Common mistakes that increase your international operation expenses.
Choosing the right Incoterm is not just paperwork — it sets who pays what, where responsibility shifts, and who arranges insurance. A wrong choice can turn a profitable shipment into a costly one: unexpected freight, insufficient insurance, customs delays, and disputes. Below we explain the most common mistakes and the questions to ask before signing.
1. Why Incoterms matter
– Air freight: Best for urgent shipments. Delivery usually takes between 24 to 72 hours depending on the origin and destination. Commonly used in Just-In-Time logistics or when speed is crucial to operations.
– Sea freight: Typically takes 15 to 45 days, depending on the route and number of stops. While slower, it works well for planned shipments.
2. Shipping costs
Incoterms define the transfer of risk between buyer and seller. Lack of clarity leads to confusion over freight costs, insurance responsibilities, and import/export formalities.
Real case:
If you agree FOB but the supplier assumes CIF, you may end up without the expected control or facing double-payments for insurance. In FOB the seller delivers to shipboard; in CIF the seller pays freight and minimum insurance to destination port.
3. Costly mistakes and fixes
• Choosing by habit: defaulting to “we use FOB” without checking if it fits the transport mode.
>Fix: confirm the transport mode first.
• Not specifying place: using “FOB” without precise port or Incoterms version (e.g., FOB Santos Port, Incoterms 2020).
>Fix: always specify exact location and version.
• Assuming insurance covers everything: CIF/CIP imply seller-arranged insurance but often with limited coverage.
>Fix: review policy exclusions and consider additional coverage when needed.
4. Quick pre-sign checklist
• Confirm transport mode (sea, air, road).
• Check who assumes insurance and liability in each leg.
• Specify the exact delivery point.
• Consult your freight forwarder or customs broker before acceptance.
An Incoterm is more than a clause — it affects costs, schedules and liability. Reviewing it properly avoids surprises. We at Megaglobal help clients negotiate terms that protect their operations.
💬 Want an expert review of your next shipment’s Incoterm? Contact us and let’s review it together.
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