No matter how easy the National Export Initiative makes an international sale, exporters must be aware of several important rules and guidelines when selling goods to an overseas entity. We will look at some of the details of things like AES and routed export transactions in future columns, but today we want to focus on Incoterms, or as it is better known, “who pays what.”
Domestic sales within the United States are fairly simple because the things to be paid for during the transportation from seller to buyer are very straightforward. It is really only prepaid by the seller or collect to the buyer.
When it comes to international shipments, there are all kinds of questions about where the buyer and seller exchange possession of the cargo, who is responsible for the domestic transportation to an airport or seaport, who pays the international freight, Customs duties and taxes at destination and the final delivery to the buyer or their named destination.
Fortunately, the answers to this lie in the Incoterms which are published by the International Chamber of Commerce. Incoterms change over time and the most recent revision was in the year 2010. In the United States, the U.S. Council for International Business (USCIB) represents their interests and publishes written resources for international traders.
From the ICC’s website:
The Incoterms® rules are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods. First published in 1936, Incoterms® rules provide internationally accepted definitions and rules of interpretation for most common commercial terms.
Incoterms fall into one of several buckets.
- The ‘E’ terms, meaning that the buyer is usually responsible for nearly everything from the seller’s door to their own.
- The ‘F’ terms, meaning that the seller is usually responsible for getting the goods to the airport or seaport of export.
- The ‘C’ terms, meaning the seller is usually responsible for getting the goods to a named point of destination overseas.
- The ‘D’ terms, meaning the seller is usually responsible for all the charges, including Customs duties, and delivery to the recipient’s door.
Within each of these three categories are more nuanced descriptions.
Three things to remember when making an overseas sale.
- The Incoterms that you provide your buyer will tell them what you are each responsible for. Ensure your pricing includes whatever your Incoterms stipulates it will.
- Even under an ‘E’ term where the buyer will take possession at your facility, an exporter is still responsible for providing the information required to file the export information with the US government.
- Whether you are a new or experienced exporter, keep a copy of the Incoterms in your library.
Of course, we here at Everglory are experienced in helping our exporters choose the correct Incoterm for their sale, including offering freight forwarding to the buyer which allows you to control the transaction from start to finish.
