Incoterms are standard terms that help two parties (a buyer and a seller involved in an international transaction) determine precisely who pays for transportation, who pays for import duties, who manages documents, and who takes what risks.

They are part of the standardization efforts that made international business easier (along with shipping containers, letters of credit, etc.).

Wikipedia outlines the incoterms and explains them one by one. Most importers who buy full containers choose FOB rather than CIF or EXW terms, usually for good reason.

However, what many companies don’t realize is, incoterms are just tools that are SUGGESTED to them… And customizing the commercial terms is possible.

Here is an example. The customer wants to receive the goods in their warehouse and have the seller pay for import duties, BUT the customer wants to control the transport (because they know they are more efficient than the supplier when it comes to transportation). So they want DDU except for the transportation aspect, which should be similar to FOB.

Writing this into a contract is not really complicated, and a logistics professional can help you both in opening your eyes on the opportunities and in ensuring your contract includes all important provisions.

If you purchase small quantities from a Chinese or Indian supplier, they might not be open to customizing the shipping terms. But if you represent a certain size of their business, they will usually listen to you and show some flexibility.

Again, my point is to avoid thinking “so, which incoterm to choose?” without looking at alternatives.