An Incoterm decides who arranges and pays for each stage of a shipment and where the risk passes from seller to buyer. It does not decide who owns the goods.
1. Who will arrange the main transport?
Under terms such as EXW and FCA the buyer organises the main carriage. Under CFR, CIF, CPT and CIP the seller does. Decide who has the better rates and the better control over the route.
2. Where do you want the risk to pass?
Risk passes at different points for each term, from the seller's premises to the buyer's door. The earlier it passes to the buyer, the earlier you need cargo insurance.
3. Who clears customs?
Export clearance and import clearance are assigned differently by each term. DDP puts import clearance on the seller, while most other terms leave it with the buyer. Make sure the party responsible knows the local rules.
4. Is the term right for the mode of transport?
FAS, FOB, CFR and CIF are meant for sea and inland waterway transport. For containers and multimodal shipments, FCA, CPT, CIP, DAP and DDP are usually the better match.
5. Is the place named precisely?
Always name the exact place or port after the term, for example FOB Istanbul or DAP a named warehouse. A vague place is a common source of disputes. Incoterms do not replace the sales contract, so write the term into it.