Top 3 tips for understanding Incoterms

Posted by:

Share via:

Top 3 tips for understanding Incoterms

In our recent Global PFS blog, we looked at the importance of getting packing right in your shipping container. But who is responsible for getting that right? The short answer is, it depends on the Incoterms used.

What are Incoterms?

Incoterms, or International Commercial Terms, are the world’s terms of trade for the sale of goods. Incoterm rules are set by the International Chamber of Commerce and are reviewed every ten years. Unlike various national trade policies which differ from country to country, these are universal across the world to provide consistency to businesses. They’re a requirement on every commercial invoice.

In simple terms, Incoterms is the international language of who pays for what, who carries the risk and where obligations are in an international purchase.

Why are Incoterms important?

Understanding the Incoterms and discussing them with your supplier prior to arranging shipping is very important. When obtaining a quote from your overseas supplier, make sure the Incoterms are formally stated, as this will limit any unexpected charges down the line. Each Incoterm stipulates where the chain of responsibility moves so you know exactly at which stage you are liable for your goods. You can often ask for a comparison using different Incoterms to decide the best option, in terms of cost and risk, for your business.

What are the most common Incoterms used?

There are 11 types of Incoterms in the 2020 edition – 4 exclusively for sea transport and 7 terms for any mode of transport. The following are the most commonly used:


  •  Ex Works (EXW) – In this instance, the seller is required to make the goods available for pickup at their own place of business. All other transportation costs and risks are assumed by the buyer. The full pick up address at origin is needed (including any applicable postcodes). This can generally be found on the supplier’s quote, however, it may differ so we recommend having your supplier reconfirm.
  •  Free on Board (FOB) –   When shipping on FOB terms, the seller pays for transportation of the goods to the nearest port/airport of export, plus loading costs. The buyer pays the cost of sea/air freight transport, insurance, unloading, and transportation from the arrival port to the final destination.


How Global PFS can help

The key to any shipment is to talk with us as soon as possible. Our team live and breathe Incoterms, as well as the various other rules, obligations and regulations. When working with Global PFS, you have a dedicated Account Manager to ensure your business goals are met and you understand your obligations in shipping your goods.

Get in touch to arrange a no obligation virtual Personalised Freight Review now or call +61 07 3185 4184 (EXT 800).



latest news