How to use Incoterms to your Advantage

Incoterms are a set of 11 internationally recognized rules that define who’s responsible for arranging and paying for transportation between a buyer and seller.

Established in 1936, Incoterms stands for International Commercial Terms. Incoterms aren’t mandatory in international trade but they do make things easier because they clearly define transportation responsibilities, including:

  • Paying for the transportation

  • Coordinating and managing the shipment

  • Purchasing insurance

  • Processing an insurance claim if it arises

  • Shipping documentation

  • Import and export customs clearance

  • Responsibility in case of a non-compliant customs clearance

If you’re an importer, Incoterms gives you transparency and control over your shipments.

There’s a common misconception that if you’re buying goods from an international vendor, having them take care of the shipping will be easier and more affordable. Unless your vendor is a freight forwarder, it’s unlikely they’re an expert in shipping and will manage the shipping themselves. Usually, they hire a third-party freight forwarder and charge an additional markup for the administration time, ultimately increasing your shipping costs.

Taking control of your shipping means choosing the routing, transit time and quality of transportation provider. You can selecta transportation solution that meets your needs; whether that’s speed, cost, accuracy of delivery date or amount of handling.

If you’re importing goods, selecting an Incoterm that puts you control of the shipping, ensures reliable delivery times, helps manage costs and reduces trade compliance risk. It also gives you the option to pickup goods from your vendor and deliver directly to your doorstep.

If you’re an exporter, Incoterms makes it easy for international customers to buy from you.

Have you ever used Amazon Prime? The free two-day shipping has raised the bar for consumer expectations and permanently changed the retail industry. Widely recognized as “The Amazon Effect,” this term refers to customer expectations that all packages will arrive quickly and shipping is cheap. This mindset shift has crept into B2B industries, with business customers expecting goods quickly, affordably and hassle free. 

If you’re exporting goods internationally, you need to make the shipping experience as easy and seamless for your customer as possible. Leveraging the right Incoterm can transform logistics into a competitive advantage.

The 11 Incoterms vary in how much of the shipping you will cover. If you’re only getting the goods halfway to the customer, they’ll be required to manage the remainder of the transportation. Mistakes often happen in the handoff and your customer might experience increased paperwork, shipment delays and unexpected costs, which negatively affects their buying experience with you. Selecting the right Incoterm can create a seamless customer experience.

Whether you’re importing or exporting, understanding Incoterms will help you make informed shipping decisions so you can transform logistics into a competitive advantage. For a comprehensive breakdown of the 11 Incoterms and how to choose the best one for your shipments, sign up for the Incoterms 101 webinar on September 24th.