Incoterms 2020 are the 11 rules published by the International Chamber of Commerce (ICC) that set who pays which costs, where risk passes from seller to buyer, and who handles export and import formalities. They have applied since 1 January 2020 and fall into two groups: seven for any mode and four for sea transport only. This guide covers all of them, with a table and examples aimed at exporters and importers trading with Indonesia.
Two groups of rules
Any mode (including multimodal and container transport): EXW, FCA, CPT, CIP, DAP, DPU, DDP.
Sea and inland waterway only: FAS, FOB, CFR, CIF.
Key changes from Incoterms 2010: DAT was replaced by DPU (Delivered at Place Unloaded), CIP now requires insurance equivalent to Institute Cargo Clauses (A), and FCA lets the parties agree that the buyer instructs its carrier to issue an on-board B/L to the seller, which helps when payment runs through a letter of credit. The glossary entry for Incoterms has a short definition.
Cost and risk transfer table
| Rule | Risk passes to buyer | Main carriage paid by | Insurance required | Export clearance | Import clearance |
|---|---|---|---|---|---|
| EXW | Goods ready at seller's premises, not loaded | Buyer | No | Buyer | Buyer |
| FCA | Handed to the carrier at the named place | Buyer | No | Seller | Buyer |
| CPT | Handed to the first carrier | Seller | No | Seller | Buyer |
| CIP | Handed to the first carrier | Seller | Seller, ICC (A) | Seller | Buyer |
| DAP | Arrived at destination, ready for unloading | Seller | No | Seller | Buyer |
| DPU | Unloaded at destination | Seller | No | Seller | Buyer |
| DDP | Arrived at destination, import duties and taxes paid | Seller | No | Seller | Seller |
| FAS | Alongside the vessel at the port of shipment | Buyer | No | Seller | Buyer |
| FOB | On board the vessel at the port of shipment | Buyer | No | Seller | Buyer |
| CFR | On board the vessel at the port of shipment | Seller | No | Seller | Buyer |
| CIF | On board the vessel at the port of shipment | Seller | Seller, ICC (C) | Seller | Buyer |
What often surprises people: under the "C" rules (CPT, CIP, CFR, CIF) the seller pays carriage to destination, but risk has already passed in the country of origin. If the vessel has an accident, the buyer bears the loss, so the buyer is the one with an interest in the insurance claim. Look up each rule's details in the Incoterms Finder.
Containers: why FCA fits better than FOB
FOB, CFR and CIF come from the era of bulk and breakbulk cargo, when goods were handed over at the ship's rail. Containers work differently: the exporter delivers the full box to the terminal before the closing time, and it then waits in the yard until the terminal operator loads it. During that time the goods are out of the seller's control, yet under FOB the seller still carries the risk until they are on board.
That is why ICC recommends FCA, CPT or CIP for containerised cargo, with a precise delivery point such as "FCA Koja Container Terminal, Tanjung Priok, Incoterms 2020". FOB remains common in practice, but understand the risk gap. The glossary entries for FOB and FCA sum up the difference.
Insurance under CIP and CIF
Only two rules oblige the seller to buy insurance:
- CIF: minimum cover equivalent to Institute Cargo Clauses (C), which covers only certain major perils such as fire, sinking or stranding.
- CIP: cover equivalent to Institute Cargo Clauses (A), an all-risks cover subject to listed exclusions.
In both cases the minimum insured value is 110% of the contract value, and the parties may agree different cover if they write it into the contract. Buyers of high-value goods on CIF terms often take out additional insurance themselves.
Keeping documents consistent
The chosen rule must appear consistently across all documents, not just the contract:
- The commercial invoice states rule, place and version, such as "FCA Cikarang, Incoterms 2020", and breaks down any freight or insurance included in the price.
- The bill of lading is usually marked freight prepaid under C and D rules and freight collect under F rules, unless agreed otherwise.
- A letter of credit must name the same rule; a small mismatch, such as a different place, can lead the bank to reject documents.
- Under CIF and CIP the insurance policy or certificate must be issued so the buyer can claim.
Mismatches between contract, invoice and B/L often surface only on arrival, when local charges are billed to a party that did not expect them.
Worked example: from FOB to CIF
A coffee exporter in Surabaya quotes FOB USD 20,000 and the buyer asks for a CIF price. Using hypothetical figures of USD 1,200 ocean freight and a 0.2% premium on 110% of the CIF value:
| Component | Calculation | Value (USD) |
|---|---|---|
| FOB price | Goods on board | 20,000.00 |
| Ocean freight | Hypothetical | 1,200.00 |
| CFR price | FOB + freight | 21,200.00 |
| CIF price | CFR ÷ (1 − 110% × 0.2%) | 21,246.74 |
| Insurance premium | 0.2% × 110% × 21,246.74 | 46.74 |
| Insured value | 110% × CIF | 23,371.42 |
The division is needed because the premium is calculated on a CIF value that includes the premium itself. For Indonesian importers the CIF figure matters because import customs value is based on CIF; when buying FOB, freight and insurance are still added to calculate duty and taxes. Run the conversion in the FOB–CIF Calculator and continue with landed cost and import taxes in Indonesia. Duty and tax figures are always estimates; check the official BTKI tariff and the latest regulations.
Choosing a rule for Indonesian trade
Exporters (SMEs and first-timers):
- Avoid EXW for exports from Indonesia. On paper the buyer handles export clearance, but the export declaration (PEB) is lodged by an exporter registered in Indonesia, so in practice the seller stays involved. FCA at your warehouse is usually clearer.
- For containers, choose FCA (buyer arranges the vessel) or CPT/CIP (you arrange it).
- If the buyer insists on FOB, name the port and understand your risk in the terminal. The guide how to export from Indonesia for SMEs covers the first steps.
Importers:
- FOB/FCA gives you control over the forwarder, schedule and destination local charges.
- CFR/CIF is convenient, but destination local charges are sometimes higher because the seller's side chose the service.
- DDP into Indonesia is difficult for a foreign seller, because importing requires a registered importer (an NIB that also serves as the importer identification number, API) and payment of import duty and taxes in Indonesia.
Common mistakes
- Leaving out the version and place. Write it in full, such as "CIF Tanjung Perak, Surabaya, Incoterms 2020". "FOB Indonesia" is too vague.
- Using FOB/CIF for air or road shipments. The sea rules do not suit other modes.
- Assuming CIF means full insurance. Minimum ICC (C) cover is very limited.
- Believing Incoterms govern payment or ownership. Those belong to the contract and the L/C.
- Ignoring terminal charges such as THC and documentation fees, where it must be clear who pays. See also export and import documents in Indonesia.
Use the tools
Compare each rule's obligations in the Incoterms Finder, work out FOB, CFR and CIF prices in the FOB–CIF Calculator, then plan the container load in the 3D load planner so your quoted freight cost per unit is realistic. This guide is for information; for the authoritative text, refer to ICC's Incoterms 2020 publication.