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Group F is based on the principle that the main carriage (i.e., international transport) is not paid for by the seller.
While these rules give the buyer full control over logistics costs, they conceal critical junctures where a procedural error can result in substantial financial losses.
Group F Incoterms 2020 – Key Responsibilities:
Transport (Organization and Costs):
- Seller: Is responsible for domestic transport in the country of dispatch. Must deliver the goods to the carrier or to the designated loading point (in the case of FCA), alongside the ship (FAS), or physically on board the vessel (FOB).
- Buyer: Bears the full cost and organizes the main international transport. Contracts and pays for sea freight, road freight, or air transport. Is responsible for logistics from the moment of taking over the cargo at the initial point until it reaches their own warehouse.
Transfer of Risk:
- Critical point: The risk of damage to or loss of goods passes to the buyer at a precisely defined moment of physical handover of the cargo:
- FCA: At the moment the goods are handed over to the first carrier nominated by the buyer. If loading takes place at the seller's premises, the seller is responsible for loading the goods.
- FAS: At the moment the goods are placed alongside the ship at the quay in the designated port.
- FOB: At the split second when the goods are safely placed on board the vessel nominated by the buyer at the port of loading.
Customs Clearance:
- Export clearance: 100% the seller's obligation and cost. This is a key difference compared to EXW. The seller must legally export the goods, declare them to the authorities, and is responsible for obtaining the export document (e.g., IE599 message).
- Import clearance: 100% the buyer's obligation and cost. The buyer is responsible for all formalities, customs duties, taxes, and the release of goods for circulation in the country of destination.
The Myth of Insurance in Group F: Obligation or Option?
According to the official interpretation of the International Chamber of Commerce (ICC):
1. No mandatory insurance: None of the Group F rules impose a legal obligation to take out an insurance policy.
2. Fully optional: Purchasing a cargo insurance policy is entirely voluntary.
3. Practical recommendation: Since the buyer is responsible for the goods throughout the entire sea or air journey (from the moment of loading at the port of dispatch), it is in their interest to independently secure the cargo. The seller is only obliged to provide the buyer – at their request and expense – with the necessary information to obtain insurance.
Group F Overview: Pros and Cons
Export Perspective (Sales on FCA / FAS / FOB)
Pros:
- Tax control: The seller handles the export customs clearance themselves. They have direct influence over the customs agency and immediately receive documents entitling them to apply the 0% VAT rate.
- No risk associated with fluctuations in international sea or air freight rates – these costs are borne by the buyer.
- The risk of damage to goods at sea or in the air does not burden the exporter's balance sheet.
Cons:
- Operational risk during loading: Under FCA (at the factory) and FOB rules, the seller is responsible for physically placing the goods on the means of transport. Damage to a pallet during container loading is at the seller's expense.
- Dependence on buyer's punctuality – if the buyer fails to provide the vessel or container on time, the seller bears the costs of storing the goods at the port.
Import Perspective (Purchasing under FCA / FAS / FOB)
Pros:
- Full independence and elimination of the risk of hidden margins being imposed by a foreign supplier in freight costs (a common issue with CIF/CFR terms).
- Freedom to choose a trusted logistics operator who represents the importer's interests, not the shipper's.
Cons:
- Necessity of independently managing transport risk from the moment of loading at the port of origin.
- Responsibility for demurrage costs or general average on the ocean vessel.
Why is FOB the most recommended rule for sea import?
Despite the necessity of assuming risk for the goods already at the port of loading, the FOB term is unequivocally the most recommended delivery basis in sea freight for any importer. Four key management factors determine this:
1. Full control over transport costs
The buyer independently negotiates the sea freight rate with their forwarder. This avoids situations typical of CIF terms, where a foreign seller (e.g., from Asia) includes a transport cost in the goods' price that is significantly higher than the current market rate.
2. Control over delivery time and conditions
In agreement with the logistics operator, the importer decides which shipping line to use and under what conditions. They have a direct influence on transit time, avoiding risky transshipment ports, and aligning sailing schedules with their own production or sales plans.
3. Transparency of costs at the port of destination
When purchasing under FOB terms, the importer knows the local port costs (THC, documentation fees, container unloading costs) and potential container demurrage/detention rates in advance. By controlling these conditions, they eliminate the financial risk associated with the monopolization of port services by an agent designated by the seller.
4. Secure insurance and local claims settlement
Under the FOB formula, optional cargo insurance is arranged in the importer's country. This is a fundamental advantage. In the event of a maritime casualty, cargo damage, or container damage during a storm, claims settlement and compensation payment occur locally, with a local insurer, and based on transparent national law. The importer avoids lengthy, often doomed-to-fail processes with foreign insurance companies chosen by the exporter.
If you wish to consult on delivery terms (FOB, FCA, EXW), cargo insurance, and the optimal sea freight cost for your business: Contact our experts and review your delivery terms.
Official source: Training materials and official interpretation of the International Chamber of Commerce (ICC) – Incoterms 2020.