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In this article, we will explore the importance of Incoterms in the freight quotation process in partnership with an NVOCC. Using practical examples, we will address the reasons why it is necessary to quote with the correct Incoterms. In the following topics, we will explore the impacts of a quote without clear information regarding Incoterms, addressing the main challenges and consequences that may arise throughout the transportation and logistics process. We will analyze how the lack of adequate definition of Incoterms can generate unexpected costs, cargo blocking, delays and affect the reputation of the freight forwarder or agent who contracted the transportation. It is essential to understand the importance of Incoterms in the quotation and ensure their correct application for a successful and smooth negotiation in international trade. What are incoterms and what is their importance in the quotation? Incoterms are terms that define the rights and obligations of buyers and sellers in international sales contracts. They clearly establish the costs, risks and responsibilities involved in the transportation and delivery of goods. These terms are widely used in the international trade industry to avoid ambiguities and ensure that all parties involved have a common understanding of the agreed conditions. Understanding the relevance of these terms and using them appropriately in quotations is essential to ensure clarity, efficiency and security in operations. Cost Distribution: Incoterms are, in essence, the benchmarks for the distribution of costs in an import or export process. They determine at which stage each value will be applied, whether it will be the responsibility of the importer or the exporter. Point of Transfer of Risk: The moment at which the goods are delivered by the exporter is crucial. From this point on, it is determined who assumes the risks related to transportation and other adversities that may arise. The Incoterm chosen will determine at what point, for example, the "shipper" (or "exporter") ceases to be responsible for the cargo and delivers it to the "consignee" (or "importer"). Transportation Risk: We cannot disregard the issue of transportation risk. Incoterms specify precisely at what point in the transaction this risk is transferred. Therefore, when preparing a quote, it is extremely important to define which Incoterm will be used to clearly determine the extent of the responsibility of each party involved. When preparing a quote, Incoterms are essential to determine the international costs and services associated with the transaction. However, it is important to emphasize that the negotiation of Incoterms is carried out between the end customers, that is, the importers and exporters. A NVOCC, due to its neutrality, does not have access to the specific details of the agreement between the parties. Therefore, it is essential that the freight forwarder or broker be able to provide the necessary information about the costs and responsibilities agreed between the end customers. In maritime transport, the most commonly used Incoterm is FOB (Free on Board), which indicates that the seller is responsible for transport and costs until the moment the goods pass the ship's rail at the port of embarkation. A lack of clarity regarding the Incoterm used in the quote can lead to unexpected costs during the process of transporting and delivering the goods. Therefore, it is essential that all parties involved pay attention to the details and ensure that the terms are defined accurately and understood by everyone. In the specific case of Brazil, it is important to mention that the country does not accept the Incoterm DDP (Delivered Duty Paid) for imports due to tax issues. Therefore, when preparing a quote involving Brazil, it is essential to consider this information and use other appropriate terms. Impacts of a quote without clear information regarding incoterms A quote without clear information regarding Incoterms can have significant impacts on the entire transport and logistics chain. If a problem occurs at this initial stage, all subsequent stages of the process will be affected. Below are some of the main impacts resulting from the lack of or divergence of Incoterms in the quote: Change in costs and fees Accurate costing in a quote is an essential component of decision-making. Incoterms, which define responsibilities and costs, are a fundamental part of this equation. And when information relating to them is missing or inaccurate, the consequences can be significant. Many freight forwarders or brokers, when starting to search for quotes, do not provide a clear definition of the Incoterm to be used. Sometimes they simply seek an estimate based on a future shipment without concrete details such as the packing list, proforma invoice or the contractual terms between importer and exporter. In most cases, the simplest terms, such as FOB or CFR, are considered, as they represent the most basic “Port to Port” options. However, this approach may not reflect the reality of the proposed operation. The main impact of this lack of precision is clear: without knowing the actual Incoterm, an accurate cost estimate cannot be provided. This can lead to unpleasant surprises later in the process, resulting in unexpected changes in costs and fees. Failing to consider a complementary service Without a clear view of the Incoterms involved, there is a risk of overlooking essential services that may be crucial to the successful operation of an export or import. Often, when receiving an initial estimate based on a simplified term, such as Port to Port, the perception may be wrongly limited to the main transport – be it sea or air. However, this is only a fraction of the complete logistics process. Without clarity on the Incoterms, there is a risk of not considering complementary services that are vital to the flow of the operation. These may include: Collection: removal of the goods from the seller's location to the shipping point. Customs clearance: all processes related to customs clearance, which vary according to the regulations of each country. Insurance: The necessary protections for the goods throughout their transit, which may depend on the Incoterm chosen. These, among other services, are often essential, depending on the Incoterm in question, and neglecting them can result in disruptions, delays and additional costs. Load blocking Without clear Incoterms information, problems can occur when the cargo is loaded. Port authorities may require specific documents or evidence of liability that were not included in the quote. This can lead to the cargo being blocked at the port and significant delays in the transportation process. Incoterms are designed to clarify the responsibilities of each party involved in a transaction. For example, under certain Incoterms, the exporter is responsible for covering all costs and ensuring that the cargo is transported until delivery to