Incoterms® 2020 for cross-border freight

What an Incoterms® rule decides

• Delivery and riskThe point where the seller has delivered and risk of loss or damage transfers to the buyer.
• Carriage and costsWhich party arranges and pays for each leg of transport and the related charges.
• Export and import clearanceWhich party is responsible for export formalities and which for import clearance, duties and taxes.
• InsuranceOnly CIP and CIF oblige the seller to buy cargo insurance; every other rule leaves insurance to the parties’ own arrangements.

What they do not decide

Incoterms® rules are not a complete contract. They do not transfer title to the goods, set the price or payment terms, define breach or remedies, or override mandatory local law. They apply because the sales contract incorporates them — which is why the rule, the named place and the version belong in writing on the order and the invoice.

Two families of rules

• Any mode of transportEXW, FCA, CPT, CIP, DAP, DPU and DDP can be used for road, air, rail, sea or multimodal moves — including all Canada–U.S. trucking.
• Sea and inland waterway onlyFAS, FOB, CFR and CIF are designed for goods handed over alongside or on board a vessel. Using them for truck or air freight leaves the delivery point ambiguous.

North American pitfalls

• The two meanings of FOBIn U.S. domestic practice, “FOB origin” and “FOB destination” come from the Uniform Commercial Code and are not the Incoterms® FOB, which is a maritime rule. On a cross-border order, state which regime you mean — or use FCA or DAP instead.
• DDP obligationsUnder DDP the seller is responsible for import clearance and for duties and taxes in the buyer’s country. That can require the seller to act as a non-resident importer and carry tax registrations; agree on this consciously, not by default.
• EXW burdens on the buyerEXW leaves export formalities with the buyer, which is awkward across borders. FCA at the seller’s premises usually works better because the seller handles export clearance.
• Vague named places“FCA Toronto” is not a delivery point. Name the exact address or terminal: the named place determines where risk and cost transfer.

Using the rules well

1. Write the full formula on quotes, orders and invoices: rule, named place, “Incoterms® 2020” — for example, FCA 4500 Industrial Blvd., Montréal, QC, Incoterms® 2020.
2. Align the freight quote with the rule: who books which leg, who pays which charges, who acts as importer of record.
3. Decide insurance explicitly for every rule other than CIP and CIF.
4. Tell your forwarder and broker the agreed rule so documents, manifests and customs declarations match the contract.
5. If the buyer and seller have not agreed on a rule, do not invent one for a quote form — say so, and settle it before booking.