Incoterms 2020 for Vietnamese sellers: choosing terms that don't cost you

Incoterms are the ICC's rules defining responsibilities between seller and buyer in international transactions. Choosing the wrong term doesn't void a contract, but it can leave you paying costs you never anticipated, or surrender control of your shipment to the buyer's nominated forwarder.

Incoterms 2020 has 11 terms. Seven work for any mode of transport, including containers and multimodal moves; four apply to sea and inland waterway only. The most common trap sits in the C group: the seller pays freight, but risk has already passed to the buyer earlier, right at origin. Paying for transport is not the same as carrying the risk along the way.

The any-mode group:

• EXW (Ex Works): the seller only makes goods available at the premises; the buyer handles everything from there, loading included. Risk passes at the seller's premises. Easy on paper, but you can't control when cargo moves and proving export for a VAT refund gets harder.
• FCA (Free Carrier): the seller hands goods to the buyer's nominated carrier at the agreed point. Risk passes on handover; the buyer pays the main carriage. This is the term ICC recommends instead of FOB when cargo ships in containers.
• CPT (Carriage Paid To): the seller pays carriage to the named destination, but risk passes to the buyer the moment goods reach the first carrier.
• CIP (Carriage and Insurance Paid To): CPT plus a seller insurance duty. Incoterms 2020 lifted CIP cover to the top level (Clause A); risk still passes at handover to the first carrier.
• DAP (Delivered at Place): the seller carries cost and risk until goods sit ready for unloading on the arriving vehicle at destination. The buyer clears import and pays import duty.
• DPU (Delivered at Place Unloaded): like DAP, but the seller must unload to complete delivery. It is the only rule that puts unloading on the seller.
• DDP (Delivered Duty Paid): the seller handles the full journey to the door, including import clearance and import duty at the far end. The heaviest obligation on the seller.

The sea and inland-waterway group:

• FAS (Free Alongside Ship): the seller delivers alongside the vessel at the load port; risk passes there; the buyer pays ocean freight.
• FOB (Free On Board): the seller's duty runs until goods are loaded on board at the load port; risk passes once on board; the buyer pays ocean freight. The most common term for Vietnamese exports, with the buyer booking the vessel through their forwarder.
• CFR (Cost and Freight): the seller pays ocean freight to the destination port, but risk passes once goods are on board at origin. No insurance.
• CIF (Cost, Insurance and Freight): CFR plus seller-bought insurance, but only at minimum cover (Clause C); risk still passes at origin. Many sellers get this point wrong.

Under CIF the seller pays freight and insurance to the destination port, yet risk passes to the buyer the instant the goods are on board at origin.

Selling FOB is simple but hands transport control to the buyer: their forwarder sets the schedule, and any Vietnam-side delay is still blamed on the seller. Selling CIF/CFR lets you choose the vessel, pool volume for better rates, and price freight into your sale. For sellers with steady volume, migrating from FOB to CIF typically improves margin and reduces deadline risk.

• The exact risk-transfer point (named port, named warehouse), never vague wording.
• Who files customs at each end, and who pays specialized inspection fees if they arise.
• DEM/DET free time at destination, and who pays container detention beyond it.

• Assuming an FOB price already covers ocean freight. FOB only runs to the point goods are on board at origin; ocean freight and import-side charges belong to the buyer. Folding freight into an FOB quote quietly eats your margin.
• Treating the "ship's rail" as the FOB delivery point. ICC dropped the "cross the rail" idea back in Incoterms 2010 and replaced it with "on board." Write the contract to the on-board point to stay correct under 2020.
• Accepting DDP without an agent in the import country. DDP pushes all import clearance and import duty onto the seller at the far end; without local law and tax knowledge, cargo stalls and costs pile up.
• Using FOB/CIF for containers. For boxes handed over at a CY/CFS, ICC recommends FCA/CPT/CIP; signing FOB/CIF for containers leaves the yard-to-vessel leg in a grey zone.

Before signing a trade contract with an unfamiliar term, you can send it to Homexim for a quick review. The route desk will point out exactly which costs and risks sit on your side under Incoterms 2020.