Choosing an Incoterm for Iran–China trade

An Incoterms rule sets where the seller delivers, when risk passes to the buyer, who books the main carriage and who handles customs at each border. Goods between Iran and China travel in containers by rail through Central Asia, in containers by sea, or as bulk by sea, and each case suits different rules. This guide explains which rules fit which shipment as of 8 October 2026.

Which Incoterms rules apply in 2026?

Incoterms 2020 are the current rules: they took effect on 1 January 2020, and no later edition has been published as of 8 October 2026. ICC has begun a revision. National committees, including ICC Germany (July 2026), say the final launch of Incoterms 2030 is planned for late 2029, and ICC Austria notes that Incoterms 2020 remain the applicable rules until then. No exact launch or effective date has been announced.

Whichever rule you choose, write the named place and the edition into the contract, for example “FCA [named terminal, city] Incoterms® 2020”.

Which rules work by rail, and which only by sea?

Seven of the eleven Incoterms 2020 rules work for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four are for sea and inland waterway only: FAS, FOB, CFR and CIF. ICC describes the maritime rules as intended for cases where the seller places the goods on board a vessel, or alongside it under FAS, at a sea or river port.

A rail or road move through Central Asia therefore needs one of the seven any-mode rules. FOB or CIF named at a rail terminal has no vessel to refer to and leaves the delivery point unclear.

Should containers go FOB or FCA?

For containers, use FCA rather than FOB, CPT rather than CFR, and CIP rather than CIF. ICC’s explanatory notes to Incoterms 2020 say the maritime rules are not appropriate where goods are handed to the carrier before they are on board, “for example where goods are handed over to a carrier at a container terminal”.

The reason is control. Under FOB the seller bears the risk until the goods are on board, but once a container is handed in at the terminal, the seller no longer controls it. FCA moves delivery, and risk, to the handover. ICC repeated the advice in a guidance paper of 21 March 2024 on shipping containers through ports.

If the sale contract requires the seller to provide an on-board bill of lading, FCA in Incoterms 2020 allows for it. The parties can agree that the buyer instructs its carrier to issue the seller a bill of lading with an on-board notation after loading, at the buyer’s cost and risk. The carrier is not obliged to agree, so confirm it at booking.

All of this assumes the sea route is open. Iranian ports, including those on the Gulf of Oman, have been under a US naval blockade since 14 July 2026, and ships bound to or from them are being redirected. Most major container lines are not routing through the Strait of Hormuz. The routes guide compares the alternatives.

Where does risk pass on a rail route across several borders?

Under FCA, CPT and CIP, risk passes once: when the seller hands the goods to the first carrier at the named place, unless the contract names a later point. Under FCA at a rail terminal, delivery takes place when the goods arrive on the seller’s vehicle, ready for unloading and at the carrier’s disposal. For CPT and CIP, ICC states that where several carriers are engaged and no specific point is agreed, risk transfers on delivery to the first carrier; parties who want it to pass later must say so in the contract.

On a train from China to Iran, every border crossing and both gauge changes are therefore at the buyer’s risk, even when the seller has booked the carriage under CPT or CIP. The SMGS contract of carriage fits this pattern: one consignment note, with each railway joining the contract as it takes over the goods. Under DAP, DPU or DDP named at a terminal in Iran, the seller keeps the risk across all borders.

Customs in transit countries follows the same split. Under FCA, CPT and CIP, the buyer carries out the formalities of any country of transit and of the country of import. Under DAP and DPU, the seller handles export and transit formalities, and the buyer handles import. On a route through Kazakhstan, Uzbekistan and Turkmenistan, the contract should name who deals with each border.

Pre-shipment inspection required by the importing country, such as Iran’s certificate of inspection (COI), is a buyer formality and cost under FCA, CPT and DAP, and the seller must help at the buyer’s request. The documents guide explains when a COI applies.

Who should insure the goods, CIF or CIP?

Only CIF and CIP oblige the seller to insure, and to different standards. CIP requires cover under Institute Cargo Clauses (A), the widest standard cover, while CIF requires only the minimum cover of Clauses (C). In both cases the insured amount is at least 110% of the contract price, and the parties may agree different cover.

Agree who arranges insurance before choosing CIF or CIP. Buyers often prefer to insure in their own market; in that case choose CPT, or CFR for bulk, and let the buyer insure.

When do DAP, DPU or DDP make sense?

Use DAP or DPU when the seller will carry the goods, and the risk, to a named place in the buyer’s country, and DDP only when the seller can also clear the goods for import there. Under DAP the seller delivers on the arriving vehicle, ready for unloading, and does not clear the goods for import. If the buyer fails to clear them, goods held at the point of entry are at the buyer’s risk.

DPU is the only rule under which the seller unloads. It replaced DAT in 2020, and the named place no longer has to be a terminal.

DDP puts the most obligations on the seller, including import clearance. ICC warns that this can be physically or legally difficult for a seller and suggests DAP or DPU instead. If the seller cannot act as importer in the destination country, it cannot deliver DDP.

Which Incoterm fits which shipment?

The table sums up the usual fit. The named place matters as much as the rule.

Shipment	Rules that fit	Watch
Containers by rail through Central Asia	FCA or CPT at the origin rail terminal; CIP if the seller insures	Risk passes at the first handover unless a later point is named
Containers by sea	FCA, CPT or CIP at the container terminal	Avoid FOB, CFR and CIF
Bulk loaded on board at a port	FOB, CFR or CIF	Risk passes once the goods are on board
Delivered to the buyer’s site or terminal	DAP or DPU; DDP only if the seller can act as importer	The seller carries the risk to destination

What this means for you

Choose the route first and the rule second: containers by rail or sea call for FCA, CPT or CIP, and bulk by sea for FOB, CFR or CIF. Name the place precisely, name the edition, and state in the contract who handles transit borders, who books pre-shipment inspection and who insures.

If risk should pass later than the first handover, for example at a border station, say so in the contract. Incoterms do not cover everything: they do not deal with whether the goods may be exported or imported, or with transfer of ownership.

Mehan’s trade desk shows the usual terms for each route in its route planner.