Incoterms 2020, explained by what actually changes hands
An Incoterm is three letters that answer three questions: who pays for what, where the risk passes, and who handles customs. It is not a price, not a contract, and — the part that catches people — not a statement about who owns the goods.
The one thing they do not cover
Incoterms allocate cost, risk and clearance obligations. They say nothing about when title transfers.
That means it is entirely normal to bear the risk of goods you do not yet own, or to own goods whose loss is somebody else's problem. If a container goes overboard between Shanghai and Rotterdam, the Incoterm tells you who absorbs that loss. It does not tell you who the cargo belonged to.
Title passes when your sales contract says it does — commonly on full payment. Leave it unstated and you are relying on whichever country's law ends up governing the deal.
The four groups
E — departure. EXW is the seller doing the least: the goods are available at their premises and everything after that is the buyer's problem, including export clearance in a country the buyer may have no presence in. That last point makes EXW a worse deal for buyers than it looks.
F — main carriage unpaid. FCA, FAS, FOB. The seller delivers to a carrier the buyer nominates, and the buyer pays the freight. FOB is the most misused term in trade: it applies to sea freight with goods loaded on a vessel, and using it for a container handed over at an inland depot is technically wrong. FCA is what most people mean.
C — main carriage paid. CFR, CIF, CPT, CIP. The seller pays freight to the destination, but risk still passes at origin. This surprises people every time: under CIF your goods can be lost mid-ocean and it is your loss, even though the seller booked and paid for the voyage.
D — arrival. DAP, DPU, DDP. The seller carries risk all the way to the destination. DDP goes furthest, making the seller responsible for import duties and clearance in the buyer's country — which is why sellers who quote DDP without checking the destination's requirements sometimes discover they cannot legally act as importer of record there.
What changed in 2020
The revision was modest. DAT became DPU, widening it from "terminal" to any named place. FCA gained an option letting the buyer instruct the carrier to issue an on-board bill of lading to the seller, which matters under letters of credit. CIP's default insurance level rose while CIF's stayed where it was.
The bigger practical change was in emphasis: the 2020 text is much clearer that FOB, CFR and CIF are for bulk and break-bulk sea freight, not for containers.
Always name the place
DAP is not an Incoterm in any useful sense. DAP Rotterdam is. Every term takes a named place, and the place is where the obligation ends — which means the same three letters describe two completely different deals depending on what follows.
Write it as the standard does: the rule, the place, and the version.
DAP Rotterdam, Incoterms 2020
Where it shows up in your documents
The Incoterm belongs on the quotation, because a price without one has not said what is included. It belongs on the purchase order and the sales confirmation, because that is where it becomes contractual. And it belongs on the commercial invoice, because customs uses it to work out whether freight and insurance form part of the value being declared.
Those four documents disagreeing about the delivery terms is a routine cause of a shipment being held — and it is the sort of error that only surfaces once the goods are already moving.