Incoterms (International Commercial Terms) are standardized rules defining the responsibilities of buyers and sellers in international trade. They clarify who is responsible for shipping, insurance, customs duties, and delivery risks.
Key Incoterms you need to know
- EXW (Ex Works) — the buyer takes full responsibility for transport from the seller's location.
- FOB (Free On Board) — the seller delivers the goods to a shipping port, then the buyer takes over.
- CIF (Cost, Insurance, and Freight) — the seller covers shipping and insurance up to the destination port.
- DDP (Delivered Duty Paid) — the seller takes full responsibility, including import duties.
Why Incoterms are important
Understanding Incoterms helps businesses:
- Avoid legal disputes over shipping responsibilities.
- Reduce costs by choosing the best terms for their needs.
- Ensure smooth customs clearance and delivery.
How to choose the right Incoterm
The right choice depends on logistical capacity of seller and buyer, foreign-market experience, contractual position, and risk management. A wrong choice can translate into unexpected costs, disputes, or customs blocks.
For Italian SMEs exporting for the first time or into new markets, it's often preferable to start with Incoterms that keep control of the chain up to the border (e.g., FOB, CPT) before moving to "complete" solutions like DDP, which require customs know-how in the destination country.
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