Incoterms 2020 for bulk cargo: the four that matter

Incoterms decide three things: who arranges carriage, who pays for it, and where risk passes from seller to buyer. Everything else in a sale contract sits on top of that.

FOB — Free On Board Risk passes when the cargo is on board at the load port. The buyer nominates the vessel and pays freight. Common in crude and dry bulk trades where the buyer has chartering capability.

CFR — Cost and Freight The seller arranges and pays carriage to the named destination port, but risk still passes on loading. The buyer carries the marine risk even though the seller booked the ship — this surprises people every year.

CIF — Cost, Insurance and Freight As CFR, but the seller must also provide marine insurance. Note the default cover level under Incoterms 2020 for CIF is the minimum Institute Cargo Clauses (C). If you want all-risks cover you have to say so in the contract.

DAP — Delivered At Place The seller carries risk all the way to the named place, unloaded. Useful for delivered inland sales, but it puts destination customs delays on the seller's side of the line.

Practical notes for energy and bulk - Do not use container terms (FCA, CPT, CIP) for bulk parcels; they do not map cleanly to ship's rail practice. - Name the port and, where relevant, the berth. "CIF India" is not a delivery term. - Align the Incoterm with the charter party. A CFR sale with a voyage charter where the buyer controls discharge speed creates a demurrage argument waiting to happen.

We routinely review sale contracts alongside the fixture so the two documents do not contradict each other.