Most freight disputes between buyer and seller trace back to one thing: nobody checked who the Incoterm actually made responsible for what. Here’s the full 11-term matrix.
| Incoterm | Seller arranges main transport | Seller pays insurance | Risk transfers to buyer | Used for |
|---|---|---|---|---|
| EXW — Ex Works | No | No | At seller’s premises | Any mode |
| FCA — Free Carrier | No | No | When handed to buyer’s carrier | Any mode |
| CPT — Carriage Paid To | Yes | No | When handed to first carrier | Any mode |
| CIP — Carriage and Insurance Paid To | Yes | Yes (110% min) | When handed to first carrier | Any mode |
| DAP — Delivered at Place | Yes | No | On arrival, before unloading | Any mode |
| DPU — Delivered at Place Unloaded | Yes | No | After unloading at destination | Any mode |
| DDP — Delivered Duty Paid | Yes | No | On arrival, duty paid by seller | Any mode |
| FAS — Free Alongside Ship | No | No | Alongside the vessel at origin port | Sea/inland waterway |
| FOB — Free on Board | No | No | Once goods are on board the vessel | Sea/inland waterway |
| CFR — Cost and Freight | Yes | No | Once goods are on board the vessel | Sea/inland waterway |
| CIF — Cost, Insurance and Freight | Yes | Yes (110% min) | Once goods are on board the vessel | Sea/inland waterway |
The split everyone gets wrong
Incoterms 2020 split responsibility into two separate things: who pays for transport, and where risk transfers. They are not the same line. Under CFR and CIF, the seller pays for ocean freight all the way to the destination port, but risk transfers to the buyer the moment goods are loaded onto the vessel at origin. If the ship sinks mid-ocean, the buyer, not the seller, bears that risk, even though the seller already paid the freight.
Why FOB and FCA get confused
FOB only applies to sea and inland waterway shipments, and specifically means risk transfers once goods are on board the vessel. A huge number of shippers use “FOB” loosely for air or trucked cargo, where it technically doesn’t apply, and FCA is the correct term instead. If your shipment isn’t moving by ship, it isn’t FOB.
DDP shifts the most onto the seller
DDP is the only term where the seller is responsible for import duty and clearance in the buyer’s country. It’s convenient for the buyer but risky for the seller, since import rules and duty rates in a foreign country are easy to get wrong. Sellers quoting DDP should build in a real cushion for duty and run it through the US import duty calculator and landed cost calculator before quoting a flat price.