What incoterms really define
Incoterms® (International Commercial Terms), issued by the International Chamber of Commerce (ICC), define who is responsible for transport, costs, risks, insurance and customs clearance between buyer and seller.
They do not determine ownership, payment terms or transfer of title, but they do determine who does what, where risk transfers and who pays which logistics costs.
For transport and logistics, this makes Incoterms operationally critical rather than purely contractual.
Why incoterms have a direct impact on logistics
Incoterms decide:
- Who books the transport
- Who pays origin and destination charges
- Who handles export and import customs
- Where responsibility and risk shift during the journey
If Incoterms are unclear or incorrectly chosen, logistics partners are forced to make assumptions. This often results in unexpected destination costs, demurrage and detention, insurance gaps or customs delays. In short: Incoterms define how smoothly—or how painfully—your shipment moves.
Commonly used incoterms and their Practical risks
EXW – Ex Works
EXW gives the seller minimal responsibility. The buyer takes over almost immediately.
In practice, EXW is often misused in international trade. Export customs clearance becomes unclear and non‑compliant, creating risk for both parties. EXW may look cheap on paper, but it frequently leads to operational problems.
FCA – Free Carrier
FCA is often the smarter alternative to EXW. The seller clears the goods for export and delivers them to a named place, such as a terminal or forwarder’s warehouse.
From a logistics and compliance perspective, FCA offers better control, clearer responsibility and fewer customs risks.
DAP – Delivered at place
Under DAP, the seller delivers the goods to an agreed destination, while the buyer handles import customs and duties.
DAP works well when the delivery location is clearly defined. If not, disputes may arise over unloading, waiting time or last‑mile costs.
DDP – Delivered duty paid
DDP places maximum responsibility on the seller, including import customs and duties.
While attractive for buyers, DDP carries significant risk for sellers who lack local customs expertise. Incorrect use of DDP often leads to tax issues, compliance exposure and unexpected liabilities.
CIF and CIP – Insurance and risk misunderstood
With CIF and CIP, sellers arrange freight and insurance, but risk transfers earlier than many companies assume. This misunderstanding frequently causes insurance disputes when damage occurs during transit.
Hidden costs often linked to incoterms
Many logistics disputes are not caused by transport itself, but by misaligned Incoterms. Common hidden costs include:
- Destination charges not covered by the Incoterm
- Demurrage and detention misunderstandings
- Insurance gaps
- Customs responsibilities falling on the wrong party
Incoterms clearly define what is included—and what is not. If this is not actively managed, costs escalate quickly.
How Koring helps you use incoterms strategically
At Koring, Incoterms are not treated as a checkbox, but as a strategic logistics decision.
We analyse your trade lane, transport mode, customs requirements and risk profile to advise which Incoterm truly fits your operation. By aligning transport, customs clearance and documentation, we ensure that the chosen Incoterm works not only contractually, but also operationally.
Our approach helps customers:
- Avoid costly Incoterm mistakes
- Prevent customs and compliance issues
- Gain transparency over total landed costs
- Maintain control over their supply chain
Incoterms as a competitive advantage
Incoterms influence cost control, delivery reliability and customer satisfaction. Companies that actively manage their Incoterms reduce risk and improve predictability. Companies that reuse Incoterms without evaluation often pay the price later.
Make incoterms work for you
Incoterms are far more than standard trade terms—they shape your logistics reality.
With the right Incoterm and the right logistics partner, you avoid surprises, reduce risk and keep your supply chain moving efficiently.
Koring helps you turn Incoterms into clarity, control and confidence in international transport.
