EXW, FCA, CIP: who is responsible for what on the way from China
Three letters in the contract tell you where the plant hands the cargo over, from which point the risk is yours and who pays for the freight. For cargo going to Uzbekistan by rail or truck, the rules for any mode of transport fit: EXW, FCA, CPT, CIP, DAP. Sea-only FOB and CIF used for overland cargo are a common mistake.
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Incoterms are the rules of the International Chamber of Commerce (ICC) that answer three questions with a single abbreviation: where the seller hands over the goods, from which moment the risk of loss or damage passes to the buyer, and who bears which costs. The current edition is Incoterms 2020. There are eleven rules, and they fall into two groups: for any mode of transport, and for sea and inland waterway transport only. Cargo from China to Uzbekistan travels overland. So you choose from the first group: EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place) and, less often, DPU (Delivered at Place Unloaded) and DDP (Delivered Duty Paid).
Two groups of rules
| Group | Rules | When they apply |
|---|---|---|
| Any mode of transport | EXW, FCA, CPT, CIP, DAP, DPU, DDP | rail, truck, air, container, multimodal transport |
| Sea and inland waterway only | FAS (Free Alongside Ship), FOB (Free On Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight) | cargo is loaded on a vessel in a port |
FOB and CIF are familiar: you often see them in Chinese plants' price lists. But they are built around loading onto a ship. If the cargo does not reach a port and goes from the plant's warehouse onto a truck or a wagon, the point of handover under FOB simply does not occur in the way it is described. Even for a sea container, FOB is considered technically inaccurate: the container is handed to the carrier at the terminal before it is on board. For containers and multimodal routes, FCA, CPT or CIP are advised.
Five rules for overland transport, in plain words
| Rule | Where the plant hands over the cargo | The risk is yours from | Who pays for the main carriage | Who clears export in China | Who clears import into Uzbekistan |
|---|---|---|---|---|---|
| EXW (Ex Works) | at its own premises, without loading | the cargo being placed at your disposal at the plant | buyer | buyer | buyer |
| FCA (Free Carrier) | to the carrier you named, at the named place | handover to the carrier | buyer | seller | buyer |
| CPT (Carriage Paid To) | to the first carrier | handover to the first carrier | seller, to the named place | seller | buyer |
| CIP (Carriage and Insurance Paid To) | to the first carrier | handover to the first carrier | seller, plus insurance | seller | buyer |
| DAP (Delivered at Place) | at the named place at your site, not unloaded | the cargo being ready for unloading there | seller | seller | buyer |
The main trap in CPT and CIP: costs and risk diverge. The plant pays for the freight to Tashkent, but the risk is yours from the moment the cargo is handed to the first carrier in China. If the cargo is damaged on the way, the buyer is the one who pursues the claim, against the carrier or the insurer.
EXW: why it looks cheap and costs a lot
EXW seems the simplest: we collect at the gate. But under it the buyer clears export in China itself, and the risk passes even before loading. For a buyer from Uzbekistan, clearing export in China on its own is usually difficult. In practice the plant or a forwarder still does the export, but outside the contract, and then there is nothing to argue from. If you need a price "from the plant", FCA with the place of handover at the plant's warehouse is more reliable: export is then, by the rules, the seller's job.
CIP and CIF: different insurance
Since 2020, under CIP the seller by default insures the cargo on broad cover, Institute Cargo Clauses (A), "all risks" with stated exclusions. Under sea CIF the default remained minimum cover, Clauses (C). The parties can agree on a different level, but if they have not, the difference is significant.
DDP: why it almost never works with China
Under DDP the seller delivers the cargo cleared and pays the duties and taxes in the buyer's country itself. It effectively acts as the importer. A Chinese plant generally has no one to clear import into Uzbekistan. If DDP appears in an offer, ask who will be the importer on the documents and whose name will be on the declaration.
What Incoterms do not settle
The rules cover only the handover of the cargo, risk and costs. They do not determine:
- when title to the goods passes to you;
- the price and the payment procedure;
- what to do about defects and how to replace them;
- force majeure, sanctions, export and import bans;
- where and under which law a dispute is settled.
All of this is written in separate clauses of the contract.
How to write it into the contract
- State the edition: "FCA … Incoterms 2020". Without the year it is unclear which rules apply.
- Name the exact place: not "FCA China" but the address of the plant's warehouse or a station. Where the risk passes depends on the place.
- For CPT, CIP and DAP, name the destination just as exactly.
- For CIP, state the level of insurance if you need other than the default.
How we do it
- We choose the route by the value of the lot and how urgently it is needed: by air, rail or truck.
- We prepare the invoice, the packing list and the transport documents, not you. Import into Uzbekistan is also on our side.
- A calculation for your lot shows what is included in the price up to your warehouse. You decide based on it.
What this article relies on
Below are the documents and materials we refer to, so that you can check what is said for yourself.
Standards and documents
Reference materials
- International Trade Administration (U.S.). Know your Incotermstrade.gov ↗
- Addleshaw Goddard. Incoterms 2020: what's changedaddleshawgoddard.com ↗
- Timewell. Incoterms 2020 guidetimewell.jp ↗
- Goods Across Borders. Incoterms 2020 explainedgoodsacrossborders.com ↗
The text of the ICC rules is paid; the rules are retold here in our own words. For a specific contract, check the wording against the official ICC publication.