Are you using the correct incoterms?
Incoterms are a set of trade terms that prevent confusion in foreign trade contracts by clarifying the obligations of buyers and sellers. These terms explain who bears the risk of lost at what points during the journey. Incoterm rules are separated into two groups: those for use in relation to any mode or modes of transport, which can be used where there is no maritime transport at all, or for transportation transactions in which maritime transport is used for only part of the carriage and for ocean and inland waterway transport, where the point of dispatch and delivery are both ports.
Intermodal terms include EXW EX-Works, FCA Free Carrier At, CPT Carriage Paid To, CIP Carriage and Insurance Paid to, DAT Delivered At Terminal, DAP Delivered At Place, and DDP Delivery Duty Paid. These terms are known as place-to-place terms. Ocean and inland waterway transport terms include CFR Cost and Freight, CIF Cost, Insurance and Freight, FAS Free Alongside Ship, FOB Free on Board. These terms are delivery terms.
One of the issues is that entities use the wrong incoterms and leave gaps in liability. Secondly, they do not ensure that all the transaction documents are uniform with the incoterm that was chosen. The transaction documents for intermodal transactions include: the contract of sale, the contract of carriage, the insurance documents, the bills of lading, and the documentary letter of credit. Some shippers are using outdated terms on their documents. We can improve the current system by making sure that the ports' rules are consistent with the documentation and that the most appropriate incoterms are being used.
Use of the wrong term can leave a party open for more liability than intended. For example, if a party in an intermodal transaction uses FOB (free on board), when liability shifts to the buyer after loaded onto the vessel, creating a risk gap for inland producers because the container is typically taken to the ship by a carrier.
Stapleton, D. “Optimizing shipper contracting: the correct usage of Incoterms for containerized/intermodal freight.” Retrieved from: https://www.pomsmeetings.org/confpapers/051/051-0153.pdf
“Commentary: Avoiding Incoterm misuse.” Freight Waves. October 4, 2014. Retrieved from: https://www.freightwaves.com/news/commentary-avoiding-incoterm-misuse
“FCA Incoterms: What FCA Means and Pricing.” Guided Imports. 2020. Retrieved From: https://guidedimports.com/blog/what-does-fca-mean-incoterms/