Understanding Incoterms 2020 for Project Cargo Shipments

What Are Incoterms?

Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international transactions, including:

Who pays for transportation

Who bears the risk during transit

Who handles customs clearance

Where risk transfers from seller to buyer

Most Relevant Incoterms for Project Cargo

EXW (Ex Works)

Best for: Buyers with strong logistics capabilities

Seller's responsibility ends at their facility

Buyer handles all transportation and risk

Maximum control but maximum responsibility for buyer

FCA (Free Carrier)

Best for: Balanced risk sharing

Seller delivers to carrier at named place

Risk transfers when goods are handed to carrier

Seller handles export clearance

FOB (Free on Board)

Best for: Ocean freight with clear delivery point

Seller delivers when goods pass ship's rail

Traditional term for ocean shipments

Seller handles export, buyer handles import

CIF (Cost, Insurance, and Freight)

Best for: Buyers wanting seller to arrange shipping

Seller pays for freight and insurance to destination port

Risk still transfers at origin port

Common but often misunderstood

DAP (Delivered at Place)

Best for: Buyers wanting door delivery

Seller delivers to named destination

Seller bears all risk until delivery

Buyer handles import clearance

DDP (Delivered Duty Paid)

Best for: Maximum seller responsibility

Seller handles everything including import duties

Buyer simply receives the goods

Highest cost for seller

Choosing the Right Incoterm

Consider these factors:

**Experience level** - Less experienced buyers may prefer DDP or DAP

**Cost control** - More control often means better pricing

**Risk tolerance** - Who can better manage transit risks?

**Local expertise** - Who knows the destination country better?

Common Mistakes to Avoid

Using FOB for non-ocean shipments

Assuming CIF means the buyer has no risk

Not specifying the exact delivery location

Forgetting to factor in all costs

Need Help?

Our team can help you select the optimal Incoterm for your project cargo shipment. Contact us for a consultation.