Incoterms 2020 Explained: Your Complete Guide to Choosing the Right Shipping Term
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Why Are Incoterms Important?
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Choosing the wrong Incoterm can cost you thousands of dollars or leave you responsible for unexpected losses. In Egypt, many international trade disputes arise due to misunderstandings or the absence of clear agreement on Incoterms.
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The 11 Incoterms in Incoterms 2020
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They are divided into two categories:
Terms for Any Mode of Transport (7 Terms)
• EXW (Ex Works): Goods are made available at the seller’s premises — you handle everything from there.
• FCA (Free Carrier): The seller delivers the goods to a designated carrier at an agreed location.
• CPT (Carriage Paid To): The seller pays freight charges to the destination, but the risk transfers to you once handed to the carrier.
• CIP (Carriage and Insurance Paid To): Similar to CPT, but includes comprehensive insurance coverage.
• DAP (Delivered at Place): The seller delivers the goods to the destination without customs clearance.
• DPU (Delivered at Place Unloaded): The seller delivers and unloads the cargo at the agreed destination.
• DDP (Delivered Duty Paid): The seller handles everything, including customs clearance and duties until delivery to your location.
Sea Freight Terms Only (4 Terms)
• FAS (Free Alongside Ship): The seller places the cargo alongside the vessel.
• FOB (Free On Board): The seller loads the cargo onto the vessel — the most commonly used term.
• CFR (Cost and Freight): The seller pays freight to the destination port, excluding insurance.
• CIF (Cost, Insurance, and Freight): Similar to CFR, but includes basic insurance coverage.
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The Most Commonly Used Terms in Trade with Egypt
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FOB — The Most Popular Choice for Egyptian Importers
The supplier (seller) covers costs until the cargo is loaded onto the vessel at the port of origin. From that point onward, responsibility shifts to you.
Advantages:
• Greater control over freight forwarders and insurance
• Better flexibility in cost management
Disadvantages:
• Requires experience in dealing with shipping companies
CIF — The Easiest Option for Beginners
The supplier pays shipping and basic insurance costs until the destination port.
Advantages:
• Simple and convenient — one total price on the invoice
Disadvantages:
• The supplier chooses the shipping line, which may not be ideal for you
• Only basic insurance is included
DDP — For Importers Seeking Complete Peace of Mind
The seller takes responsibility for everything until the cargo reaches your warehouse, customs-cleared.
Advantages:
• No surprises — one all-inclusive cost
Disadvantages:
• Usually the most expensive option, as suppliers add margins to all expenses
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What Changed in Incoterms 2020?
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Key updates from the 2010 version:
Greater clarification regarding security and safety responsibilities.
DAT was replaced with DPU (Delivered at Place Unloaded) to broaden the delivery definition.
FCA now allows a Bill of Lading with On-Board notation, which is highly important for Letters of Credit.
CIP now requires Insurance Level A (comprehensive coverage) instead of Level C.
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How to Choose the Right Incoterm for Your Business
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Ask yourself:
• Do you already work with a trusted freight forwarder? → FOB is likely better.
• Are you a new importer unfamiliar with shipping companies? → CIF is simpler.
• Do you want complete convenience and have the budget? → DDP is ideal.
• Are you exporting from Egypt and want to stay competitive? → CIF or CPT may be better