Incoterms® 2020 in maritime transport

Incoterms® 2020 in maritime transport
– practical division of responsibilities, risks and costs

In maritime transport, Incoterms® are not just theory from a textbook. They are a specific business decision that affects port costs, responsibility for documents, the risk of delays and disputes with contractors. In practice, most problems do not start on the ship, but in the commercial contract.

What Incoterms® are in operational practice

Incoterms® regulate three key areas:

1. who organises transport,
2. who bears the costs of each stage,
3. at what point the risk of damage or loss of goods is transferred.

And that’s it.

They do not regulate:

• payment,
• ownership of the goods,
• carrier liability,
• relations with customs authorities.

Therefore, Incoterms do not provide protection on their own. They only provide protection when they are tailored to the actual logistics process.

Why Incoterms are critical in maritime transport

Sea transport involves:

• a long chain of events,
• many points of contact (ports, terminals, agencies),
• fees charged “by the clock”,
• documents that determine the release of goods.

An incorrectly chosen Incoterm causes:

• disputes over port costs,
• lack of control over documents,
• problems with customs clearance,
• uncertainty about who should respond when something goes wrong.

EXW – why it is usually a bad decision in maritime transport

EXW looks attractive: the seller “does nothing”.

In maritime practice, this means that the buyer:

• is responsible for export,
• assumes the risk very early on,
• often has no formal means of action in the country of dispatch.

The most common problem:
The importer is responsible for a process over which they have no real influence.

EXW in maritime import is a formula for very experienced companies with local facilities.

FOB – popular but often misunderstood

FOB works well only when:

• the port of loading is clearly defined,
• the parties know who is responsible for terminal costs,
• the buyer actually controls the sea freight.

Practical error:
FOB is sometimes used in situations where the seller still controls the process.

FOB gives control, but requires experience and a good operational partner.

CFR and CIF – cost comfort, loss of control

In CFR/CIF, the seller organises sea transport.

What this means in practice:

• the buyer does not choose the shipping company,
• does not control the schedule,
• and receives the documents “after the fact”.

CIF – the biggest misunderstanding

CIF includes insurance, but:

• usually to a minimum extent,
• often not adjusted to the value of the goods,
• no real protection in case of damage.

CIF gives a false sense of security.

DAP and DDP – when “all-in” makes sense

DAP and DDP are convenient, but:

• they place a huge responsibility on the seller,
• they require customs facilities and local presence,
• they can be difficult to implement when importing from outside the EU.

DDP in maritime transport requires:

• experience in customs clearance,
• knowledge of local regulations,
• full control over documentation.

These are formulas for companies that know exactly what they are doing.

Incoterms and actual port costs

Incoterm does not answer the question: “Who will pay demurrage and detention?”

If this is not specified in the contract:

• the costs fall on the party that currently has access to the container,
• and the buck starts getting passed around.

That is why Incoterms must always be read together with the operating conditions.

Incoterms and IMO, designs and dimensions

For cargoes:

• hazardous (IMO),
• oversized,
• project,

Incoterm:

• must include responsibility for documentation,
• should clearly define the point of risk transfer,
• cannot be “automatic”.

There is no room for schematics here.

How PKS Gdańsk Oliwa approaches Incoterms

In its operational practice, PKS Gdańsk Oliwa:

• works with all Incoterms® formulas,
• manages the process from contract to clearance and delivery,
• represents the customer’s interests vis-à-vis shipowners, ports and administrations,
• provides a single dedicated forwarding agent who takes responsibility for the entire process.

This is particularly important for:

• IMO,
• projects,
• difficult destinations.

Decision checklist – before you sign the contract

Ask yourself the following questions:

• Do I control sea transport?
• Do I know who is responsible at the port?
• Does the insurance cover the actual value?
• Do I have control over the documents?
• Does Incoterm suit the type of cargo?
• If even one question raises doubts, then it is not a good Incoterm.

Mini-FAQ

Are Incoterms mandatory?
No, but their absence leads to interpretative chaos.

Is FOB “safe”?
Only with good operational control.

Is CIF sufficient protection?
Usually not.

Can Incoterms be changed during transport?
Theoretically yes, but in practice it is very difficult.

Is it worth consulting Incoterms before shipping?
This is the moment when improvements can still be made.

If you are planning sea transport and want to choose Incoterms consciously, instead of putting out fires at the port, consult the terms and conditions before signing the contract.
This is one decision that often determines the success of the entire operation.

If you have any questions or need support, we are at your disposal.

Joanna Toczko + 48 503 026 510