Deciding on the best Incoterm 2000

by Tekle Sebhatu

Question:

For those of us who are new to the world of import/export and don't have a lot of experience, how do you decide which shipping term is the best one to use? For example moving children's clothes from India to Indiana, USA?

Answer:

Shipping terms are decided based on the responsibility the importer or the exporter is willing to take in a specific transaction. Shipping terms in some regions of the world are referred to as "pricing terms" or "terms of sale." "Incoterms" are universally accepted term used in import-export transactions. These terms define the rights and obligations of the importer and the exporter. You should be very familiar with the most common shipping terms before agreeing to any of them. While you can use any of the 13 Incoterms, most importers prefer and accept either CIF - Cost, Insurance and Freight (named port of destination) or CFR - Cost and Freight (named port of destination). The destination port is the importer's port. Furthermore, most US importers, for example, prefer CFR over CIF and arrange insurance in the US only because they want to control the insurance part of the transaction. They find it to be easier to file claims with local insurers than foreign insurers in the event of loss of or damage to the goods. I recommend that you hire a custom broker to help you clear products for at least your first and second shipment. You will be glad you did!