When I moved from Shanghai to Rotterdam fifteen years ago, one of the first things I learned in logistics was this: “Never ship without understanding your Incoterms.”
At the time, I thought Incoterms were just another set of European trade abbreviations — something only customs officers needed to worry about. But experience taught me that these three-letter codes are the universal language of logistics. Whether you’re exporting electronics from Shenzhen or importing machinery into Amsterdam, the way you define your Incoterms determines who pays, who risks, and who takes responsibility when things go wrong.
So, let’s decode what Incoterms 2020 really mean — and why mastering them can save your business time, money, and a few grey hairs.
What Are Incoterms, Exactly?
Incoterms (short for International Commercial Terms) are globally recognized rules developed by the International Chamber of Commerce (ICC). They define how costs, risks, and responsibilities are divided between buyers and sellers in international trade.
Think of them as a shared dictionary that prevents misunderstandings. Without them, a simple question like “Who pays for the freight?” can turn into a costly dispute at the port.
The latest edition — Incoterms 2020 — updated several important definitions to reflect how modern logistics works. These rules now better account for container shipping, multi-modal transport, and digital documentation.
The Most Commonly Used Terms (and What They Really Mean)
Here’s a quick translation of some of the most frequently used Incoterms into plain, everyday logistics language:
EXW (Ex Works) – The buyer takes responsibility from the seller’s door. Cheap for the seller, risky for the buyer.
FCA (Free Carrier) – The seller delivers the goods to a carrier or terminal named by the buyer. Common for containerized cargo.
CIF (Cost, Insurance & Freight) – The seller pays for transport and insurance until the goods reach the destination port — a favorite in traditional sea freight.
DAP (Delivered at Place) – The seller covers transport until the goods arrive at the buyer’s location, but not import duties or taxes.
DDP (Delivered Duty Paid) – The seller takes on everything — freight, customs, and import VAT. Convenient for the buyer, but risky and costly for the seller.
Choosing the right term isn’t just about convenience. It’s about control and compliance. Each choice affects your logistics flow, cost structure, and tax obligations under EU and Dutch law.
Why Incoterms Matter More Than Ever
In today’s fast-changing global trade environment — with Brexit adjustments, new EU VAT rules, and stricter customs checks — Incoterms are the anchor that keeps transactions clear and compliant.
For example, under the Union Customs Code (UCC), the Incoterm you choose affects your customs declaration responsibilities. Misunderstanding your role can lead to delayed clearances or even non-compliance penalties.
At HanPort Logistics B.V., we help our clients translate legal text into practical workflows. Our teams ensure every contract, invoice, and customs entry uses the right Incoterm — not just what “sounds right,” but what’s legally and operationally correct.
Common Mistakes (and How to Avoid Them)
Even experienced traders get tripped up by Incoterms. Here are some pitfalls we often help clients fix:
Using outdated terms: “FOB” for container shipments, for example, can cause confusion; “FCA” is the correct modern term.
Not matching the term with the Incoterm location: It’s FCA Rotterdam Terminal, not just FCA Rotterdam.
Ignoring insurance coverage: Under CIP, sellers must provide insurance with higher coverage (Clause A) since 2020.
Assuming DDP means “problem-free”: It can actually create hidden VAT and tax complications in the EU.
Understanding these nuances prevents headaches later — and that’s where good logistics partners make the difference.
The HanPort Approach: Simplicity Meets Precision
At HanPort, we believe global trade shouldn’t feel like legal gymnastics. Our compliance team provides clear, bilingual guidance to clients across Europe and Asia, ensuring every shipment is fully aligned with Incoterms, customs codes, and tax laws.
We combine practical know-how with digital efficiency. Our systems automatically align Incoterms with shipment data and customs filings — minimizing human error and maximizing transparency.
Whether you’re a Dutch exporter sending machinery to China or an Asian manufacturer delivering to the EU, we make sure every term, line, and clause works in your favor.
Final Thoughts
Incoterms might seem like a few small words — but they carry enormous meaning. They define trust, responsibility, and collaboration in global trade.
As someone who’s worked on both sides of the world, I see Incoterms not just as rules, but as a shared language of logistics — one that connects cultures, markets, and people.
At HanPort Logistics, we speak that language fluently — and we help our partners do the same. Because understanding Incoterms isn’t just good practice. It’s smart business.
HanPort Logistics B.V.
Delivering trust. Moving value.