Best Incoterms for buyers | iContainers (2024)

FAQs

Best Incoterms for buyers | iContainers? ›

Because the seller will build shipping into the price of the goods, these Incoterms might be difficult for buyers to accept as they take on the risk — and cost — but have no control over the shipment until the goods arrive in their country. The Incoterms more favorable to buyers are DAT, DAP, and DDP.

Because the seller will build shipping into the price of the goods, these Incoterms might be difficult for buyers to accept as they take on the risk — and cost — but have no control over the shipment until the goods arrive in their country. The Incoterms more favorable to buyers are DAT, DAP, and DDP.

EX Works (EXW) – This Incoterm places the most responsibility on the buyer. The seller makes the goods available at a named place, typically their warehouse or factory. All transportation arrangements, costs, and risks fall on the buyer.

In choosing the right incoterm, buyers and sellers must consider their experience level. For example, EXW Incoterm is not suitable for importers. A buyer with more experience importing goods can decide on Ex Works Incoterm. DAP, DDP, and DPU Incoterms are good for importers with little experience.

Incoterms, widely-used terms of sale, are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.

CIF gives the seller more control over logistics, enabling them to choose their preferred carrier and insurance provider. FOB, on the other hand, gives the buyer more control over logistics. With FOB the buyer can opt for the carrier and insurance cover of their choice once the goods are loaded onto the ship.

Supplier Relationships: If you have a strong, established relationship with your supplier and trust their handling of the goods, you may be more inclined to choose EXW. FOB can be a better option if you are less certain about the supplier's capabilities.

Delivered Duty Paid (DDP):

The seller is responsible for bringing the goods to the destination and bears all risk up to this point. As a result, this places great responsibility on the seller, making them responsible for clearing customs and paying taxes.

As the seller, the EX-Works Incoterm may appear to be the simplest solution for you. The EX-Works Incoterm means that the seller arranges the packaging and the buyer arranges shipping and carries all the costs.

Delivery – at which point the seller's responsibility ends and the risk of loss or damage passes to the buyer. Transportation – which party is responsible for transportation costs. Documentation and formalities – who is responsible for dealing with customs, shipping documentation, duty payments, and other formalities.

How do you use Incoterms effectively? ›

Incoterms only establish who pays what and when, and who assumes the risk. Be sure to cover payment terms and ownership transfer clearly in your purchase order. Understand who is obligated to insure the goods while in-transit. Be sure your company has proper cargo insurance to cover your risk.

By considering the nature of goods, mode of transport, cost responsibilities, and regulatory compliance, traders can select the most suitable Incoterm for their transactions. Choosing the right Incoterm is essential for mitigating risks and clarifying responsibilities in international trade.

One strong advantage of choosing the FOB Incoterm is the flexibility it gives you. You will be the one to choose the shipping routes and times and are able to negotiate prices with your freight forwarder. This is the most recommended Incoterm for importers and buyers.

Incoterms in Practice

The seller agrees to have the goods available for collection at an agreed location. The buyer collects the goods and is responsible for both export and import declarations, shipping costs and the payment of duties.

Ex Works is the most fundamental Incoterm, requiring the buyer to cover all costs of transporting the goods from the seller's premises. Only the goods' availability for pickup at the seller's location is required. The buyer is responsible for all loading, transportation, and import/export clearance costs and risks.

For an international purchase operation, the most advantageous Incoterms for the importer will be DAT (Delivered At Terminal), DAP (Delivered At Place) and DDP (Delivered Duty Paid). The buyer is only responsible for customs formalities in the country of arrival, inland transport to his premises and unloading.

EXW - Ex Works (named place of delivery)

Ex Works term is often used in initial rounds of quoting because it reflects the cost of good without logistics.

Goods shipped EXW will usually be cheaper FOB since Free on Board would have the supplier bear the costs of transportation, handling, and customs clearance. EXW terms, however, are often riskier for the seller since they are responsible for the goods until they reach their destination.