In this blog we discuss the correct choice of INCOTERM that helps your overall expenses during shipment. We will also discuss some real-life example and practical tips for better clarification.
When people do import and export between countries, most of them think about price, quality and shipment time period. But there is one most important thing that is ignored by most of the businesses — INCOTERMS

INCOTERMS means International Commercial Terms. These rules are published by the International Chamber of Commerce (ICC) . These terms explain who iis responsible for what type of charges during the shipping process — like loading, customs clearance, freight charges and unloading.

Choosing the right INCOTERM can make a huge difference in terms of money spent during shipment. Any type of mistake in this can lead you to pay extra, face delays, or even create issues with the seller or buyer. Here are a few key ways in which choosing the correct INCOTERM can reduce overall expenses during shipment:

1. Avoiding Hidden Charges

Many importers end up paying extra because they are not sure who is responsible for what. For example, under CFR, unloading charges are not covered by the seller. But some buyers assume it is included. Later, they get a surprise invoice from the shipping line. By choosing the right INCOTERM and understanding it properly, you can avoid these hidden or unexpected charges.

2. Better Control Over Freight Rates

If you choose terms like FOB, you (the buyer) are in control of the freight booking. You can compare rates from different freight forwarders and choose the most economical one. But in CIF, the seller books the freight, and they may not offer the best rate.

So, if your shipment volume is large or regular, choosing an INCOTERM that allows you to control freight can lead to big savings.

3. Custom Clearance Efficiency

When you handle customs clearance in your own country under terms like FOB or EXW, you can choose a local customs broker who charges less and works faster. If you depend on the seller’s agent (in DDP, for example), the charges may be higher, and there may be delays.

Fast and cheap clearance = saving money + quicker delivery.

4. Avoiding Double Insurance

INCOTERMS like CIF include marine insurance. But if the buyer also buys separate insurance by mistake, that’s double cost. On the other hand, under FOB or EXW, you can choose your own insurer and get better rates.

Proper INCOTERM = one insurance = cost saving.

5. Reducing Port Charges and Demurrage

Port storage charges (also called demurrage or detention) are a big pain for importers. If your INCOTERM is not clear, the shipping line may delay document release. That means your goods sit at the port longer, and you pay high daily charges.

Using an INCOTERM that clearly states who manages documents and clearance helps avoid these delays.

6. Easier Budget Planning

Once you know your responsibilities as per the selected INCOTERM, you can plan your budget better. You know exactly what part of the supply chain you will pay for—no guesswork, no surprises. This helps manage finances more efficiently.

Real-Life Example: How One INCOTERM Saved Lakhs

Let’s take a real-world case.

A business in Mumbai was regularly importing fabric rolls from Turkey. Initially, they were using CIF Mumbai, where the Turkish supplier was booking the freight. Over time, they realised the freight cost was higher than the market rate.

They switched to FOB Istanbul, where they booked the freight themselves using an Indian freight forwarder. The cost per container was reduced  by ₹18,000. They imported 10 containers in a year — that’s a direct saving of ₹1.8 lakhs!

Mistakes to Avoid While Choosing INCOTERMS

Just knowing the names of INCOTERMS is not enough. Many businesses make simple but costly mistakes:

• Not updating the INCOTERMS version (latest is INCOTERMS 2020)
• Thinking all costs are covered under CIF or DDP
• Not clarifying who will pay port handling charges
• Assuming insurance is always covered
• Using the same INCOTERM for all shipments without review

Tip: Always mention the full INCOTERM along with the port name, like “FOB Shanghai Port” or “DDP Bangalore.”

Which INCOTERM Is Best for You?

There is no single best INCOTERM. The “right” term depends on:

• Who has better shipping contacts (buyer or seller)?
• Where is the risk lower?
• Who can handle customs clearance more easily?
• How frequent are the shipments?
• What is the value of the goods?

Here’s a quick idea:

Role of Freight Forwarders in INCOTERMS

Freight forwarders help importers and exporters choose the most suitable INCOTERM based on:

• Cost-benefit analysis
• Shipping frequency
• Nature of goods
• Port handling processes
• Insurance options

They not only arrange transport but also guide you on legal documentation, customs clearance, and end-to-end supply chain support.

Conclusion

Choosing the correct INCOTERM may seem like a small decision. But in reality, it affects your entire international transaction—cost, time, risk, and control.

If you’re an importer or exporter, don’t just go with what the seller suggests. Talk to a freight forwarder, study the INCOTERM that matches your business needs, and decide wisely.

By doing this, you avoid extra charges, improve delivery speed, and most importantly, save a lot of money. In the competitive world of international trade, this small knowledge can give you a big edge.