International shipping can be a complex and daunting process for small businesses, but understanding the Incoterms used in international trade can help make the process more manageable.
Incoterms, short for "International Commercial Terms," are a set of standardized trade terms developed by the International Chamber of Commerce (ICC) to clearly define the responsibilities of both the buyer and the seller in international transactions. The most commonly used Incoterms in international shipping are FOB (Free on Board), CIF (Cost, Insurance, and Freight), and EXW (Ex Works).
FOB, or Free on Board, means that the seller is responsible for loading the goods onto the shipping vessel at the port of origin, but the buyer is responsible for all costs and risks associated with the transportation of the goods from that point on. This is a common term used in sea and inland waterway transport.
CIF, or Cost, Insurance, and Freight, is similar to FOB, but in this case, the seller is also responsible for arranging and paying for the shipping insurance. The buyer is still responsible for all costs and risks associated with the transportation of the goods from the port of origin.
EXW, or Ex Works, is the least commonly used Incoterm and it means that the seller is only responsible for making the goods available at their premises, with all costs and risks associated with the transportation of the goods being the responsibility of the buyer.
When preparing for international shipping as a small business, it is important to clearly communicate the Incoterm that will be used in the transaction with the buyer to avoid any confusion or misunderstandings. Additionally, a small business should be familiar with the laws and regulations of the country or countries involved in the shipment to avoid any potential legal issues. For example, tariffs and customs clearance are important aspect need to be take care by the business itself. Also, it will be good to have a logistics partner/shipping agent who can assist in these processes as it can be difficult for small business to navigate these laws and regulations alone.
Best 4 Shipping can be such a partner to help you navigate the waters on International shipping. Contact us now so we can help with your logistics needs.