Incoterms for Sea Freight and Ocean Transport (2022)

Incoterms for sea freight: which incoterm should you choose in 2022

When drafting an international trade contract, it is essential to know which ocean and sea freight Incoterms are the most beneficial for you and your trade partners. The sea freight Incoterms were updated in 2020 by the ICC. Although there are 11 different Incoterms in total, 4 of them apply only for sea shipments. Learn more about the Incoterms for sea freight, the changes made to the sea freight Incoterms in 2020 and get ready to ship your goods internationally more effectively.

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Which incoterms are only for sea shipments?

Out of the 11 Incoterms, there are 4 that are exclusive for sea and ocean freight: FAS, FOB, CIF and CFR. These Incoterms can only be used for sea shipments, and they describe the conditions in which the cargo is loaded and unloaded on a vessel, who is responsible for insurance and customs clearance and the conditions of maritime transport.

Sea freight is one of the most popular methods of transport for international trade, so both sellers and buyers should be familiar with the Incoterms for sea and ocean Freight.

SEA FREIGHT INCOTERMS

Incoterms for sea freight: essential information

We have prepared an overview of the most common Incoterms for sea freight. Please check our extended pages to get a deeper insight and learn how to choose the best sea freight Incoterm for you.

FAS or Free Alongside Ship on ocean freight

FAS is one of the most popular among the 4 Incoterms for sea shipments. Free alongside ship means that the seller is obliged to clear the goods for export and leave them at the port of origin, while the buyer is responsible for loading, transporting and unloading the goods.
Read more about FAS

FOB or Free On Board on ocean freight

This is probably the most used Incoterm for sea freight. Under FOB, the seller is obliged to leave the goods free on board of the vessel at the port of origin, packed and cleared for transport. The buyer is responsible for transporting and for the insurance of the cargo from the moment it is loaded on the boat.
Read more about FOB

CFR or Cost and Freight on ocean freight

The CFR Incoterm for exporting or importing goods by sea mandates that the seller delivers the goods properly packaged and cleared for export and loads them on the selected vessel. The seller also pays for transport to the destination port.
All about CFR

CIF or Cost Insurance and Freight on ocean freight

The CIF incoterm establishes that the seller has to deliver the goods safely and properly packaged to the vessel at the export port, pay for the freight transport to the destination port and the customs clearance.
More about CIF

CONTAINER SHIPPING

Incoterms for container shipping by sea freight

Following the ICC recommendations, the Incoterms for sea shipments are meant for goods that are transported in bulk and should not be used for containerised cargo. This is because, in this case, the seller does not load the cargo onto the vessel but leaves the container at the designated point in the port of origin, making it difficult to establish ownership and liability when loading and unloading the cargo on the ship itself. Also, containerised cargo goes unchecked until it arrives at the destination, which makes it harder to determine when the damages occurred.

The ICC recommends using the multimodal Incoterms for container shipping by ocean freight to avoid miscommunication:

Sea freight Incoterms

FOB – Free on Board: the cargo has to be cleared for export and be ready for transport on board the selected vessel or ship.
CFR – Cost and Freight: the seller delivers the goods properly packaged and cleared for export and loads them on the selected vessel or ship.
CIF – Cost Insurance Freight: the seller pays for transport and insurance, and must load the goods, packaged and cleared for export, on board the selected vessel or ship.

Incoterms for container shipping

FCA – Free Carrier: the cargo has to be cleared for export and ready to transport at a designated location (hub, port or warehouse).
CPT – Carriage Paid To: the seller delivers the goods properly packaged and cleared to a selected location (hub, port or warehouse).
CIP – Carriage and Insurance Paid To: the seller pays for transport and insurance and must carry the goods, packaged and cleared for export, to the selected location (hub, port or warehouse).

Even if it is not recommended, there are still many people that use Sea Freight Incoterms such as FOB and CIF for containerised cargo. Regardless of which Incoterms you decide to use, we advise buyers and sellers to agree on the Incoterms and establish responsibilities beforehand.

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Sea and ocean freight incoterms: frequently asked questions

Can I use the ocean freight Incoterms for multimodal trade routes?
Yes, sea and ocean freight Incoterms can be used for multimodal trade when the cargo is transported by sea, ocean or through inland waterways. These sea shipment Incoterms will regulate the cargo transport up to the port of destination.
Can I use sea freight incoterms for air cargo?
Incoterms for sea shipments can be used for sea, ocean and inland waterways (rivers, lakes) exclusively. However, the sea freight Incoterms were changed in 2020 and are updated and adapted regularly, which means they can be interpreted slightly differently in some countries. For example, some traders in the US may use FOB for air cargo. In this particular case, the plane would be the vessel. Both parties are advised to agree on the terms beforehand to avoid miscommunication.
What are the best Incoterms for exporting or importing goods by sea?
All Incoterms for shipping by sea have their advantages and disadvantages for international traders. Buyers are advised to discuss the possible options before choosing the best sea freight Incoterm for them.
As a seller exporting goods, you may want to have the buyer pay for customs clearance if the costs in your country are very high. When importing goods, buyers often choose to book their own freight forwarder (FOB) to have control over the shipping costs.
What sea freight incoterm is better for the buyer?
It depends on the volume, type of cargo and flexibility you want. When importing goods, buyers often choose FOB.
FOB or Free on Board is one of the most popular options because the seller will arrange all local transport on their end and clear the goods for export. This means the buyer does not have to get a quote on the local market. Furthermore, this Incoterm for shipping by sea allows the buyer to choose their freight forwarder, which gives them total control of the freight expenses.
Which Incoterms for sea and ocean freight is the best for the seller?
Sellers often choose the sea freight Incoterm based on the route. For example, CIF is a good option for sellers, as it does not involve a lot of risks and allows them to control the shipping costs until the destination port. This would allow you, as a seller, to choose the most cost-effective and efficient route for you. However, FOB is often the preferred sea freight Incoterm for a seller that does not want to organise the freight transport themselves and is not particularly interested in tracking the cargo. Although this allows the seller to release the responsibility of the cargo to the buyer from the destination port, it also means that the seller will have to bring their cargo to a loading port chosen by the buyer.