Incoterms 2020 Explained — Plain English, for South African Trade

Incoterms are the three-letter codes on every international invoice — FOB, CIF, DDP and the rest — and they decide one thing: who is responsible for the goods, the cost, and the risk at each step of the journey. There are 11 official Incoterms in the current 2020 rules, published by the International Chamber of Commerce. Seven work for any transport mode; four are for sea freight only. Getting the Incoterm right avoids disputes, surprise bills, and customs delays. This guide explains all 11 in plain English, with the South African context that matters — including the one thing most exporters get wrong about how SARS values your goods. JLog is a Cape Town 3PL and customs clearance specialist; we work with these terms every day.

Incoterms® 2020 is the ninth set of ICC rules, in force since 1 January 2020. Source: International Chamber of Commerce.

What an Incoterm does — and what it doesn’t

An Incoterm answers three questions: who pays for transport and insurance, where the seller’s responsibility ends and the buyer’s begins (the “delivery” point), and who handles export and import customs. Two ideas matter: “delivery” is the moment risk passes from seller to buyer, and “free” describes how far the seller must get the goods before the buyer takes over. Incoterms do NOT cover the price itself, payment terms, when ownership transfers, or which country’s law applies — those belong in your sales contract.

The most important point for South African importers

Here is the thing generic Incoterms guides miss. The Incoterm on your invoice is a commercial agreement — it tells you who pays for freight, insurance and customs. It does NOT set the value SARS uses to calculate your duty. South Africa calculates customs duty on the FOB value (the goods at the point of export, before international freight and insurance), and import VAT on the Added Tax Value: FOB + 10% upliftment + any non-rebated duty. So even if your supplier quotes a “CIF” or “DDP” price that bundles in shipping, SARS still strips it back to the FOB base for duty. Knowing this stops you overpaying — and stops you being surprised at clearance.

Where cost & risk transfer — visualised

Each bar is the journey from the seller’s premises to the buyer’s door. Forest green shows the seller’s responsibility for cost; brass shows the buyer’s. The dashed line marks where risk passes from seller to buyer — which, for the C-terms, is much earlier than where cost passes. That gap is the most misunderstood thing in international trade.

All 11 Incoterms at a glance

The scannable version — who arranges and pays the main carriage, where risk passes to the buyer, and whether the seller must insure.

The 7 Incoterms for any transport mode

EXW — Ex Works

The seller does the bare minimum: they make the goods available at their own premises, and you handle everything from that gate onward — export clearance, transport, insurance, import, delivery. Cheapest headline price, most work and risk for you. In practice EXW is hard to use cleanly because the buyer often can’t handle export clearance in the seller’s country; FCA is usually better.

FCA — Free Carrier

The seller delivers the goods, cleared for export, to a carrier or place you nominate. Risk passes to you there. FCA has largely replaced FOB for modern containerised cargo, and under the 2020 rules it can require the carrier to issue a bill of lading to the seller — useful when paying by letter of credit.

CPT — Carriage Paid To

The seller pays freight to the named destination, but risk passes to you as soon as the goods reach the first carrier — not at destination. Seller pays carriage; you carry transit risk. No seller insurance obligation.

CIP — Carriage and Insurance Paid To

Like CPT, but the seller must also buy insurance — and under the 2020 rules that’s the higher level (Institute Cargo Clause A, comprehensive cover to at least 110% of value). The good “all-risk” option for any mode.

DAP — Delivered at Place

The seller delivers to your named destination, ready for unloading, covering all transport cost and risk to that point. You handle import clearance, duties, and unloading. A practical middle ground if you want the seller to ship but you’d rather control your own SARS clearance.

DPU — Delivered at Place Unloaded

Like DAP, but the seller also unloads at destination — the only Incoterm where the seller is responsible for unloading. (Replaced the old “DAT — Delivered at Terminal” in 2020, and now covers any place, not just terminals.) You still handle import duties.

DDP — Delivered Duty Paid

The seller does everything: transport, export AND import clearance, and pays all duties and VAT, delivering to your door. Easiest for the buyer, heaviest for the seller — use with care, as the seller may need to be registered for import and VAT in the destination country. A South African exporter selling DDP into the UK takes on UK import VAT.

The 4 Incoterms for sea & inland waterway only

FAS — Free Alongside Ship

The seller delivers the goods alongside the vessel at the named port of loading. From there you take over — loading, freight, the lot. Mainly for bulk or break-bulk cargo.

FOB — Free On Board

The seller delivers the goods loaded onto the vessel; risk passes once they’re on board. You pay freight and insurance from there. FOB is the most commonly used — and most commonly misused — Incoterm: it’s meant for non-containerised sea freight, but people apply it to containers and air, where FCA is correct. Note: in SA customs, FOB is also the valuation base SARS uses for duty — a separate customs meaning, not the commercial Incoterm.

CFR — Cost and Freight

The seller pays freight to the destination port, but risk passes to you when goods are loaded at origin. No seller insurance obligation. For containers, CPT is the correct modern equivalent.

CIF — Cost, Insurance and Freight

Like CFR, but the seller must also buy insurance — at the minimum level (Institute Cargo Clause C). Common in commodity trade. Important SA reminder: CIF describes who pays for shipping and insurance — it is NOT the South African customs valuation base.

Which Incoterm should you use?

A rough guide, not legal advice. For maximum control and the best freight rates: FCA or FOB — you negotiate the main carriage with your own forwarder. For simplicity as a buyer: DAP or DDP — the seller arranges shipping; DDP even covers duties if they’ll do it. For containers: use FCA, CPT, or CIP — not FOB, CFR, or CIF, which are designed for non-containerised sea freight. For a South African exporter selling to consumers abroad: DDP gives the smoothest buyer experience (no surprise import bills), but you take on the destination country’s duty and VAT compliance. JLog helps you pick the right term for your goods, route, and volume — and prepares the documents so the Incoterm on your invoice matches what actually happens.

Frequently asked questions

What’s the difference between FOB and CIF?

Under both, risk passes to the buyer when goods are loaded onto the vessel at origin. The difference is cost: under FOB the buyer pays freight and insurance onward; under CIF the seller pays freight and minimum insurance to the destination port.

Does the Incoterm change how much duty I pay in South Africa?

No. SARS calculates duty on the FOB customs value and VAT on the Added Tax Value (FOB + 10% uplift + duty), whatever Incoterm is on your invoice. The Incoterm decides who pays for shipping and insurance commercially — not the customs valuation base.

Which Incoterm is best for shipping containers?

FCA, CPT, or CIP. The sea-only terms FOB, CFR and CIF were designed for non-containerised cargo and create a risk gap when used for containers.

What changed in Incoterms 2020?

DAT was renamed DPU and broadened beyond terminals; CIP’s insurance requirement rose to Institute Cargo Clause A while CIF stayed at Clause C; FCA gained a bill-of-lading option for letters of credit; and own-transport is now allowed.

Are Incoterms a legal contract on their own?

No. An Incoterm is one clause of a sales contract. It does not transfer ownership or set payment terms, which must be agreed separately.

Need help choosing?

Not sure which Incoterm fits your shipment? Email [email protected] or call 021 300 6099. Tell us your goods, route, and whether you’re buying or selling — we’ll tell you the right term and prepare documents to match. JLog also handles customs clearance and fine art shipping for South African importers and exporters. For the freight and customs acronyms on your paperwork, see our Logistics & Shipping Terms Glossary.

Last updated: June 2026 · JLog — Specialist 3PL & Customs, Cape Town