Incoterms 2020 is a set of eleven three-letter rules published by the International Chamber of Commerce. Each rule allocates three things between seller and buyer: who arranges and pays for carriage, who carries the risk of loss or damage at each point of the journey, and who handles export and import formalities. For frozen food the risk line matters more than the cost line, because a load that thaws is not damaged in the ordinary sense – it is worthless, and the argument about who owned it at the moment the temperature rose is expensive.
The eleven rules, grouped by what they can carry
Seven rules work for any mode of transport, including road, rail, air and multimodal. Four are written for sea and inland waterway carriage only.
| Group | Rules | Use for frozen food |
|---|---|---|
| Any mode | EXW, FCA, CPT, CIP, DAP, DPU, DDP | Yes. Road reefer from Ukraine falls here. |
| Sea and inland waterway | FAS, FOB, CFR, CIF | Only for genuine port-to-port reefer container moves. |
The most common mistake in frozen trade is naming FOB or CIF on a truck load. Those rules describe the moment cargo passes onto a vessel. On a road movement there is no vessel and no ship’s rail, so the risk transfer point is undefined and the clause has to be reconstructed by argument after the fact. If the goods travel by reefer truck, use one of the seven multimodal rules.
What each rule means for a temperature-controlled load
EXW – Ex Works
The seller makes the goods available at its own premises. The buyer loads, exports and carries. For frozen food this is the highest-risk option a buyer can accept, because the buyer takes risk before the pallets even leave the cold store dock, and typically has no way of proving the core temperature at handover. It also puts the export declaration on a party that is not established in the exporting country, which is often impractical.
FCA – Free Carrier
The seller delivers to a carrier nominated by the buyer, either at the seller’s premises (seller loads) or at another named place (seller delivers, buyer unloads). FCA at the seller’s cold store is the cleanest starting point for frozen cargo: the seller is responsible up to and including loading into a pre-cooled trailer, which is exactly the point where the seller controls the product temperature and the buyer does not. Incoterms 2020 added an option under which the buyer instructs its carrier to issue an on-board transport document to the seller, which matters when a letter of credit demands one.
CPT and CIP – Carriage Paid To / Carriage and Insurance Paid To
The seller contracts and pays carriage to a named destination, but risk passes when the goods are handed to the first carrier. This split surprises people: under CPT the seller pays the freight all the way to Rotterdam while the buyer has carried the risk since the trailer left Vinnytsia. CIP additionally requires the seller to insure, and in Incoterms 2020 the default cover level for CIP was raised to an all-risks standard equivalent to Institute Cargo Clauses (A). CIF, the sea equivalent, kept the older minimum cover.
DAP, DPU and DDP – delivered rules
The seller carries risk all the way to the destination. Under DAP the goods arrive ready for unloading and the buyer unloads. Under DPU the seller unloads, which is the only Incoterms rule that obliges the seller to do so. Under DDP the seller also clears the goods for import and pays import duty and, unless agreed otherwise, import VAT.
DDP is popular in tenders and awkward in practice for frozen food from a non-EU origin. It requires the seller to act as importer of record in the destination country, which usually means a local VAT registration and a customs representative, and it makes the seller responsible for food-law import controls it cannot physically attend. DAP with a clear named delivery point is normally the better answer to a buyer who says “quote me landed”.
Name the place, not just the rule. “DAP Hamburg” is ambiguous. “DAP consignee cold store, Hamburg, Incoterms 2020” is a contract term. Under the delivered rules the named place is where risk transfers, so a vague name is a vague risk line.
What Incoterms never decide
This is the part that causes disputes. An Incoterms rule does not deal with:
- Transfer of title or ownership.
- Payment terms, currency, or the consequences of non-payment.
- The specification of the goods, including the delivery temperature.
- Force majeure, limitation of liability, or the law governing the contract.
- Whether a temperature excursion counts as damage.
That last point deserves a clause of its own. Write into the contract what the maximum permitted product temperature is at loading and at delivery, what evidence is accepted (recorder download, probe reading between cartons, both), who may take the reading, and what happens at each severity level. See temperature logging and cold chain breaks for the wording that survives a claim.
A short decision path
- Is the goods movement road or multimodal? If yes, discard FAS, FOB, CFR and CIF.
- Does the buyer already have a reefer carrier it trusts on the corridor? If yes, FCA seller’s cold store, loaded.
- Does the buyer want one landed price and no involvement in transport? DAP named cold store.
- Does the buyer insist the seller acts as importer of record? Check whether the seller can realistically register, then price the compliance work separately. Do not accept DDP by default.
- Whatever the rule, add the temperature clause, the insurance clause and the named place.
Worked comparison
| Question | FCA seller’s store | CPT buyer’s DC | DAP buyer’s DC |
|---|---|---|---|
| Who books the truck | Buyer | Seller | Seller |
| Who pays the freight | Buyer | Seller | Seller |
| Where risk passes | On loading at origin | On handover to first carrier | At the destination, before unloading |
| Who insures in practice | Buyer | Buyer (unless CIP) | Seller |
| Who clears export | Seller | Seller | Seller |
| Who clears import | Buyer | Buyer | Buyer |
Frequently misread details
- Under FCA at the seller’s premises the seller loads. Under FCA at any other named place the seller delivers on the arriving vehicle, ready for unloading, and does not unload.
- Under the C rules the seller’s cost obligation and the buyer’s risk exposure end at different places. That is not a drafting error in the rules; it is the defining feature of the group.
- “Incoterms” without a year is not a reference. Always write the edition, because DPU did not exist before 2020 and the CIP insurance level changed in 2020.
- Incoterms rules are incorporated by reference, so the sales contract has to say so.
Next: how a reefer road movement from Ukraine to the EU actually runs, and the short answer to DAP or DDP for frozen food.
