Incoterms 2020: where title and risk actually transfer

Incoterms are a set of eleven standard trade terms published by the International Chamber of Commerce. Each rule allocates, between buyer and seller, the responsibility for carriage, insurance, export and import formalities, and — critically — the point at which the risk of loss or damage passes. What Incoterms do not do is transfer title: ownership is governed by the sale contract and applicable law, not by the three-letter code. Treating an Incoterm as if it settled ownership is the first common and costly error.

The rules divide into two families. Seven apply to any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP); four are reserved for sea and inland waterway carriage (FAS, FOB, CFR, CIF). Using a maritime term such as FOB for containerised cargo that is handed over at an inland terminal is the second common error — the risk-transfer point described by the rule no longer matches physical reality, and an incident in the gap is disputed rather than covered.

For industrial equipment, the choice of Incoterm is a structuring decision, not a shipping detail. It interacts directly with who acts as importer of record, who can recover import VAT, and whose insurance responds to a loss in transit. Deciding the term before the price — and aligning it with the customs and tax position — is what converts a clean quotation into a deal that actually clears.