Incoterms group C

Many importers prefer to purchase goods on CPT, CIP, CFR or CIF as per Incoterms 2020 or 2010, i.e. with transport costs included in the price from the seller, thus avoiding commitment to transport procurement. Also, avoiding the risk of eventual transport cost increase after the sale-purchase agreement has been concluded. These two main advantages are important, but insufficient to compensate for the significant disadvantages of Incoterms group C for the buyer.

An important disadvantage for the buyer is the lack of control over the transportation process and often the lack of up-to-date information about the estimated time of arrival of the shipment. Another, far more significant, disadvantage is the place and time of risk transfer from the seller to the buyer. Some traders mistakenly make an analogy between paying freight and bearing the risk for the cargo during the transport. Under Incoterms group C, there is a discrepancy between the time and place of risk transfer and the time and place to which carriage is paid by the seller. Risk in group C is transferred identically as in group F. That is, broadly speaking, at the time and place of surrendering the goods by the seller/consignor to a carrier or a freight forwarder with some specifics related to FCA, FAS and FOB terms. In case of damage during transport, the buyer should set up a claim directly to the carrier or the freight forwarder who has issued the shipping document. Given the lack of special contractual relationship between the parties (outside of carrier-consignee relationship under the shipping document), the chances of a successful claim settlement for the buyer are minimal. Besides, trying to achieve the lowest shipping costs included in an already negotiated price, the seller may assign the transport to a substandard carrier or freight forwarder, thus increasing the risk of cargo damage, loss or other transport related problems.

And last but not least, the existing vicious practice (mainly for waterborne shipments) of obtaining a clean shipping document against a Letter of Indemnity from the shipper is more feasible when the contract of carriage is concluded by or on behalf of the shipper.

Therefore, the party paying and accordingly managing the transport under the sales contract is generally in a more favorable position, and in this regard the recommendations to traders are to try to buy without transport included and sell with transport included. This will, of course, cost them a bit more effort in the negotiations, as the opposite party will probably seek to achieve the same. But merchants who succeed in taking over the delivery will have the ability to manage the transport and related risks as well as they could achieve better financial results thanks to the transport costs themselves.