Incoterms 2020 for road freight

What Incoterms cover and what they do not

Incoterms are 11 trade rules from the International Chamber of Commerce (ICC). The buyer and the seller write one rule into the sales contract. The rule says who books and pays the transport. It also says where the risk passes and who clears customs. Incoterms do not decide the price, the payment or who owns the goods.

Your sales contract must settle these points.

• The price and the payment terms
• When the buyer becomes the owner, often at payment
• The quality of the goods
• The transport contract with the carrier
• The law that applies and how to settle a dispute

Incoterms 2020 and the next edition

Incoterms 2020 is the current edition of the rules. ICC is preparing a new edition, Incoterms 2030, and plans to publish it in late 2029. Until then, Incoterms 2020 remains the current set of rules. Write the edition into your contract, so both sides read the same text.

This guide is general information, not legal advice. For a large or unusual contract, ask a lawyer.

Seven Incoterms rules for road freight

Seven of the 11 Incoterms rules work for any mode of transport, including a truck. These are EXW, FCA, CPT, CIP, DAP, DPU and DDP. Under EXW and FCA, the buyer books and pays the main transport. Under the other five rules, the seller does. RNJ Transport works for the side that books the truck.

Under CPT and CIP, the seller pays the truck, but the risk passes at loading. Under DAP, DPU and DDP, the risk stays with the seller until the truck arrives.

Why FOB, CFR, CIF and FAS do not fit a truck

FOB, CFR, CIF and FAS are Incoterms rules for sea and inland waterway transport only. Under these rules, delivery happens at a ship: alongside it or on board. A truck has no such point. For a truck, use FCA in place of FOB. Use CPT or CIP in place of CFR or CIF.

A ferry crossing does not change this. On loads between Lithuania and Sweden, the trailer crosses the sea by ferry. The load still goes from door to door, so DAP or another rule for any mode fits.

Loading and unloading under EXW, FCA, DAP and DPU

Incoterms also decide who loads and unloads the truck. Under EXW, the seller only makes the goods available, not loaded. The buyer must load them. Under FCA at the seller’s premises, the seller loads the truck. Under DAP and DDP, the buyer unloads at the destination. Under DPU, the seller unloads.

Usually, the seller’s staff load the truck at the warehouse. Under EXW, the risk is already with the buyer during that loading. FCA fits daily practice better, because the risk passes after loading. ICC says EXW suits domestic sales and suggests FCA for export.

Customs clearance inside and outside the EU

Under every road rule except EXW, the seller clears export. Under every rule except DDP, the buyer clears import. Inside the EU, EU goods need neither. Goods that move between EU countries pay no customs duties and need no customs declaration. A load from the Netherlands to Lithuania needs no customs clearance.

Norway is different. Norway is in the European Economic Area, but outside the EU customs union. Customs borders and procedures still apply between Norway and the EU. On a Norway load, the Incoterms rule decides who clears export and who clears import.

DDP to Norway means the seller clears import in Norway. ICC advises both sides to think carefully before they choose DDP. Agree before loading who files each declaration: the seller, the buyer or a customs broker.

How to write the Incoterms rule in a contract

Write three parts in the contract: the rule, the exact place and the edition. For example: “DAP Kaunas, [street address and postcode], Incoterms 2020”. ICC advises a precise place, because a city name alone can mean many addresses. Under DAP, DPU and DDP, the named place is where the risk passes.

Under CPT and CIP, the named place is the destination. The risk passes earlier, at loading.

Choosing a rule: buying from the Netherlands, selling to Sweden

You buy goods from the Netherlands and want to book the truck. Then ask for FCA at the supplier’s address. The supplier loads, and you choose the carrier. If the supplier should arrange transport, ask for DAP at your address. Avoid EXW, because the supplier then has no duty to load.

You sell goods to Sweden, and the buyer wants a delivered price. Then use DAP at the buyer’s address. You book the truck, and the risk stays with you until it arrives. The carrier’s CMR liability is limited to 8.33 SDR per kilogram, about 10 euros per kilogram. For valuable goods, check cargo insurance.

1. 1

   Decide who books the truck

   The buyer books under EXW and FCA. The seller books under CPT, CIP, DAP, DPU and DDP.

2. 2

   Choose a rule for road freight

   At the seller’s premises, choose FCA over EXW. For delivery to the buyer, choose DAP, or DPU if the seller unloads.

3. 3

   Write the full place and the edition

   Write the rule, the street address and “Incoterms 2020” in the contract and on the order.

4. 4

   Check customs outside the EU

   For Norway, agree who clears export and who clears import.

5. 5

   Send us the rule with your request

   Send us the route, the date, the load size and the rule in the price form. Then we know where we collect and deliver.

Incoterms for road freight: who does what

The table has one row for each rule that fits a truck. Inside the EU, EU goods need no customs clearance, so the last two columns apply to loads to or from Norway.