Incoterms 2020: a five-question decision tree
Stop defaulting to CIF. A simple decision tree that maps risk transfer, freight control, and insurance to the right Incoterm.
Most disputes we see start with the wrong Incoterm on the invoice. Answer five questions before you commit.
1. Who controls the main carriage?
If the seller does, you are in the C or D family. If the buyer does, you are in E or F.
2. Is it containerised?
Containerised cargo should almost never use FOB, CFR or CIF. Those are for bulk break-bulk. Use FCA, CPT or CIP instead.
3. Who insures?
Only CIF and CIP require the seller to insure. Under CIP, that insurance must be Institute Cargo Clauses (A), not (C).
4. Where does risk transfer?
Read the named place carefully. Under DAP the seller carries risk to the named place; under DDP the seller also clears import.
5. Who pays import duty?
Under DDP, the seller does. That is a bigger commitment than it looks in most jurisdictions. When in doubt, use DAP.
Run the same shipment through our Incoterms Visualiser to see cost and risk transfer side by side.
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