1 Overview
Incoterms are the International Chamber of Commerce's standard trade definitions that divide tasks, costs and risk between a seller and a buyer in a sale of goods. The 2020 revision replaced the 2010 version and took effect on 1 January 2020. It did not rewrite the architecture of the rules. There are still eleven terms, still split between rules for any transport mode and rules reserved for sea and inland waterway carriage, and the core logic of each term remains recognisable to anyone who worked with the 2010 edition. What changed is a set of targeted adjustments that respond to how goods actually move today, particularly in containerised and multimodal supply chains where cargo is handed between rail, road and ocean legs before it reaches the buyer.
The most visible change is a rename. DAT, or Delivered at Terminal, became DPU, or Delivered at Place Unloaded. The old name suggested a terminal in the narrow sense, which caused confusion when goods were delivered to a warehouse, a yard or another inland point. The new name puts the emphasis where it belongs: the seller's obligation ends only once the goods are unloaded at the agreed destination. That single change clarifies cost and risk for rail and multimodal shipments, where the final leg is often a truck or a short rail move to a facility that is not a marine terminal.
Other changes are subtler but commercially important. CIP now requires a higher level of insurance cover than before, FCA gained an optional bill of lading mechanism for letter-of-credit transactions, and several rules now address costs that arise from security requirements and terminal handling more explicitly. The 2010 edition remains in contracts that were not updated, so traders still need to read the version clause carefully.
2 Where the risk and the cost actually land
Risk and cost are separate questions under every Incoterm, and the 2020 revision did not move the risk transfer points of the existing rules. Under EXW, risk passes when the goods are placed at the buyer's disposal at the seller's premises, before loading. Under FCA, risk passes when the seller delivers the goods to the carrier nominated by the buyer at the named place, or loads them onto the buyer's collecting vehicle if the named place is the seller's premises. Under CPT and CIP, risk passes when the goods are handed to the first carrier, even though the seller pays freight to the destination. Under DAP and DPU, risk passes at destination, with DPU requiring the seller to unload. Under DDP, risk passes at destination ready for unloading, and the seller also bears import duty.
The cost side is where 2020 made several practical adjustments. Under CIP, the seller must now arrange insurance cover that meets Institute Cargo Clauses (A), the broadest standard cover, rather than the narrower (C) clauses that CIF still requires. Under FCA, DAP and DPU, the rules now state more clearly which party bears costs such as terminal handling and security-related charges, reducing the room for argument when a carrier or terminal bills one side for a service the other expected to pay. Under DPU, the seller's cost obligation explicitly includes unloading at the named place, which is why the term was renamed from DAT.
For rail and multimodal shipments, these distinctions matter because cargo often moves under a single contract across several legs. A seller who quotes CIP to an inland destination is now promising broader insurance than under the 2010 version, and a buyer who accepts DPU should expect the seller to arrange and pay for unloading, not merely arrival.
3 How the mechanics work end to end
The mechanics begin with the sales contract, which should name the Incoterm, the named place or port, and the version, for example FCA Warsaw Rail Terminal Incoterms 2020. If the contract is silent on the version, the parties may later disagree about whether 2010 or 2020 applies, so the version clause is not cosmetic. Once the rule is fixed, it allocates export clearance, main carriage, insurance, import clearance and unloading. Under most rules the seller handles export clearance, while import clearance falls to the buyer except under DDP.
The transport document follows the rule. Under FCA, the seller hands goods to the buyer's carrier and obtains a receipt, typically a consignment note or a forwarder's cargo receipt. Under CPT and CIP, the seller contracts carriage to the named destination and provides the usual transport document. Under CIF and CFR, the seller must provide a bill of lading or equivalent sea document. The 2020 FCA option allows the buyer's carrier to issue an on-board bill of lading to the seller, which helps the seller present documents under a letter of credit even though risk has already passed at the FCA point.
Insurance is only mandatory under CIF and CIP. Under CIF the seller arranges minimum cover under Institute Cargo Clauses (C); under CIP the seller must arrange Institute Cargo Clauses (A) cover unless the parties agree otherwise. In both cases the buyer can ask for more cover at its own cost. Under DAP, DPU and DDP, insurance is not required by the rule, so the buyer should check whether its own policy covers the leg before risk passes. Customs formalities, duty and taxes follow the same logic: the rule tells you who is responsible, but the actual broker instruction and payment still need to be arranged.
4 A worked example from door to destination
Suppose a seller in Poland agrees to sell machine parts to a buyer in Kazakhstan, moving by rail with a truck collection at origin and a truck delivery at destination. The parties choose FCA Poznan Rail Terminal Incoterms 2020. The seller loads the goods onto the collecting vehicle at its warehouse, moves them to the rail terminal, and delivers them into the custody of the carrier nominated by the buyer. Risk passes at that point. The seller handles export clearance and provides the buyer with a consignment note or terminal receipt. The buyer pays the rail freight, arranges insurance if it wants cover, and handles import clearance in Kazakhstan. If the buyer needs a bill of lading for its bank, the 2020 FCA option allows the carrier to issue an on-board bill of lading to the seller, which the seller can present under the letter of credit.
