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What are Incoterms, and how can online retailers use them?

What are Incoterms, and how can online retailers use them?

Incoterms may seem daunting and confusing to retailers, when they aren’t sure how to use them properly, or what it is they’re using. However, once understood, they’re a useful set of terms relating to international commerce law—therefore, helping retailers sell abroad.

Incoterms provide a common language for retailers to use, which define trade when operating across customs borders. This helps bridge the gap between cross-border commerce. They are 11 rules which help define who is responsible for a shipment, throughout its international journey crossing customs borders. The terms themselves aren’t binding, however they’re often used within contracts for retailers and carriers to understand who is responsible for their shipments at different points in the journey.

Incoterms are typically used in sales contracts to clearly define the roles between seller and buyer in an international transaction involving transportation and delivery of goods, for example:

  • Who takes care of insurance of the goods, licenses, permissions and all other formalities?
  • Who arranges transport and who is liable for the delivered goods?
  • When does the cost and risk change from seller/sender to buyer/receiver?

Incoterms can be used within buying and selling of transportation and delivery of goods, at both ends of the supply chain, as warehouses and retailers must understand the terms by which they’re agreeing to send shipments. They help define who looks after insurance of the products, licenses and permissions, as well as the arrangement of transport, and the risk assessment of shipping. They are required on the commercial invoice of each shipment.

The terms themselves can be found on the International Chamber of Commerce’s website. They have been publishing the rules since 1919, and can be found in 29 languages, and in online formats. The codes themselves come in 11 three letter formats, so that they’re globally understood. They must be complied by in order to fulfil international shipping.

 

Seamless delivery closes the deal

When properly coordinated with other elements of a sales agreement, as well as with the contracts of carriage and insurance, trade terms become a very powerful tool in the quest to mitigate supply chain troubles. If products’ quality and price are on par with your competitors, the next order might very well go to the seller that excels at facilitating the movement of goods. With nShift’s solutions, you can easily populate the Inco Terms necessary for your shipments crossing customs borders.

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