) — on board the vessel at the named port. Sea and inland waterway only.
Group C — main carriage paid by seller
- CFR (Cost and Freight) — seller pays freight to destination port; risk passes at origin.
- CIF (Cost, Insurance and Freight) — CFR plus minimum insurance. Sea only.
- CPT (Carriage Paid To) — CFR for any mode.
- CIP (Carriage and Insurance Paid To) — CPT plus insurance, at all-risks level under Incoterms 2020. Any mode.
Group D — arrival
- DAP (Delivered At Place) — seller delivers, ready for unloading, at destination. Buyer clears import.
- DPU (Delivered at Place Unloaded) — as DAP but the seller unloads. The only term where the seller unloads.
- DDP (Delivered Duty Paid) — seller delivers cleared, duties and taxes paid. Maximum seller obligation.
03The C-term trap
Under CIF and CFR, the seller pays freight to the destination port but risk passes at the origin port. If the vessel sinks mid-ocean, that is the buyer's loss, even though the seller booked and paid for the voyage.
This is not a drafting error; it is deliberate. C-terms are shipment contracts, not arrival contracts. Sellers should never assume a C-term means "delivered".
04What changed in 2020
- DAT became DPU, and the place is no longer restricted to a terminal.
- CIP insurance was raised to Institute Cargo Clauses (A) — all-risks. CIF stayed at Clauses (C), the minimum, because commodity trades rely on it.
- FCA got an onboard bill of lading option, so sellers using FCA can still satisfy a letter of credit that demands an onboard B/L.
- Security requirements and cost allocation were laid out more explicitly per rule.