INCOTERMS 101: NAVIGATING INTERNATIONAL SOURCING
WHAT ARE INCOTERMS?
11 terms set by the International Chamber of Commerce for use in contracts, purchase orders and quotations for B2B sales and purchases of tangible goods.
WHY DO THEY EXIST?
Incoterms divide costs, risks and responsibilities between sellers and buyers. They guide parties in international trade contracts to fulfill tasks such as shipping or insurance. And, they reduce issues of misunderstanding between buyer and seller.
USING INCOTERMS IN CONTRACTS
When purchasing for your business from overseas or if selling internationally, strengthen your trade by the following:
Determine the Incoterm that best suits your business (tip: seek advice from a professional such as a freight forwarder, local foreign trade office, etc.). Once chosen, request the seller to quote based on these terms.
Be as specific as possible with the term by following the standard format: INCOTERM, Location seller must deliver to, INOCTERMS 2020 (example: CIF, Shanghai, Incoterms 2020).
Provide the Incoterm details to your logistics provider in order to ensure you are not misquoted or discharged for additional freight fees outside of your responsibility in the contract.
Remember as your business grows and changes, so can your terms of trade.