Incoterms: why three letters can cost you a lot in industrial sourcing

In industrial sourcing, incoterms are often the detail that gets overlooked – until it becomes expensive.

Your Asian supplier sends you a quote. At the bottom of the document, three letters. These three letters define who pays what, who bears the risk and from which point. There are 11 in total in the Incoterms 2020 version.

But in practice, in Asia-Europe flows, a few of them account for the vast majority of transactions.

Misunderstanding them means exposing yourself to hidden costs, disputes and unpleasant surprises at delivery.

At Castmetal Advanced Services, we work primarily in DDP, and depending on the situation in DAP, FCA or FOB. Here is what these incoterms mean in practice – and why this choice simplifies your life.

Incoterms in industrial sourcing: what are we talking about?

Incoterms – International Commercial Terms – are standardised rules published by the International Chamber of Commerce since 1936. Their latest version, Incoterms 2020, defines 11 rules that allocate between seller and buyer the transport costs, risk transfer, insurance and customs obligations.

What incoterms do not cover: the transfer of ownership, payment terms and the law applicable to the contract. They define only logistical responsibility.

In practice, not all incoterms are equal. And some expose the buyer to risks and costs they had not anticipated.

DDP: the solution we favour

At Castmetal Advanced Services, we work mainly in DDP (Delivered Duty Paid). In practice: we take charge of the entire logistics chain through to delivery at your premises, including customs duties and VAT.

For you, it is the simplest solution. You order your parts and receive them, with no logistics, customs or regulatory steps to manage.

It is also the solution that protects you best. If anything goes wrong in transit, we bear the responsibility – not you.

DAP, FCA, FOB: we adapt to your constraints

Depending on the situation and our clients’ preferences, we can also work in DAP (Delivered At Place). We deliver to the agreed location, but customs duties and VAT remain the client’s responsibility.

Less frequently, we work in FCA (Free Carrier) or FOB (Free on Board) when the client has their own freight forwarder and wants to manage the international freight directly. In FCA, we handle transport to the named carrier and export customs clearance. In FOB, we handle up to loading on board the vessel.

For any other specific requirement, we adapt to the request.

Comparing quotes with different incoterms: the most common trap

Receiving a quote without a clearly defined incoterm, or with a different incoterm from yours, makes proper comparison impossible. You need to reconstruct the total cost: inland transport in Asia, international freight, customs duties, import clearance, final delivery. Not forgetting the total weight and number of parts, which directly influence logistics costs.

Without this reconstruction, the comparison makes no sense. That is why we work systematically on a full-cost basis, so you can make informed decisions.

To go further, read our articles:

→ Total cost of ownership

→ Asia-Europe transport modes

Beyond logistics: regulatory compliance

Choosing the right incoterm also means choosing who bears the regulatory complexity. And that complexity is only increasing.

International sanctions on certain flows or parts, the Carbon Border Adjustment Mechanism (CBAM) and its implications for your imports, export restrictions… all subjects in constant evolution that you do not need to follow when you work with us.

We verify the compliance of every shipment before it departs.

You receive your parts. We handle the rest.