The Best Incoterms For Importers: Winning in International Trade - USA Customs Clearance (2024)

Knowing what the best Incoterms for importers are is helpful when you’re trying to reach an agreement with an international seller. Numerous things can go wrong when goods are shipped internationally. Whether the goods are damaged or the seller tries to scam you, you must protect yourself financially.

The best Incoterms for importers that will provide the necessary protection and benefits when conducting an international transaction are:

• Freight On Board (FOB)
• Delivered At Terminal (DAT)
• Delivered At Place (DAP)
• Delivered Duty Paid (DDP)
• Cost and Freight (CFR)
• Cost, Insurance and Freight (CIF)

In this article, we’ll elaborate on why these are the best Incoterms for importers and why you should use them.

Incoterms Basics

Before getting into which Incoterms are the best ones for importers to use, you should know what Incoterms are in the first place in case you’re unfamiliar with them. Incoterms were published by the International Chamber of Commerce (ICC) as a means for international buyers and sellers to better understand one another’s responsibilities when shipping goods.

There are 11 different types of Incoterms and each of them are able to be used by any buyers or sellers operating out of any country in the world. Our article on the 11 types of Incoterms covers each of these Incoterms, their categories, and what modes of transport they apply to. If you need further assistance with understanding any Incoterms, our Licensed Customs Brokers will be able to help.

Buyers and Sellers in International Trade: What’s the Difference?

When looking through each of the Incoterms, you’ll likely find no mention of an importer or exporter. That’s because Incoterms use different words in place of these two. To clarify this discrepancy, the buyer is the same thing as the importer. Similarly, the seller listed in Incoterms refers to the exporter.

Want to know the difference between Incoterms and payment terms? Check out our article to learn more.

What Are Best Incoterms For Importers?

Importers can face many challenges when they bring goods into the country. These challenges can be overwhelming, especially if you’ve never imported before. Fortunately, these Incoterms place some important responsibilities on the seller, making the shipping process much easier for the importer.

Free On Board (FOB)

Under the FOB Incoterm, the seller (exporter) will take care of a few important responsibilities. For one, they’ll take care of all the customs duties of their home country. This is beneficial for importers that are not familiar with the customs laws of the country they’re buying goods from.

Another benefit of using this Incoterm is that the seller is responsible for dropping the goods off at the port of origin. While you will have to be responsible for shipping the actual goods, you will have the flexibility to decide which carriers will be responsible for transporting the shipment. This includes choosing the carrier that provides the ship that will transport the goods, as well as the carrier that picks the goods up at the port.

As a buyer, FOB is useful to you if you’re aware of what customs responsibilities will be expected of you in your own country. That way you’ll know that your goods will arrive at the port of destination without worrying whether or not the seller fulfilled your country’s customs duties and formalities properly.

One thing to keep in mind before using FOB Incoterms is that it’s only applicable for ocean, sea and inland waterway transport. However, once the goods arrive in the buyer’s country, the goods can be transported by land or air from that point.

Delivered At Terminal (DAT), Delivered At Place (DAP) and Delivered Duty Paid (DDP)

The DAT, DAP and DDP Incoterms are very useful if you’re an importer who has never imported goods or has little experience. Under these Incoterms, the exporter is responsible for most of the shipment. This includes handling their country’s customs responsibilities and picking a carrier to transport the goods to the importer’s country.

These Incoterms will require the buyer to handle the customs responsibilities of their own country. The great part about this is that you won’t have to worry about the foreign seller possibly making a mistake during this process.

Understanding U.S. import regulations might be difficult for a U.S. citizen, but they can be even more complicated for a foreign seller. If you do have trouble figuring out the customs responsibilities for your shipment when using one of these Incoterms, schedule a consulting session with USA Customs Clearance so we can help you out.

Cost and Freight (CFR) and Cost, Insurance and Freight (CIF)

These two Incoterms split the responsibilities between the buyer and seller right down the middle. Typically, buyers and sellers who have established a strong level of trust from previous international transactions will use these two Incoterms.

Under these Incoterms, the seller is only responsible for the shipment until it arrives at the port of destination. After that point, the buyer takes over responsibility for the shipment.

However, where they differ is in regards to insurance responsibilities. The CIF Incoterms dictates that the seller has to insure the goods. This detail makes CIF Incoterms more favorable because the seller is spending the money to protect your shipment from the various costs and risks that occur when conducting international trade.

Like with the FOB Incoterms, these two Incoterms are only applicable when sea, ocean or inland waterways are used to deliver the goods. For more information on import/export insurance, check out our article about the topic.

To summarize the amount of responsibility an importer will have over their shipment, we’ve used the table below to give a visual representation.

Amount Of Responsibility A Buyer Has Under Each Incoterm

Want to more about how to use Incoterms? Check out our article for an easy rundown.

Can Incoterms 2010 Be Used As Opposed To Incoterms 2020?

Incoterms 2010 and 2020 can both be used by buyers and sellers conducting global trade with one another. The only stipulation is that both parties have to agree to the same Incoterms from the corresponding edition. For the most part, the Incoterms we discussed do not differ greatly from either of these two.

The 2020 Incoterms edition does make a slight change to the DAT Incoterms. In the 2020 edition, these Incoterms are Delivered at Placed Unloaded or DPU. This version of the Incoterms is slightly more beneficial to the buyer than the 2010 DAT Incoterms.

Unlike the DAT Incoterms, DPU gives the buyer the option to pick other drop-off points other than a terminal. Other than this added flexibility, the 2020 DPU Incoterms is the same as the 2010 DAT Incoterms.

Our article on the importance of Incoterms will show you why should use them when conducting an international transaction, regardless of whether you’re a buyer or a seller.

Let USA Customs Clearance Consult You Through the Importation Process

Regardless of what Incoterms you and the seller agree on, there will be at least one type of import responsibility that you will have to be accountable for. At USA Customs Clearance, our team of Licensed Customs Brokers can help guide you along through any responsibility that you have to handle.

We can also provide importers with a continuous customs bond. With this bond, you will be able to import any amount of goods you want for an entire year. Reach out to us today so you can start importing with confidence.