What are incoterms and why
should you care about them?
Have you ever tried to talk to a supplier about shipping, only for them to throw a bunch of strange acronyms(like DDP and CIF) at you?
You're not alone. These acronyms, known as incoterms, significantly impact your shipping process – but they're notoriously confusing to
buyers.However, incoterms exist to reduce confusion between buyers and suppliers, not cause it. An incoterm provides one universal
definition for a series of tasks, responsibilities, and decisions; when you and your supplier both understand the terms, your shipping
discussions will be more efficient. By familiarizing yourself with the details of each incoterm, you can choose the one that makes
the most sense for your next order.
How should you decide which is right for you?
The biggest factor is experience level.
As you move from E to D types, the buyer's risk, knowledge required, and time commitment decreases (sounds good, right?). However, the buyer's level of control and visibility into costs also decreases (maybe not so good).
How should you decide which is right for you? The biggest factor is experience level. More experienced buyers generally want more control over the shipping process and associated costs, and they're comfortable taking on more risk and responsibility to get it. Less experienced buyers generally benefit from offloading some responsibility to their suppliers, even if it means giving up some control and price visibility. This is why Whale Group generally recommends FOB for experienced buyers and CIF or DDP for new buyers; if you use Whale Group logistics, you must use one of these terms.
The four most common incoterms are: