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Perspectives

ReferenceInternational Business Law

Incoterms® 2020 FCA and CPT – Best practice

This guidance paper is relevant to users of the Incoterms 2020 rules for shipping goods in containers through ports anywhere in the world.

Peter Poleacov (updated )5 min

A container port at dusk: gantry cranes over two loaded ships, with a skyline behind

Introduction

This guidance paper responds to a key issue in port practice highlighted in a 2023 worldwide survey carried out by the ICC Commission on Commercial Law and Practice on the use of the Incoterms 2020 rules in major ports internationally: the frequent mismatch between the chosen Incoterms 2020 rule and the practical realities of shipping goods in containers through ports. This guidance paper is relevant to users of the Incoterms 2020 rules for shipping goods in containers through ports anywhere in the world.

Guidance paper

The survey reveals that the top two considerations for traders when selecting an Incoterms 2020 rule are

  1. Controlling freight costs

  2. Clarifying the transfer of risk

Where goods are shipped in containers through a port at departure and/or at arrival, the Incoterms 2020 rules FCA and CPT provide the best matching point to delineate freight cost and transfer of risk:

  • “FCA container terminal [port of departure] Incoterms 2020”

  • “CPT container terminal [port of arrival] Incoterms 2020”

The traditional maritime Incoterms 2020 rules FOB, CFR, and CIF have an on-board point of delivery that is not suitable for containers since users have in practice no control over the start of freight cost and transfer of risk up to or after this point. This mismatch has for years given rise to additional costs, Terminal Handling Charges (THC) overcharge/double charging in ports, uncertainty, and disputes.

The trading community will benefit greatly by shifting practice away from the traditional maritime terms FOB, CFR, and CIF and replacing them with the Incoterms 2020 rules which are far more suitable for containers: FCA, CPT, and CIP.

FCA and CPT (or CIP if insurance cover is agreed) are in reality the “updated” maritime Incoterms 2020 rules for containers, identifying what actually happens to containers, rather than pretending that the old maritime terms adequately describe the container trade. The FCA/CPT/CIP rules are designed to control freight cost and transfer of risk for all goods shipped in containers through a port since they define the appropriate point to transfer freight costs and risk.

This guidance paper was drafted by the Co-chairs and the Special Adviser of the International Chamber of Commerce (ICC) Incoterms 2020 Drafting Group: Christoph Martin Radtke, David Lowe, and Charles Debattista together with Professor GAO Xiang, Executive Chair of the ICC China Commission on Commercial Law and Practice.1

Why FOB gets expensive in container trade

So much for the ICC recommendation. What advisory practice adds is why the mistake is so persistent and what it actually costs.

FOB sits in countless contracts because it has always been there. The rule comes from a time when the seller genuinely accompanied the goods to the ship’s rail. In container trade, which today accounts for by far the greater part of general cargo, that moment no longer exists. The seller delivers the container to the terminal and has no further control over it.

That is where the gap opens. Under FOB, risk passes only once the goods are on board. Between handover at the terminal and loading, however, there is a period in which the seller bears the risk without any remaining access to the goods. If damage to the goods is only found later, seller and buyer argue over a question of proof that rarely has a certain answer: did it occur before or after loading on board? The seller no longer holds the goods, and the buyer points to the rule. Under German maritime law, the carrier is liable from the moment it takes over the goods for carriage (Section 498(1) of the German Commercial Code, Handelsgesetzbuch, HGB). In container trade, this liability often starts at the terminal. It is limited to statutory maximum amounts (Section 504(1) HGB) and applies only toward whoever holds the claims under the contract of carriage. That does not change the transfer of risk between seller and buyer, which stays tied to loading on board.

Then there is the cost side. Terminal handling charges are repeatedly billed twice under the maritime rules, once through the freight and once directly at the terminal.

Switching costs nothing but attention while drafting. Parties that agree on FCA set the transfer of risk at handover at the named place. Both sides can evidence that moment with a receipt. The parties should name the delivery point precisely. FCA has two variants, and the choice between your own premises and the container terminal moves both risk and cost considerably. Under CPT, the seller pays the freight to the named container terminal at the port of arrival, but risk passes as soon as it hands the goods over to the first carrier.2

A full overview of all eleven clauses, the transfer of risk, and the allocation of costs is in the article “Incoterms® 2020: practical overview”. How to avoid customs risks specifically on exports to the US is covered in the article “How to avoid US tariffs as an international supplier”. Why the suitable container clause nonetheless rarely makes it cleanly into the contract is covered in the article “Incoterms® 2020: A Reality Check”.

Notes

  1. ICC, guidance paper “Incoterms® 2020 FCA and CPT: Best practice for shipping containers through ports”, 2024. ↩

  2. Incoterms® 2020, CPT, Explanatory Notes for Users, nos. 1, 3, and 4. ↩

Reference: Poleacov, P. (2026). Incoterms® 2020 FCA and CPT – Best practice. INN.LAW. https://inn.law/en/perspectives/incoterms-best-practice/