With so many supply chain challenges recently, there has been an increased interest in Incoterms®. But I still get the question, why use them? Why are they important?
Incoterms® are a set of internationally accepted terms that clarify the delivery, sharing of shipping costs, customs obligations and liability status between a Seller and a Buyer when shipping a product across borders. But businesses do NOT have to use them and they don’t replace a sales contract, so often they are ignored or not clarified.
Not using Incoterms® is similar to a handshake deal with an international distributor. Not having a clear understanding of what obligations the distributor has in the local market, how they are allowed to represent your brand, sales targets or even legal standing presents a risk. The same applies to Incoterms®.
Incoterms® help simplify contracts by using the terms to quickly and clearly outline which parts of the shipping, customs & liability is on the Seller or on the Buyer, based on the term selected. This reduces risk by default. Fewer surprises equals less risk and hidden costs.
But Incoterms® also helps lower costs if terms are selected that place more responsibility on the Buyer or Seller for carriage. With today’s unprecedented shipping rates, this becomes a very important decision.
Finally, Incoterms® help improve communications between a Seller and a Buyer. This improves customer satisfaction, which only helps a Seller working to establish a good reputation in a foreign market. Relationships are the cornerstone of international business, and a dispute over a shipment is always a negative experience.. on both sides.
Exportspark offers several Incoterms courses and advisory services. Contact us today to determine the next available course or to set up a custom training session for you and your staff.