INCOTERMS 2020: The rule that determines who pays, who assumes the risk and how to avoid problems in your imports and exports.

Table of Contents

1. What do Incoterms really regulate?
   • Who pays for each stage of transport?
   • Who assumes the risk and at what exact point is it transferred?
   • What documents does each party provide?
   • What obligations does each party assume before customs authorities?
   • Other important aspects
2. Choosing the right Incoterm changes your entire operation
   • a) Direct impact on the final price
   • b) Impact on customs
   • c) Impact on risks
   • d) Impact on legal responsibility
3. Simplified classification of Incoterms 2020
4. The most common mistakes we see as customs agents
   • Using EXW when the exporter does not have sufficient knowledge to manage the customs office of exit
   • Using FOB for cargo that is not 100% maritime or containerised
   • Thinking that CIF protects the buyer
   • Choosing an Incoterm because “it has always been used this way”
5. How to choose the right Incoterm for your company?
6. Professional recommendation: avoid EXW and use FCA

In international trade, 80% of operational, customs and legal problems arise from choosing the wrong Incoterm. Delays, unexpected extra costs, goods held at customs, contractual disputes or even the loss of cargo could have been avoided with the correct definition.

Incoterms 2020, published by the International Chamber of Commerce (ICC), universally establish who assumes costs, risks and obligations at each stage of transport. They are not contracts, but they are the operational legal basis of any international sale.

What do Incoterms really regulate?

Each Incoterm rule precisely defines:

Who pays for each stage of transport?

International freight, port costs, handling, clearance, insurance, etc.

Who assumes the risk and at what exact point is it transferred?

This point is key, because at a specific moment in the process, the seller pays and is responsible; once that stage ends, the buyer pays and assumes responsibility.

What documents does each party provide?

The Incoterm defines the documents that must be provided by each party: commercial invoice, B/L, AWB, insurance, cargo declaration, packing list, certificates, etc.

What obligations does each party assume before customs authorities?

At this point, for example, it is essential to know who will assume the taxes in the country of origin and destination.  A poor definition is not a minor detail; it is a guaranteed conflict.

Other important aspects

• The transfer of ownership rights over the goods
• The consequences of contractual breach
• Exemptions from liability in the event of unforeseeable circumstances
• These must be resolved in other contractual clauses or under the applicable law

Choosing the right Incoterm changes your entire operation

Before closing any commercial agreement, we need to know which Incoterm is most suitable for the operation. 

a) Direct impact on the final price

The Incoterm determines which costs are included in the price and which are not. A poorly negotiated rule can increase the cost of a product by up to 12–18%.

b) Impact on customs

If the Incoterm does not match the documentation submitted in the SAD, Customs may:

• Claim differences in value,
• Impose penalties,
• Hold the goods,
• Initiate a customs value review.

c) Impact on risks

Choosing an Incoterm under which your company assumes risks it cannot control may leave you without coverage in the event of damage, delays or loss.

d) Impact on legal responsibility

The Incoterm is automatically incorporated into the sales contract, becoming your legal obligation.

Simplified classification of Incoterms 2020

EXW – The buyer controls the entire process from the supplier’s premises

Suitable only for very simple domestic operations. In exports, it is not recommended due to customs risks.

FCA / FOB – The critical point is delivery to the carrier

• FCA: the seller delivers at their warehouse or at an agreed point.
• FOB: delivery on board the vessel (sea transport only).

CIF / CFR / CPT / CIP – The seller pays for transport, but the risk is transferred earlier

A common mistake made by buyers: they believe CIF protects them, but the risk passes when the goods cross the ship’s rail, not when they arrive at destination.

DAP / DPU / DDP – The seller delivers at destination

More convenient for the buyer, but with significant customs implications under DDP.

The most common mistakes we see as customs agents

Using EXW when the exporter does not have sufficient knowledge to manage the customs office of exit

Common outcome:

• Export rejections,
• Inspections,
• Documentary inconsistencies,
• Penalties for lack of traceability.

Using FOB for cargo that is not 100% maritime or containerised

The ICC recommends FCA for containers; the FOB Incoterm creates conflicts over who assumes damage at the terminal.

Thinking that CIF protects the buyer

The buyer receives the insurance, yes, but the risk is transferred before transport. If the damage occurs after loading, the seller is no longer responsible.

Choosing an Incoterm because “it has always been used this way”

Every contract, every customer, every port and every customs authority requires a different technical decision.

How to choose the right Incoterm for your company?

The main variables to consider are the following:

• Negotiate the Incoterm before negotiating the price.
• Define who really controls each stage of transport.
• Assess technical, customs and financial risks.
• Identify who has better access to shipping lines, freight rates or customs clearance.
• Confirm whether there are customs or health restrictions.

At Omnia Aduanas, we see companies every day that lose margin or become legally exposed because they have not chosen the right rule.

Professional recommendation: avoid EXW and use FCA

For Spanish and European exporters, we recommend moving from EXW to FCA, because:

• FCA allows you to control customs, avoiding penalties.
• It ensures that documentary traceability remains in the hands of the exporter.
• It reduces risks regarding the buyer’s carrier.
• It improves logistics and reputational control before authorities.