OVERVIEW OF INCOTERMS 2020: MASTER THE RULES & OPTIMIZE SOLUTIONS WITH SONGWIN LOGISTICS

In international trade, barriers such as language, culture, and legal systems between countries pose significant challenges. To address these issues, Incoterms were created as a “common language,” enabling buyers and sellers to clearly understand their respective responsibilities.

Currently, Incoterms 2020 is the latest version widely applied worldwide. Misunderstanding or selecting the wrong Incoterms can result in substantial financial losses and increased risks for businesses.

1. What is Incoterms 2020 and what problems does it solve?

Incoterms (International Commercial Terms) is a set of international trade rules published by the International Chamber of Commerce (ICC). The Incoterms 2020 version officially came into effect on January 1, 2020, with updates that better reflect modern logistics practices.

When incorporated into a sales contract (e.g., FOB Cat Lai Port, Incoterms 2020), these rules clearly define three key elements:

• Responsibilities: Who handles transportation? Who manages export/import customs clearance? Who arranges insurance?
• Costs: Allocation of expenses such as handling charges, freight, duties, etc.
• Risk Transfer: The exact point at which the risk of loss or damage shifts from seller to buyer

2. Classification of the 11 Incoterms 2020 rules

Similar to the 2010 version, Incoterms 2020 retains 11 rules, with some refinements (e.g., DAT renamed to DPU, higher default insurance coverage for CIP). These are divided into two groups based on transport modes:

Group 1: Applicable to ALL modes of transport

(Sea, air, road, rail, and multimodal transport)

• EXW (Ex Works): Minimum responsibility for the seller
• FCA (Free Carrier): Delivered to the carrier
• CPT (Carriage Paid To): Freight paid to destination
• CIP (Carriage and Insurance Paid To): Freight and insurance paid (Institute Cargo Clauses A)
• DAP (Delivered At Place): Delivered at destination (unloaded by buyer)
• DPU (Delivered at Place Unloaded): Delivered and unloaded at destination
• DDP (Delivered Duty Paid): Maximum responsibility for the seller (all duties paid)

Group 2: Applicable ONLY to SEA and inland waterway transport

• FAS (Free Alongside Ship): Delivered alongside vessel (commonly for bulk or oversized cargo)
• FOB (Free On Board): Delivered on board the vessel
• CFR (Cost and Freight): Cost and freight included
• CIF (Cost, Insurance and Freight): Cost, insurance, and freight included

3. Managing Incoterms risks effectively with Songwin Logistics

While the theory may seem straightforward, businesses often face difficulties in practice.
How can you negotiate the best freight rates when selling under CIF terms?
How do you handle customs procedures when purchasing under EXW from an unfamiliar market?

That’s when you need a knowledgeable logistics partner like Songwin Logistics.

About Songwin Logistics

We are proud to be a trusted provider of international transportation and customs clearance solutions. Understanding the complexities of global trade, Songwin Logistics is not just a freight forwarder—we are your strategic partner in optimizing costs and minimizing legal risks.

Our Key Services

• International Freight Solutions: Competitive ocean freight (FCL/LCL) and air freight across Asia, Europe, the U.S., and more—empowering you to confidently negotiate under C (CFR, CIF) and D (DAP, DDP) terms.
• Full-Service Customs Clearance: Fast and efficient import-export procedures, handling licenses, C/O, and specialized inspections.
• Domestic Trucking: A diverse fleet ensuring seamless connectivity from factory (EXW) to port (FOB) and beyond—safe and on time.
• Trade Consulting: Our experts provide free consultation on selecting the most suitable Incoterms 2020 for each shipment and market, helping you maximize profit margins.

Your shipment’s success is our benchmark. Don’t let the complexities of Incoterms and supply chains slow down your business growth.

👉 Contact us today for a free consultation!

SONGWIN INTERNATIONAL LOGISTICS VIETNAM CO., LTD

📍 Address: 344 Nguyen Trong Tuyen Street, Tan Son Hoa Ward, Ho Chi Minh City, Vietnam
📞 Hotline (24/7): +84 83 681 3969 - +84 373 262 105
📧 Email: Sales2@songwinlog.com

Songwin Logistics – Trust Builds the Brand, Professionalism Drives Success.