Complete guide to Incoterms: what they are and how they impact international transport
2025-11-07

If your company exports or imports goods, it is essential to understand Incoterms. These standardized terms are fundamental to ensure clarity in international transport contracts, define responsibilities, and avoid unexpected costs.

In this complete guide, we explain what Incoterms are, how they work, and which ones are most commonly used.

What are Incoterms?

Incoterms (International Commercial Terms) are a set of rules created by the International Chamber of Commerce (ICC) that define the obligations, costs, and risks between seller and buyer in international transactions.

They were created to avoid misunderstandings about who pays for transport, who handles insurance, who deals with customs, and at what point the responsibility for the cargo changes hands.

Most recent update: Incoterms 2020

Why are Incoterms important?

• They prevent commercial conflicts
• They ensure transparency in responsibilities
• They facilitate negotiation between parties from different countries
• They reduce logistical and financial risks

In practice, Incoterms directly impact the cost, logistics, and timeframe of the operation.

How do Incoterms work?

Each Incoterm defines:

• Who is responsible for transporting the goods
• Who bears the costs at each stage
• Where the transfer of risk between parties occurs
• Who handles documentation and customs clearance

They are usually accompanied by the specific delivery location, for example:

• FOB Port of Leixões
• DDP Buyer's warehouse in Paris

Main Incoterms used in international transport

EXW – Ex Works (at origin)

The seller makes the goods available at their own warehouse.
The buyer assumes all costs and risks from the place of origin.

FCA – Free Carrier

The seller delivers the goods to the carrier nominated by the buyer.
Widely used in multimodal transport.

FOB – Free On Board

The seller delivers the cargo on board the ship.
Ideal for maritime transport. The risk passes to the buyer at that moment.

CIF – Cost, Insurance and Freight

The seller covers transport and insurance to the port of destination.
The seller is responsible until arrival at the port (but risk transfers at shipment).

DAP – Delivered at Place

The seller delivers at the agreed location, but without unloading.
The buyer handles customs at destination.

DDP – Delivered Duty Paid

The seller delivers at the buyer's location, with all taxes paid.
The seller assumes maximum responsibility.

How to choose the right Incoterm?

The choice depends on several factors:

• Your company's level of experience with international trade
• Capacity to negotiate with suppliers or customers
• Destination location and modes of transport
• Need for control over costs and risks

Practical example:
A Portuguese company exporting to Brazil can use:

• FOB Port of Lisbon, if the Brazilian client organizes the transport
• CIF Port of Santos, if the seller wants to include transport and insurance
• DDP São Paulo, if they want to deliver directly to the client's warehouse

How does Cargobase help?

At Cargobase, we help our clients to:

• Choose the most suitable Incoterm for the operation
• Calculate logistical costs based on the chosen term
• Handle documentation, transport, and customs clearance
• Ensure safe and efficient deliveries, as planned

Incoterms are more than just