Incoterms and shipments

When you create a shipment, you can specify which Incoterms to use. If no Incoterms is selected, then it is assumed that Incoterms do not apply to this shipment.

Incoterms refer to what costs are to be included.

For example: CFR refers to Cost and Freight, and CIF refers to Cost, Freight and Insurance.

Note: Transportation Manager only identifies which Incoterms is to be quoted and who is responsible for meeting the costs of freight, the buyer or the seller. Transportation Manager does not perform any other functions relating to Incoterms.

The combination of the buyer/seller designation and the Incoterms shipping location determines whether the shipment leg is Collect or Prepaid.

The following table indicates the freight terms for shipment legs based on the combination of the Incoterms shipping location and buyer or seller designation.

Incoterms shipping location	Buyer/Seller designation	Freight terms
Origin	Seller	Collect
Origin	Buyer	Prepaid
Destination	Seller	Prepaid
Destination	Buyer	Collect
Midpoint	Buyer	Collect for shipment legs up to the midpoint; Prepaid for all shipment legs after the midpoint
Midpoint	Seller	Prepaid for shipment legs up to the midpoint; Collect for all shipment legs after the midpoint

For example:

If the Incoterms shipping location is the shipment origin and the Buyer/Seller Designation field value is Seller, the following conditions are applicable:
- The seller pays the freight of the shipment up to the Incoterms shipping location, which is the shipment origin location.
- The buyer pays the freight of the shipment from the shipment origin to the shipment destination.
- The buyer pays the entire freight for the shipment. So, the freight term is Collect.
If the Incoterms shipping location is a midpoint and the Buyer/Seller Designation field value is Buyer, the following conditions are applicable:
- The buyer pays the freight for the shipment up to the Incoterms shipping location, which is the midpoint.
- The seller pays the freight for the shipment from the midpoint to the shipment destination.
- The responsibility for the freight and risk on shipment is transferred from the buyer to the seller at the midpoint. So, the freight term is Collect up to the midpoint and Prepaid from the midpoint.