Understanding Incoterms 2020: Choosing the Right Rule for Your Freight

In international logistics, clear communication is everything. International Commercial Terms—better known as Incoterms—are the universal rules that define exactly when the responsibility, costs, and risks of a shipment shift from the seller to the buyer.

Choosing the wrong term in your sales contract can lead to costly misunderstandings. For example, buying under EXW (Ex Works) gives the buyer maximum control but makes them responsible for everything, including local clearing at the origin country. Conversely, shipping via CIF (Cost, Insurance, and Freight) means the seller covers ocean transit, but the buyer takes on the risk once the goods cross the ship's rail.

Aligning with your clearing and forwarding partner before signing commercial invoices ensures you select an Incoterm that matches your risk tolerance and operational capabilities.