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Knowing the best Incoterms® for exporters is crucial for anyone selling goods to overseas consumers. These policies help set clear rules for sellers and buyers. Omitting Incoterms® can make it much harder for importers and exporters to understand one another. This can lead to confusion and serious issues with shipments to other countries.
The International Chamber of Commerce (ICC) created Incoterms® to make international transaction easier. Out of all of them, the best Incoterm® for exporters include:
These terms help the seller by reducing their overall responsibilities when exporting.
A U.S. seller that knows the best Incoterms® for exporters will be able to negotiate a business agreement that works in their favor.
Some Incoterms® are better for sellers, while others are best suited for buyers. There are certain ones that evenly split the duties between exporters and importers fairly. As a seller, it’s important to pick an Incoterm® that makes international shipping easier on your operations.
When an agreement is made under EXW, the seller prepares the goods for pickup at their premises.
Possible locations include:
The buyer is then responsible for every other aspect of the shipping process, from the carrier to insurance, and even covering any risks associated with transport. One of the primary benefits of using EXW for exporters is the simplicity of it from the seller's perspective.
After the goods are ready at the agreed location, the seller's obligation is essentially complete. Since the exporter is only worried about preparing their products for pickup, they just have to worry about the cost related to the initial packing.
In an FCA agreement, the seller's responsibility is to drop off the shipment at a location specified by the buyer. This can vary from a forwarder's warehouse or even a transportation hub.
Once the goods have been dropped off, the seller’s obligations are complete. It will be up to the buyer to handle the rest of the duties associated with a shipment. The FCA Incoterm® gives sellers a certain degree of flexibility because they can choose their preferred method of transportation.
This includes:
Some transport methods may be better suited to a product than others, and buyers may wish to retain control to ensure products arrive in the best condition. Sellers will also be free from many of the documentation burdens that come with exporting. Risk remains much lower for companies that send goods to overseas buyers.
FAS requires a seller to drop their goods off by the vessel that will transport the shipment. This means the items are placed at a specified port and made ready for the loading process. The buyer then assumes all subsequent responsibilities after the goods have been dropped off alongside the ship.
The FAS Incoterm® only applies to loads that are transported by vessel. With this policy, exporters don’t need to manage or pay for the loading process. As a result, logistical burdens are reduced.
For FAS to be effectively utilized, it's imperative that both parties have a clear understanding of the port procedures and the specifics of the loading process.
While FOB splits duties more evenly amongst the two parties, it still works in favor of the seller under the right circumstances. Under this Incoterm®, the exporters will need to deliver their shipment to the port and load them onto the ship.
This provides sellers with predictability in terms of costs, as they're only accountable for charges up to and including the loading process at the port. Although exporters will have more to do when using FOB, their duties are still much less than it is for buyers.
Navigating the intricate web of international trade can be a daunting endeavor. Since buyers and sellers are from different nations, it can be easy for them to misunderstand one another. This leads to confusion and the wrong expectations. Issues like these make Incoterms® essential when conducting international trade.
Benefits of using them include:
Incoterms® provide an easy-to-understand language that buyers and sellers can use. With these policies, importers and exporters will be on the same page. With Incoterms®, everyone knows what they’re responsible for throughout the shipping process.
Unexpected costs are a concern that buyers and sellers try to avoid. Since Incoterms® dictate financial responsibilities, importers and exporters will know exactly what they’ll need to pay for. This allows the parties involved to estimate their overall expenses.
Finally, Incoterms® makes conducting trade much easier. Exporters and importers won’t have to waste time negotiating the fine details of a shipment. Instead, each party can agree to an Incoterm® that benefits each.
Given there’s four Incoterms® that favor exporters, it may be difficult for U.S. sellers to choose the one that’s right for them when starting their export business. Fortunately, there are four criteria that shippers can review to find the policy that works best for their shipment.
These include the:
Based on these factors, sellers can pick the best export Incoterms® for their specific needs.
The nature of the goods being exported is something that sellers should consider before picking an Incoterm®. Products come in different varieties.
This includes:
Every good comes with unique regulations and procedures for loading. Exporters will need to determine if a buyer can handle these responsibilities. If a buyer can’t competently handle the loading procedures and export regulations, sellers may want to select the FAS or FOB Incoterm®.