Now change the rule to CIP Almaty Incoterms 2020. The seller still handles export clearance and pays carriage to Almaty, but risk passes when the goods are handed to the first carrier in Poland. The seller must arrange insurance under Institute Cargo Clauses (A), a broader cover than the 2010 CIP required. The buyer handles import clearance and pays duty. If the goods are damaged in transit after the first carrier takes them, the buyer bears the risk but can claim under the insurance policy the seller arranged, provided the loss falls within the cover.
Finally, consider DPU Almaty Incoterms 2020. The seller pays carriage to Almaty and must unload the goods at the named place. Risk passes once unloading is complete. The buyer clears import and pays duty. Under the old DAT name, the parties might have argued about whether an inland warehouse counted as a terminal; under DPU the obligation to unload at the named place is explicit, which removes that ambiguity.
5 Mistakes that cost money at the border
One common mistake is naming an Incoterm without a precise place. FCA, CPT, CIP, DAP, DPU and DDP all require a named place, and the choice of place can shift loading, unloading and terminal costs. A contract that says only DAP Almaty leaves open whether the seller delivers to a terminal, a warehouse or the buyer's door, and who pays for unloading. The 2020 rules are clearer than 2010 about terminal handling and security costs, but they still depend on the parties naming the point precisely.
A second mistake is assuming that CIP and CIF carry the same insurance obligation. Under 2020, CIP requires Institute Cargo Clauses (A) cover, while CIF requires only (C) cover. A seller who quotes CIP using a (C) policy is not meeting the rule, and a buyer who expects all-risks cover under CIF will be disappointed unless it negotiates higher cover. Similarly, parties sometimes assume insurance is required under DAP, DPU or DDP. It is not, so the buyer must arrange its own cover or agree separately with the seller.
A third mistake is ignoring the version clause. If a contract signed in 2021 refers simply to CIP without a year, one side may argue that 2010 applies and the other that 2020 applies, which changes the insurance standard and some cost allocations. A fourth mistake is using sea-only rules such as FOB or CIF for a containerised rail or multimodal move. The rules can be written into the contract, but they fit poorly when goods are handed between modes, and risk may pass at a point that does not match the physical journey. Finally, parties often forget that DDP makes the seller responsible for import clearance and duty, which may be impossible if the seller cannot register for tax in the destination country.
6 Documents worth keeping
The commercial invoice is the anchor document. It identifies the parties, the goods, the value and the Incoterm with its named place and version. Customs authorities use it to assess duty, and banks use it to check compliance with a letter of credit. The packing list supports the invoice by describing how the goods are packed, which helps at inspection and when calculating gross weight for rail or truck loading.
The transport document depends on the rule and the mode. Under FCA, the seller should keep the carrier's receipt or consignment note showing when and where the goods were handed over. Under CPT and CIP, the seller holds the carriage contract and the transport document issued to the named destination. Under CIF and CFR, the seller must obtain a bill of lading or equivalent sea document. Under the 2020 FCA option, an on-board bill of lading issued to the seller can be critical for letter-of-credit presentation, so it should be requested in writing before shipment.
Insurance documents matter under CIF and CIP. The seller should retain the policy or certificate showing the cover level, the insured value and the duration. Under CIP 2020, the document should reflect Institute Cargo Clauses (A) cover. Export and import declarations, certificates of origin, and any security or dangerous goods filings should also be kept, because they show which party performed each customs formality. Finally, keep the contract or purchase order that names the Incoterm, the place and the version. When a dispute arises months later, that clause is the first thing a customs broker, bank or arbitrator will ask for.
7 Frequently asked questions
Does Incoterms 2020 replace Incoterms 2010 automatically? No. The ICC publishes the rules, but they apply only when the parties write them into the contract. A contract that refers to Incoterms 2010 continues to use those definitions unless the parties agree to update it. For new contracts, naming Incoterms 2020 is the safer choice because it reflects the current standard and the clarified cost allocations.
What is the main difference between DAT and DPU? DAT, or Delivered at Terminal, was renamed DPU, or Delivered at Place Unloaded, in 2020. The obligation is essentially the same: the seller delivers and unloads at the named destination. The new name avoids the implication that the destination must be a terminal, which makes the rule easier to use for inland rail, road and multimodal deliveries to warehouses or yards.
Does CIP now require more insurance than CIF? Yes. Under Incoterms 2020, CIP requires the seller to arrange cover meeting Institute Cargo Clauses (A), while CIF requires only Institute Cargo Clauses (C). Both rules allow the parties to agree a different level of cover, but the default under CIP is broader. This matters for high-value goods moving by rail or multimodal routes where the seller is paying freight but risk passes early.
Can FCA be used with a letter of credit? Yes, and 2020 made this easier. The parties may agree that the buyer instructs its carrier to issue an on-board bill of lading to the seller after the goods are loaded. This gives the seller a document that banks accept, even though risk passed when the goods were handed to the carrier at the FCA point. The instruction should be agreed before shipment and reflected in the contract.