Incoterms 2020 for cannabinoid buyers: who does what at the border

Incoterms 2020, published by the International Chamber of Commerce, are eleven three-letter rules that define who arranges and pays for carriage, who clears customs and where risk passes from seller to buyer. They do not set price, transfer ownership or override product-specific law. For a controlled ingredient, choosing the wrong rule can quietly put an unprepared party in charge of an import declaration.

The eleven rules split into two groups: seven for any transport mode (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four for sea and inland waterway only (FAS, FOB, CFR, CIF). Most cannabinoid ingredient movements by road or air use the first group.

The two extremes: EXW and DDP

Under EXW (Ex Works) the seller only makes the goods available at their premises; the buyer takes on export clearance, carriage, import clearance and all duty and tax. For a cross-border cannabinoid buyer with no presence in the origin country, EXW can create an export-clearance problem on day one.

DDP (Delivered Duty Paid) is the opposite: the seller delivers cleared for import with duties and taxes paid. It is convenient for the buyer but places the full import burden, including any licences and VAT registration, on a seller who may not be equipped to handle a controlled product in the destination market. Convenience on paper can become a stalled shipment in practice.

The practical middle ground

FCA (Free Carrier) is often the most workable rule for controlled goods: the seller handles export clearance and hands the goods to the buyer’s nominated carrier, and risk passes at that point. CPT and CIP add seller-arranged carriage to a named destination, and under CIP the seller must buy insurance at the higher Institute Cargo Clauses (A) level. DAP and DPU deliver to destination but leave import clearance with the buyer, with DPU the only rule where the seller unloads.

EXW: buyer does export and import clearance; maximum buyer burden

FCA: seller clears export, risk passes at handover to buyer’s carrier

CPT / CIP: seller pays carriage to destination; CIP requires ICC (A) insurance

DAP / DPU: seller delivers to destination, buyer clears import; DPU adds unloading

DDP: seller delivers cleared and duty-paid; maximum seller burden

Name the place precisely

Every Incoterm must be followed by a named place, and the precision of that place decides where cost and risk actually switch. "FCA Rotterdam" is ambiguous; "FCA [seller warehouse address], Rotterdam, Incoterms 2020" is not. For CPT and CIP, remember that risk passes when the goods are handed to the first carrier, not when they reach the named destination, a gap that surprises buyers who assume cover runs to the door.

Match the rule to who can clear customs

Before agreeing a term, confirm which party holds the EORI registration, import licence and regulatory responsibility in each country. A rule that assigns import clearance to a party without the right registration is a rule that will fail at the border regardless of how good the price looked. Align the Incoterm with the customs and regulatory reality, then let it drive the transport and insurance arrangements.