Choosing the right Incoterms (International Commercial Terms) are essential to optimising your supply chain. With the current focus on cost-saving, we use Incoterms as a strategic tool to maximise efficiency across the board. Our experts are guided by your unique business goals. We deliver research-backed recommendations on using Incoterms to achieve objectives such as:
- Reduce overall supplier costs
- Minimise duties
- Increase control
- Reduce risk
- Reduce net costs and increase profitability
Understanding key incoterms
Incoterms stand for International Commercial Terms. They determine who are responsible for different elements of shipping, including insurance coverage, risks and freight costs.
These terms are divided into C, D, E and F categories. They’re internationally recognised and are important to prevent misunderstandings that can arise during trade between different countries.
Supply chain managers and business owners should stay up to date with the latest Incoterm changes. By revising them regularly, you can capitalise on cost-saving and risk mitigation opportunities.
Here’s a breakdown of some important terms within each Incoterm category, and what they mean for your supply chain in 2025.
D-terms
Businesses often select D-terms for their initial convenience. The seller will bear almost all costs and risks associated with transporting goods to the destination. Duty costs may be the responsibility of the buyer.
However, the bundling of freight, insurance and duties inflates supplier costs. Selecting D-terms can leave buyers with less control over their supply chain and leave them responsible for hidden costs.
DAP (Delivered at Place) and DDP (Delivered Duty Paid)
- Seller’s obligation: Until port of destination
- Buyer’s obligation: From port of destination onwards
- Risk transfer point: Port of destination
C-terms
C-terms mean shared responsibility. Buyers often enjoy the initial convenience of the seller covering the freight, which is included in the sale price.
Risk transfer occurs early, at the port of loading. This can limit control and opportunities for cost optimisation. The buyer is responsible for import duties and any costs following arrival and the port of destination.
Many businesses find it difficult to distinguish between CIF and CFR. While the responsibilities of buyers and sellers are nearly identical under both, there are important differences between insurance obligations and costs.
CFR means the seller is not obligated to purchase insurance. However, CIF means the seller is responsible for purchasing insurance coverage for the buyer’s risk of lost or damaged goods. We took a deep dive into the differences between CIF and CFR in a recent blog, which you can read here.
CIF (Cost, insurance and freight) and CFR
- Seller’s obligation: Until port of destination
- Buyer’s obligation: From port of destination onwards
- Risk transfer point: Port of loading
E/ F- terms
E/F-terms mean more control for buyers and minimum supplier sale costs. They place the costs and risks of the freight, as well duties, on the buyer.
The buyer doesn’t need to worry about hidden bundled costs. Initial sale costs will be lower as they shouldn’t include insurance, or depending on the term origin changes.
Our clients using F-terms often have more power to extend their free holding time to prevent detention costs. We leverage our knowledge and industry network to negotiate this on their behalf.
FOB (Free on Board)
- Seller’s obligation: Until port of loading
- Buyer’s obligation: From port of loading onwards
- Risk transfer point: Port of loading
FAS (Free Alongside Ship)
- Seller’s obligation: Until alongside ship
- Buyer’s obligation: From alongside ship onwards
- Risk transfer point: Alongside ship
Make your Incoterms matter
Our supply chain consultants identify which Incoterms are most beneficial for our clients. This starts when you first begin your journey with us and continues through ongoing revisions as the global trade landscape changes. Our in-depth knowledge of both your supply chain and international trade transactions empowers us to align terms to achieve the best outcome possible for your business.
Choose Incoterms that work for you with Stockwells by your side. Dive into our freight forwarding and logistics expertise by reaching out to us today. Click here to start the conversation.