The International Chamber of Commerce divides the eleven Incoterms 2020 rules into two families by mode of transport. Seven of them — EXW, FCA, CPT, CIP, DAP, DPU and DDP — carry no mode restriction at all and work for road, rail, air, sea or any combination of those. The remaining four — FAS, FOB, CFR and CIF — are restricted to sea and inland waterway transport, and the restriction is not decorative. Those four were drafted for a seller who physically places goods alongside or on board a named vessel: bulk parcels, break-bulk and conventional cargo. A sealed box handed to a terminal is not that transaction.
Under FOB the seller delivers, and risk passes, when the goods are on board the vessel at the named port of shipment. Under CFR and CIF the delivery point is identical; the difference is only that the seller additionally contracts and pays for carriage, and under CIF for insurance. In all three, the moment risk changes hands is the moment the cargo crosses onto the ship.
What actually happens to a container
A container of bitumen never goes to the ship's side under the seller's control. It is stuffed at a drum plant or a packing yard, trucked to a container terminal, gated in, stacked in a yard, and loaded to the vessel by the terminal on the carrier's schedule. From the moment it passes the terminal gate the seller has no access to it, no ability to inspect it, no influence over how it is stacked and no say in when it is lifted. Gate-in to loading is routinely several days, and longer where the vessel rolls.
Write FOB across that shipment and you have opened a gap. Risk stays with the seller through a period of custody the seller cannot supervise, inside a facility the seller cannot enter, under a carriage contract the buyer arranged. If the box is dropped, crushed in a stack collapse, flooded in a yard or simply mislaid between gate-in and loading, the loss falls on the seller even though the buyer's carrier held it throughout. Worse, both parties' cargo policies are usually written to a delivery point that no longer matches the facts, which is how a claim ends up with neither insurer accepting it.
The rules that fit containerised cargo
- FCA (Free Carrier) — the seller delivers when the goods are handed over to the carrier, or to another person nominated by the buyer, at the named place. If the named place is the seller's own premises, delivery occurs when the goods are loaded onto the buyer's collecting vehicle; at any other place, delivery occurs when the goods are placed at the carrier's disposal on the seller's arriving means of transport, ready for unloading. Risk passes at the real handover. Export clearance stays with the seller. This is the direct replacement for FOB.
- CPT (Carriage Paid To) — as FCA, but the seller contracts and pays for carriage to the named destination. Risk still passes on handover to the first carrier, not at destination. This is the direct replacement for CFR.
- CIP (Carriage and Insurance Paid To) — as CPT, with the seller also obliged to insure the cargo. This is the direct replacement for CIF, and Incoterms 2020 made a substantive change here: CIP now requires all-risks cover at Institute Cargo Clauses (A) level, whereas CIF still carries only the minimum Institute Cargo Clauses (C). On a container of drummed cargo, ICC (C) is thin protection.
The two critical points
CPT and CIP deliberately separate the point at which risk passes from the point to which the seller pays. That is the design of the rules, not a defect in them, but it has to be understood. A buyer who reads "CIP Mumbai" as "the seller carries the risk to Mumbai" has misread it — risk passed at the container terminal in the country of origin. Name both points precisely in the contract, the place of delivery and the place of destination, and the ambiguity disappears.
Answering the on-board bill of lading objection
The reason exporters keep putting FOB on containers is documentary, not legal. A letter of credit will normally call for a bill of lading bearing an on-board notation, and since FCA delivery is complete before the box ever reaches the ship, the document that falls out of it naturally is a received-for-shipment bill. Incoterms 2020 supplies the remedy in the FCA A6/B6 delivery-document provisions: where the parties have agreed it, the buyer must instruct its carrier — at the buyer's cost and risk — to issue a transport document stating the goods have been loaded on board, and must then pass that document to the seller for tender under the credit.
Two conditions attach, and both are missed regularly. The mechanism operates only if it has been written into the sale contract, and the credit has to be opened in terms that will accept the document the mechanism produces. Get one and not the other and the seller has traded a risk gap for a documentary discrepancy. Get both, and no documentary argument for running a container on a maritime rule survives.
What Incoterms rules never do
They allocate delivery, risk, cost and obligations between seller and buyer. They do not transfer title, they do not set payment terms, they do not govern breach, sanctions or force majeure, and they are not a contract of carriage or of insurance. Always cite the edition — "FCA Jebel Ali container terminal, Incoterms 2020" — because the rules change between editions, and the CIP insurance level is a live example of why the edition matters.