OPINIO
Trade4go
Jul 29th, 2025
Original content
Host: Mzingaye Ndubiwa - Global Market Analyst - (South Africa)
Presenter: Alper Akkurt - Global Supply Chain Manager (Türkiye)
Speakers: Kevin López - Assistant Manager (Colombia), Wanjugu Gatheru - Business Development Representative - (Kenya), Ben Lategan - Senior Market Analyst - (South Africa)
Agenda:
Handling international trade requires a clear understanding of Incoterms, the internationally recognized standards that define the precise responsibilities between buyers and sellers. More than just contractual jargon, these terms are vital risk management tools that dictate who pays for what, where risk transfers, and what obligations each party holds. The 2020 rules reflect modern trade realities with key updates, including the renaming of Delivered at Terminal (DAT) to Delivered at Place Unloaded (DPU) for broader application and adjustments to insurance requirements for Carriage and Insurance Paid To (CIP). However, common mistakes, such as using the wrong term for a specific transport mode or overlooking the practical implications of terms like Ex Works (EXW) and Delivered Duty Paid (DDP), can result in significant financial losses, customs delays, and legal disputes. As seen in real-world cases, choosing Incoterms based on price alone without considering the transfer of risk can undo an otherwise profitable deal, making a practical understanding of these rules essential for anyone involved in global commerce.
Figure 1. Incoterms Cost and Risk Allocation Chart
Source: Tridge
In 2025, the logistics industry faces major hurdles, including volatile freight costs, persistent port congestion, and rising insurance premiums driven by geopolitical disruptions in key maritime channels, such as the Red Sea. In response, a strategic pivot is underway, with businesses actively rerouting trade through emerging corridors in Africa, Southeast Asia, and Mexico, and utilizing multimodal options, such as the China-European Union (EU) rail. Successfully navigating this new terrain hinges on technology. Game-changing tools that offer real-time, end-to-end visibility and Artificial Intelligence (AI)-powered predictive analytics are now necessities. By integrating these technologies, companies can move from reactive firefighting to proactive planning, optimizing routes, securing transactions, and ensuring that smart, data-driven coordination becomes the cornerstone of their supply chain strategy. According to
The Tridge Monthly Outlook data, which showcases the trend of the Freightos Baltic Index. A key benchmark for global container freight rates illustrates significant volatility and sharp increases in shipping costs. This reflects the impact of ongoing port congestion, equipment shortages, and geopolitical disruptions, such as the Red Sea crisis, as mentioned above.
Similarly, Tridge services, such as Tridge Eye for real-time visibility, Tridge Pay for secure transactions, and AI-powered analytics for predictive insights, articulate the proposed solution, demonstrating how technology and coordinated services can create a resilient, transparent, and efficient supply chain.
Figure 2. Freightos Baltic Index Trend
Sources: Tridge
Figure 3. Tridge’s Role in Supply Chain Visibility
Source: Tridge
During the panel discussion, speakers Wanjugu Gatheru, Kevin López, Alper Akkurt, and Ben Lategan explained common mistakes businesses make when selecting Incoterms, like mismatch between the Incoterm and the mode of transport, and assuming CIF (Cost, Insurance, and Freight) insurance covers the entire journey, provided real-world examples, and discussed the role of technology in changing logistical planning, costs, and risks for shipments.
On the question about the single most common, and costly mistake businesses make when selecting Incoterms for their sales contracts Tridge panelists Akkurt, López, Gatheru, and Lategan made a suggestion that a fundamental misunderstanding or misapplication of Incoterms often stems from a lack of communication between sales and logistics departments. This error manifests in several critical ways, primarily by selecting a term that is inappropriate for the mode of transport, such as using the sea-freight-specific terms FOB (Free On Board) or CIF for containerized or air shipments. This creates a dangerous "risk gap," leaving goods uninsured and liability unclear if they are damaged or lost in a terminal before being loaded onto the vessel. The correct term in such cases is often FCA (Free Carrier), which aligns the transfer of risk with the physical handover of goods to the carrier. Furthermore, businesses frequently confuse the transfer of risk with the transfer of legal ownership, as Incoterms only govern the former. Many companies default to familiar terms like CIF without fully understanding their limitations, such as providing only minimal insurance coverage that terminates at the destination port, leaving them vulnerable to unexpected costs resulting from delays, spoilage, or damage during inland transit.
Moving on to the second question regarding the real-world examples of choosing between two different Incoterms (e.g., FOB vs. CIF), Tridge speakers noted that the choice between Incoterms can significantly impact a company's logistical planning, costs, and risk profile, effectively transforming its role from a simple producer to a full-service logistics manager. Lopez described a Colombian coffee exporter that used CIF for a shipment to New York, which resulted in the buyer facing unexpected terminal handling fees and demurrage costs. Switching to FOB on subsequent shipments empowered the buyer to control their logistics and eliminated these surprise charges. An example from Gatheru involved a Kenyan fruit exporter whose CIF insurance failed to cover spoilage caused by shipping delays, a risk that the buyer would have assumed under FOB terms.
The contrast is particularly stark when comparing different products from the exact origin. Lategan stated that Shipping wine under FCA terms limits the seller's risk to their local port, whereas shipping perishable fresh fruit under DAP (Delivered At Place) makes the seller responsible for the entire cold chain journey. This includes costly real-time monitoring and comprehensive insurance, where a single delay could eradicate the whole profit margin. These cases highlight how Incoterms decisions directly dictate cost allocation, risk exposure, and the level of control each party has over the shipment.
Finally, the Tridge experts shed some light on how technology, from real-time tracking to data analytics, changes the way businesses can manage their shipments and mitigate the risks outlined in their chosen Incoterms. Technology is fundamentally transforming how businesses manage Incoterms-related risks by enabling a shift from a reactive to a proactive and predictive approach. Real-time tracking, powered by Global Positioning System (GPS) and Internet of Things (IoT) sensors embedded in smart containers, provides unprecedented end-to-end visibility. This allows both buyers and sellers to monitor not only a shipment's location but also its internal conditions, such as temperature and humidity. This stream of data creates a verifiable, tangible record that can pinpoint precisely when and where damage occurred, thereby clarifying liability according to the agreed-upon Incoterms’ risk transfer point. Beyond simple tracking, advanced data analytics and AI-powered platforms are now offering predictive insights. By aggregating data from carriers, ports, weather systems, and geopolitical events, these tools can forecast potential disruptions, allowing businesses to proactively reroute shipments, manage customs clearance, or select a more strategically advantageous Incoterm from the start. This data-driven foresight enhances accountability, minimizes financial exposure, and transforms static contractual clauses into dynamic tools for agile supply chain management.
Click here to view the webinar recording, or click here to see the presentation slides from July Webinar.
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