Incoterms® 2020 for bulk commodities

The Incoterms® rule in a commodity contract decides who pays freight and insurance, where risk passes and which documents trigger payment. Here is how the rules work in bulk trade.

Last updated: October 20265 min readAndalucia Premium

In brief

Incoterms® 2020 of the ICC contain 11 rules: seven for any mode of transport, four for sea and inland waterway.

For bulk cargoes FOB, CFR and CIF dominate; under all three, risk passes once the goods are on board at the port of shipment.

The Incoterms® rule does not replace the sales contract: price, quality, payment and title must still be agreed.

What are Incoterms® 2020?

Incoterms® 2020 are standard trade rules published by the International Chamber of Commerce (ICC). They define which tasks, costs and risks seller and buyer bear in the delivery of goods.

The rules have been in force since 1 January 2020 and only apply if the contract refers to them, ideally in the form “CIF Algeciras Incoterms® 2020”. They cover delivery, transfer of risk, transport and insurance obligations, export and import clearance and the documents the seller must provide.

They do not govern the price, the transfer of ownership, payment terms or the consequences of a breach of contract. These points belong in the sales contract itself.

How many Incoterms® rules are there?

There are 11 rules. Seven can be used for any mode of transport and four only for sea and inland waterway transport.

Group	Rules
Any mode of transport	EXW, FCA, CPT, CIP, DAP, DPU, DDP
Sea and inland waterway only	FAS, FOB, CFR, CIF

In the 2020 edition DPU (delivered at place unloaded) replaced the former DAT rule. The sea rules are designed for cargo that is loaded directly on board a vessel, which is why they fit bulk commodities in particular.

Which Incoterms® are used for bulk commodities?

For seaborne bulk cargoes, FOB, CFR and CIF are the most common. FCA, CPT, CIP and DAP are used more often for containers and land transport.

FOB (free on board): the buyer charters the vessel and the seller loads the goods at the named port of shipment.
CFR (cost and freight): the seller arranges and pays sea freight to the named destination port.
CIF (cost, insurance and freight): as CFR, plus the seller insures the cargo for the buyer’s benefit.

For container lots the ICC recommends the multimodal rules (FCA, CPT, CIP), because containers are usually handed over at a terminal and not loaded on board by the seller.

What is the difference between FOB, CFR and CIF?

The difference lies in who arranges and pays freight and insurance. The point at which risk passes is the same for all three: when the goods are on board the vessel at the port of shipment.

Rule	Freight paid by	Insurance arranged by	Risk passes
FOB	Buyer	Buyer (own decision)	On board at port of shipment
CFR	Seller	Buyer (own decision)	On board at port of shipment
CIF	Seller	Seller, for the buyer	On board at port of shipment

This means that under CFR and CIF the buyer bears the risk during the sea voyage even though the seller pays the freight. Under CIF, the insurance protects the buyer against that risk.

Where does risk pass from seller to buyer under CIF?

Risk passes when the goods are on board the vessel at the port of shipment, not at the destination port. Damage during the voyage is the buyer’s risk, covered by the cargo insurance the seller has taken out.

Under CIF Incoterms® 2020 the seller only has to provide minimum cover according to the Institute Cargo Clauses (C) or similar, for at least 110% of the contract value. Buyers who need broader cover, such as Institute Cargo Clauses (A), should agree this explicitly in the contract.

Under CIP, by contrast, the 2020 rules require the higher level of cover according to Institute Cargo Clauses (A).

Which Incoterms® rule should a buyer choose?

The buyer should choose the rule under which it can best control the costs and risks it is able to manage. Buyers with access to freight and insurance often prefer FOB, others prefer CFR or CIF delivered prices.

FOB suits buyers with their own chartering capacity or a freight forwarder, because they control vessel choice and freight costs.
CFR / CIF suit buyers who want a price delivered to their port and leave freight to the seller.
DAP / DDP shift almost everything to the seller but are less common for bulk cargoes, because the seller then bears risks in the destination country.

Whatever the choice, the payment instrument must match it: under a letter of credit, the transport document required must fit the chosen rule.

What are common mistakes with Incoterms® in commodity contracts?

Typical mistakes are missing ports, missing edition year and rules that do not match the mode of transport or the payment instrument. Each of them can lead to disputes over costs and risk.

Naming a rule without a precise port or place, for example “CIF Spain”.
Omitting the edition, so that it remains unclear whether the 2010 or 2020 rules apply.
Using FOB or CIF for containers handed over at an inland terminal.
Assuming that the Incoterms® rule also determines when ownership passes.
Failing to align laytime and demurrage in the sales contract with the charter party.

Last updated: October 2026This page provides general information about trade practice. It is not legal, tax or investment advice.

FAQ

Frequently asked questions

Commodity trading questions, answered

Are Incoterms® 2010 still valid?

Yes, parties may still agree on them, because Incoterms® only apply by contractual reference. For new contracts, however, the 2020 edition should be used and named explicitly.

Does the Incoterms® rule determine when ownership passes?

No. Transfer of title is governed by the sales contract and the applicable law, not by the Incoterms® rule. In commodity trade, title often passes against payment or against transfer of the original bill of lading.

Who pays unloading costs under CFR?

That depends on the contract of carriage and the sales contract. Unloading costs at the destination are the buyer’s unless they are included in the freight paid by the seller, so they should be stated explicitly.

What does CIF ASWP mean?

ASWP stands for “any safe world port”. It describes an offer where the destination port is still to be agreed; before signing, the specific destination port must be fixed, because freight and insurance depend on it.

Is DDP suitable for bulk commodities?

Rarely. Under DDP the seller must handle import clearance and pay duties and taxes in the destination country, which is difficult for a foreign seller and is therefore uncommon in bulk trade.

Who chooses the vessel under FOB?

The buyer. It nominates the vessel and informs the seller in time; the seller must then deliver the goods on board within the agreed loading period.

Is there an Incoterms 2026 edition?

No. As of the date of this guide, the current edition published by the ICC is Incoterms® 2020. If a new edition appears, the contract should state which edition applies, for example “CIF Algeciras Incoterms® 2020”.

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