What factors should I consider when deciding on the best Incoterm to use?

Boxes on trolley in warehouse against forklift machine in warehouse

There are a number of factors businesses should consider when deciding on the best Incoterm for their business and beginning negotiations with a supplier / customer. Two key points to consider are:

  • What is your business’s understanding of Incoterms?
Firstly, businesses must ensure that staff members who are negotiating the Incoterm have a detailed understanding of the term they choose and what responsibility it puts onto the business. It is normally the logistics or shipping department that carries out the relevant activities associated with the chosen Incoterm so it’s important that each department involved in the movement of the product agrees on the term and can adhere to the relevant requirements.
  • How much responsibility is your business comfortable with?

When it comes to the transport and safe delivery of goods, it is important to decide if you want to engage a transport company and have the responsibility for the shipment or whether you want to pass this on to your customer or supplier. Businesses may wish to retain more control of the transportation process and would therefore select an Incoterm which gives them this control, for example, EX Works as this would allow businesses to collect the goods from the seller’s premises and have complete control of the movement and transportation of the goods.

Read our comprehensive guide to Incoterms article with lots more information about the 11 different Incoterms, important actions businesses need to take and links to further support.