How to choose · Customs and international trade

How to choose Incoterms for an international sale or purchase

Last updated 25 October 2026 · 2 sources listed · Reading time about 3 minutes

Short answer

Incoterms rules allocate tasks, costs and the point where risk passes between buyer and seller. Choose by deciding who can control each leg best, which party is better placed to clear customs, what mode of transport is used, and how much risk each side can insure. Name the exact place and the rules edition in the contract, and avoid terms unsuited to containerised or air cargo.

Who this is for: A seller or buyer drafting an international sales contract who must decide which delivery term allocates costs, risk and tasks.

What to evaluate

Transport mode suitability
Some terms are designed for sea and inland waterway only, and misuse for containers causes risk and documentation gaps.
How to check: Confirm each term is suitable for the mode actually used, especially for containerised goods.
Control of the main carriage
The party that books transport can choose carriers, routing and timing. Giving that control to the party with the weaker logistics expertise causes avoidable problems.
How to check: Decide who has better freight buying power and information.
Customs clearance responsibility
Terms differ on who clears exports and imports. Some parties cannot lawfully act as importer or exporter of record in the other country.
How to check: Check local rules and whether each party has the registration needed.
Risk transfer point
The point where risk passes decides who bears loss or damage in transit and who needs to insure.
How to check: Map the journey and identify the named place where risk shifts.
Insurance obligations
Only some terms oblige a party to buy insurance, and at a minimum level.
How to check: Check whether the term requires cover and whether that minimum fits the cargo.
Named place precision
Vague places invite disputes over where obligations end, since many ports and terminals exist within a city.
How to check: Specify the named place as precisely as possible.
Payment and finance alignment
Letters of credit and bank documents often require specific terms and documents.
How to check: Align term with the payment instrument and required documents.

Comparison

Typical term families and their allocation of responsibility
Term family	Good when	Watch out for
Buyer collects at seller premises	Buyer has strong logistics and wants full control.	Seller export clearance support and loading responsibility can be unclear.
Seller delivers to carrier at origin	Seller arranges export clearance and hands to buyer's carrier.	Mode mismatch if a sea-only term is used for containers.
Seller pays main carriage to destination port or place	Seller has good freight rates and buyer wants predictable landed cost.	Risk passes early, before the buyer controls the cargo.
Seller bears cost to a named place with insurance	Buyer wants more protection and the seller can insure.	Insurance minimum may be low for high value goods.
Seller delivers cleared at destination	Buyer wants a near door-to-door price and seller can handle import compliance.	Seller exposure to foreign duty and registration problems.

Decision worksheet

Rate up to three options against this guide’s own criteria. It runs in your browser and saves only on this device. It is a thinking aid, not a recommendation.

1. Have you checked each criterion?

Transport mode suitability — Confirm each term is suitable for the mode actually used, especially for containerised goods.
Control of the main carriage — Decide who has better freight buying power and information.
Customs clearance responsibility — Check local rules and whether each party has the registration needed.
Risk transfer point — Map the journey and identify the named place where risk shifts.
Insurance obligations — Check whether the term requires cover and whether that minimum fits the cargo.
Named place precision — Specify the named place as precisely as possible.
Payment and finance alignment — Align term with the payment instrument and required documents.

0 of 7 criteria checked.

2. Compare options (0 = fails or unknown, 3 = meets it well)

Criterion	Option 1 name	Option 2 name	Option 3 name
Transport mode suitability	Transport mode suitability score for Option A	Transport mode suitability score for Option B	Transport mode suitability score for Option C
Control of the main carriage	Control of the main carriage score for Option A	Control of the main carriage score for Option B	Control of the main carriage score for Option C
Customs clearance responsibility	Customs clearance responsibility score for Option A	Customs clearance responsibility score for Option B	Customs clearance responsibility score for Option C
Risk transfer point	Risk transfer point score for Option A	Risk transfer point score for Option B	Risk transfer point score for Option C
Insurance obligations	Insurance obligations score for Option A	Insurance obligations score for Option B	Insurance obligations score for Option C
Named place precision	Named place precision score for Option A	Named place precision score for Option B	Named place precision score for Option C
Payment and finance alignment	Payment and finance alignment score for Option A	Payment and finance alignment score for Option B	Payment and finance alignment score for Option C
Total (max 21)	0	0	0

Questions to ask before you commit

Which edition of the rules does our contract reference?
Who books the main carriage and who chooses the forwarder?
Who is the exporter and importer of record, and is that lawful for each party?
At what exact named place does risk transfer?
Is any insurance required by the term, and at what level of cover?
Who pays for terminal handling at each end?
Which documents must each party provide, and by what date?
How do the chosen term and our payment method fit together?

Typical trade-offs

Selling on terms where you control transport

Upside: Better service control and potential margin on freight.
Downside: More exposure to disruption and cost swings.

Buying on terms where the supplier delivers

Upside: Simpler budgeting and less admin.
Downside: Less visibility and control over routing and carrier quality.

Delivered duty-paid style terms

Upside: Strong customer experience with a clear landed price.
Downside: Seller carries import compliance and tax risk abroad.

Common mistakes

Using sea-only terms for containerised cargo. Choose a term designed for any mode when goods are handed over at a terminal.
Naming a country instead of a place. Specify the port, terminal or address.
Forgetting that Incoterms do not govern title or payment. Address them in the contract.
Not stating the edition. Reference the specific rules version you intend.
Ignoring who can legally clear customs. Check registration and licensing requirements.

Sources and further reading

These pages were reachable when we last checked. They informed definitions and rules referred to above; they do not endorse this guide. Where rules differ by country, check the authority for your location.

Incoterms rules — International Chamber of Commerce, retrieved 27 October 2026
World Customs Organization — World Customs Organization, retrieved 27 October 2026

Comparison · Customs and international trade

Customs broker versus filing your own import declarations

Brokers bring expertise in classification, valuation and procedure, and often handle many entries daily. Self-filing gives control and can reduce per-entry cost at high volume but demands trained staff, software access and responsibility for compliance. In most systems the importer remains accountable for accuracy even when a broker files. Rules and licensing vary by country.

Cost factors · Customs and international trade

Understanding landed cost: duties, taxes and fees on imported goods

Landed cost combines the goods price, transport, insurance, customs duty, import taxes and handling fees. Duty depends on classification, customs value and origin, while taxes depend on local rules and may be recoverable. Errors in classification or valuation are the most costly mistakes. Rules vary by country, so confirm with the customs authority or a licensed adviser.

Requirements · Customs and international trade

Documents required to import or export goods and how to avoid clearance delays

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