What a trade term does and does not do
Incoterms® 2020 is a set of eleven three-letter terms published by the International Chamber of Commerce. They reflect business-to-business practice in sales contracts and allocate costs, risks and obligations between buyer and seller. That is the whole job of the term: it sits in the sales contract between two parties.
A freight forwarder is usually not a party to that contract. The forwarder works from a separate agreement with whoever engages it, and that agreement has its own scope: which steps are performed, by whom, and for what price. A trade term informs the scope, but it does not replace it. "We agreed FOB" tells the forwarder where the seller’s obligations are meant to end. It does not say whether the forwarder is booking the main leg, handling export clearance or arranging delivery at the other end.
The practical consequence is simple. Treat the trade term as input to the quotation request, and then ask for the scope in writing.
Reading the handover as a line, not a label
It helps to picture the movement as a line with handover points: the seller’s premises, the export port or airport, the main carriage, the import port or airport, and the buyer’s premises. Each term places a different marker on that line to show where responsibility for specific things changes hands. The exact allocation for each of the eleven terms is in the rules themselves, which are published by the ICC and are worth reading in the original rather than relying on a summary.
What you can do without reproducing the rule text is to ask, for each segment of the line, four things: who arranges it, who pays for it, who carries the risk of loss or damage during it, and who holds the documents needed for it. If two parties give different answers for the same segment, the gap is where a dispute eventually starts.
A responsibility matrix you can fill in
Copy this table into your shipment brief. Fill each row with the party’s name, not with a yes or no. A name makes a gap visible.
| Segment | Arranges | Pays | Document needed | Confirmed in writing by |
|---|---|---|---|---|
| Pickup at seller’s premises | Collection order / cargo readiness | |||
| Export clearance | Export declaration and supporting documents | |||
| Main carriage | Booking and transport document | |||
| Import clearance | Import declaration and supporting documents | |||
| Delivery at destination | Delivery order / proof of delivery |
A worked example with an invented purchase
Hypothetical case: buyer in Jakarta, seller abroad
A Jakarta buyer agrees to purchase machine parts from a supplier overseas. The sales contract names a term that places the main carriage with the buyer. The buyer asks a forwarder to quote the sea freight and the import side.
The forwarder replies with a question rather than a price: does the buyer want the quotation to start when the goods are handed to the carrier at the named place, or from the supplier’s door? The buyer realizes the term fixes only the seller’s side and had never asked who collects at the supplier. A short email to the supplier closes the point, and the quotation is written for the segments the buyer is actually responsible for.
The example is invented to show the mechanism. It is not a customer story and does not describe any real transaction.
Questions to ask each party
These are written as questions because the answers belong in the booking, not in your memory.
- To the seller: where do your obligations end, and who books the carrier after that point? What documents will you issue, and when?
- To the buyer: which segments do you want quoted, and which do you want a different party to handle? Who is the importer or exporter of record for the declaration?
- To the forwarder: which segments are in this quotation and which are explicitly out? Which charges are billed at origin and which at destination, and in which currency?
- To all three: who is notified of arrival, who gives the delivery instruction, and who signs for the cargo?
Where scope gaps usually appear
- Terminal and handling charges at origin or destination that neither side assumed were theirs.
- Export clearance, which the term may place with one party while the forwarder’s quotation assumes the other.
- Insurance, which some terms require one party to arrange and others leave open.
- The delivery leg after the port, which a quotation for the main carriage may not include.
None of these is an error in the term. Each is a place where a written scope would have prevented a surprise.
Keep the written scope with the booking
Once the questions above have answers, store them next to the booking, not in an email thread that only one person can find. A one-page scope with the matrix filled in, the named place and the date it was confirmed is enough. When the carrier, the buyer or the broker changes, the page changes hands with the job.
Review it whenever something moves: a new delivery address, a change of consignee, a different mode. Each of those can shift a responsibility from one party to another without anyone saying so. The cheapest moment to notice is before the cargo moves, and the matrix makes the shift visible because a name changes in a cell.
Limits of this guide
This article does not interpret any specific term and is not legal advice. The rules are published by the ICC and the sales contract is what binds buyer and seller; read both for the shipment in question. A forwarder’s own conditions and any document it issues, for example those of FIATA where members use them, set the terms of the forwarding service separately.