With these policies, they’ll be able to ensure their goods are handled correctly. However, if a buyer is competent enough to correctly handle export regulations and loading procedures, then sellers should try to use the EXW works or FCA Incoterms®.
The goal is to choose the method that ensures products will arrive in the best conditions and in the right time frame. These are important in the long-term for growing a good reputation as a company.
Exporters aren’t the only ones that will try to push for a certain Incoterm®. Buyers may try to negotiate a policy that works in their favor as well. Importers have different reasons for choosing a specific Incoterm® for their transaction.
These reasons include a:
Some buyers prefer having a hands-on approach and want to manage significant portions of the shipping and logistics process. They might opt for Incoterms® where risk and responsibilities transfer early, allowing them to select their carriers, routes, and even insurance.
Buyers like these will likely agree to EXW and FCA Incoterms®, thus minimizing many shipping duties for sellers. However, there are other circumstances where importers may want a more casual transaction. In cases like this, they will argue for an Incoterm® that puts more work on the seller.
If this happens, sellers should try to compromise with FAS or FOB, which more evenly distributes responsibilities between each party. Based on an importer’s familiarity with logistics in a seller’s country, buyers often try to negotiate an Incoterm® that gives them more import-related tasks. If their understanding isn’t great, they could choose a policy that places more work on the seller of the goods.
Costs remain a driving factor for many buyers. Incoterms® directly influence who bears which costs during the transit process. Some buyers, especially those working on tight budgets, might prefer policies where certain expenses are borne by the seller.
Risk is a major concern amongst importers. If they don’t trust a seller to fulfill their end of the transaction, an Incoterm® that gives them more control over the shipment might be more favorable. On the other hand, importers may want sellers to take on more risks if they have less experience importing goods. This is especially the case for inexperienced buyers.
When exporting goods internationally, it's essential to be well-versed in the regulations and rules governing imports in the buyer's country. Each nation has its distinct set of standards that will have to be followed.
These include:
Sellers that have no experience exporting to a certain nation will likely struggle to follow these unique regulations. As a result, buyers may agree to Incoterms® that give them more work, like EXW and FCA, to make the process easier.
That said, importers in a country that frequently conducts trade with the U.S. may expect their seller to put in a little more work on their end. We’ve provided some data on the most frequent purchasers of U.S. exports.
| Country | Amount of Exports Purchased (In Billions) |
| Canada | $356.5 |
| Mexico | $324.3 |
| China | $150.4 |
| Japan | $80.2 |
| United Kingdom | $76.2 |
Provided by the U.S Trade Representative
Buyers from these countries will likely push for an Incoterm® that more evenly distributes responsibilities. Since these countries conduct trade with the U.S. frequently, it should be easier for exporters to understand applicable regulations.
The mode of transport that’s used to move freight internationally has an impact on the Incoterm® that’s used. Ocean and air are the most common methods of shipping exports. That said, rail or road is also an option if the buyer is in a nearshore country. Exporters and importers should both be aware that certain Incoterms® can only be used for specific modes of transport.
For example, the following policies are only applicable for ocean shipping:
If a buyer can only import using ocean transport, they should try to negotiate for the FAS or FOB Incoterm®. When the method of shipping doesn’t matter, sellers should instead argue for EXW and FCA before trying to push for other policies.
Incoterms® aren’t required for exporting goods to other countries. Buyers and sellers are free to conduct their transitions as they see fit. That said, using Incoterms is highly recommended by import and export officials.
These policies offer various benefits to each party involved in an international transaction. For one, Incoterms® are recognized worldwide. This means that regardless of where the buyer and seller are located, the terms will be universally understood.
Navigating the complex waters of international trade can be daunting, but it doesn't have to be. Picking the best Incoterm® for export will determine the success of your shipping endeavors. At Cargo Export USA, we understand the intricacies of global trade and are committed to helping you through every step of the process.
With our consulting sessions, you can meet with one of our professionals and determine the best Incoterm® for your unique shipment of freight. We also provide a variety of export-related services.
These include:
Isn’t it time you took your exporting game to the next level? With our help, you’ll be able to ship globally with ease. Our team of experts will guide you through your responsibilities and walk you through the exporting process.
Call (866) 301-0635 to speak to one of our team members or fill out a risk-free quote if you’re ready to get started. Your global success story starts with Cargo Export USA.
