Shipping terms are one of the first things to learn when you’re looking to start importing or exporting. Unlike Payment Terms, which is an agreement on when you or the other party actually have to pay for goods (eg: 30% upfront, 70% on completion of order etc.), shipping terms set out the supplier’s and buyer’s responsibilities and risks during the shipping process.
Imagine that you go to your local appliance store to purchase a new washing machine. They give you a price of $500. Now the question becomes, does that price mean you have to pickup the washing machine from the store? Or does it include delivery to your doorstep? Or does it include delivery and installation into your home? Where does the store’s responsibility end and yours start? And where does the risk transfer? and is there insurance included?
There is a lot of questions to ask, right? And that example is only a local delivery situation. In international transactions there can be many more steps involved and the consequences of misunderstanding your rights and responsibilities when buying or selling can be much more severe. This is where the ‘shipping terms’ come in.
Shipping terms try and simplify the shipping services and establish who does what, and when the risk transfers from supplier to buyer. The most common shipping terms used worldwide are published by the International Chamber of Commerce- the latest iteration called INCOTERMS® 2020. These terms are almost universally used which means that the rules they set out can be understood and applied on international contracts, even across different languages.