the importer. If there is a misunderstanding or incorrect information about which Incoterm was agreed, the cargo may encounter problems upon arrival at its destination. The destination port or airport may charge the importer, which may refuse to pay, claiming that these costs were not their responsibility under the agreed terms. When cargo is held up due to misunderstandings or lack of clarity about Incoterms, costs can quickly accumulate. In addition to the fees associated with storing the cargo, additional costs may arise due to delays in the process. This situation can be further complicated if there is no clear understanding of who should bear these additional costs. Negative impact on the image of the freight forwarder or agent If a freight forwarder or agent fails to provide the correct Incoterms information in the quote, this can have a negative impact on the relationship with their client. Incorrectly purchasing a transport service due to unclear terms can result in problems and misunderstandings, which can affect the trust and image of the freight forwarder or agent. It is essential that all parties involved are aware of these details and ensure that the terms are defined correctly from the outset in order to avoid problems and ensure efficient and smooth negotiations in international trade. Serious problems that can occur (with a real example) Misunderstanding or misunderstanding Incoterms can have serious financial and operational consequences. Let's look at a real case: a Brazilian client exported to the US under the Incoterm "FOB", limiting its liability to the shipment of the goods. However, it informed its American client that the operation was "DDU", where it assumed liability until final delivery, excluding taxes. This ambiguous approach aimed to take advantage of tax incentives in Brazil. However, the situation became complicated when the cargo was stolen at a terminal in New York. The insurer, based on the "FOB", refused to pay compensation, while the importer, based on the "DDU", insisted on coverage and did not pay for the goods or the freight. A lawsuit was filed in the US and the exporter had to hire lawyers to try to be compensated by the terminal where the theft occurred. The loss from this shipment? More than R$1,000,000.00!!! This case highlights the need for clarity when defining Incoterms. Ambiguities or misunderstandings can lead to legal disputes and financial losses, highlighting the importance of all parties being aligned and aware of their roles and responsibilities. Non-existent incoterms that should disappear from your vocabulary Over time, some expressions have emerged that, while popular in some industry conversations, are technically non-existent or contradictory. Let’s explore some of these expressions and explain why they should be eliminated from your trading vocabulary, especially in quoting: FOB Prepaid "FOB" (Free on Board) refers to the seller delivering the goods on board the vessel at the port of shipment and the international freight being the responsibility of the buyer, i.e. collect (paid at destination). However, the term "prepaid" is not a recognized part of the FOB Incoterm, as it means that the freight would be prepaid (paid at origin). If the freight needs to be prepaid, CFR can be used, but be careful, because this incoterm involves other responsibilities. FCA with Collection The term "FCA" (Free Carrier) means that the seller makes the goods available at its headquarters or transports them to the location indicated by the importer. It is important to know where the cargo will be made available, which could be at the port or airport itself, for example. Adding "with collection" is redundant and may create confusion, since collection is implicit in the FCA. Remember that in the FCA, the importer is the one who carries out the customs clearance. Tax Free DDP "DDP" (Delivered Duty Paid) implies that the seller delivers the goods to the buyer, paying all customs duties. Therefore, "DDP without duty" is contradictory, as the core idea of ​​DDP is that all costs and fees are covered, including taxes. DAP Collect "DAP" (Delivered At Place) indicates that the seller must arrange international transport and take the goods to the place agreed with the buyer, but the clearance at the destination and unloading of the goods are the responsibility of the buyer. If the seller needs to pay the freight, it will be prepaid (paid at origin) and no collect (paid at destination) is applicable. FOB Air "FOB" is a term used for ocean freight. Using it in the context of air freight is incorrect and can lead to misunderstandings. In air freight situations, terms such as "FCA" or "EXW" are more appropriate. CIF without Insurance "CIF" (Cost, Insurance, and Freight) explicitly includes the cost of insurance in the price of the goods. Thus, "CIF without insurance" is a contradiction in terms. After all, how do you find the right incoterm? How can a freight forwarder or broker ensure that he or she has the correct Incoterm before requesting a quote with an NVOCC? The answer often lies at the beginning of the negotiation process. When entering into an international commercial transaction, the exporter will usually send the importer a “proforma invoice”. This document is a preliminary sales agreement and usually includes essential details about the proposed transaction. Valuable tip: The proforma is the key to finding the correct Incoterm. Its structure contains a wealth of information related to the sales agreement, including, among others, the agreed Incoterm. This specification will determine the division of responsibilities and costs between the exporter and the importer. When the quote is made with the correct Incoterm, the main beneficiary is the freight forwarder or broker, as they will no longer face the potential problems already highlighted here. Conclusion In this article, we highlight the importance of Incoterms in the quoting process. They play a key role in defining the rights, responsibilities and costs between buyers and sellers in international trade. For freight forwarders and freight forwarders, it is crucial to have accurate access to Incoterms information when quoting services. This ensures accurate negotiation and avoids unexpected costs, cargo hold-ups, delays and reputational damage. The practical examples have demonstrated how a lack of clarity in Incoterms can have negative impacts, such as changes in costs, fees, cargo hold-ups and delays in the transportation process. As a reliable and capable partner, Allink stands out as an experienced NVOCC capable of meeting the needs of freight forwarders and freight forwarders. With precise knowledge of Incoterms, Allink ensures complete quotations and efficient international services. Therefore, when requesting a quote, it is essential to understand the importance of Incoterms and to rely on a reliable partner like Allink, which understands the relevance of these terms and guarantees a transparent and hassle-free negotiation.