5 Common Mistakes Traders Make When Selecting Their Incoterm

1. Not specifying when the title of goods changes hands

The Incoterm rules are silent on when the title passes from seller to buyer, so it cannot be assumed when the title of goods is passed based on the chosen incoterm. It needs to be defined clearly and separately in the sales contract.

2. Selecting EXW term without understanding its implications

With EXW, the buyer is required to perform/submit export formalities – and in many countries it will be necessary for the exporter to communicate with the authorities in a number of different ways.

3. Not detailing the specific airport, port or place

Failure to specify the port or place with sufficient precision could cause issues, as it may refer to many places within a wide area. Always make sure to give as much detail as possible, e.g. “FCA Vietnam”.

4. Not mentioning taxes or VAT in the DDP terms

It is critical to incorporate or mention taxes and VAT separately in the sales contract. 

5. Not knowing the full implications of selecting the DDP incoterm

When selecting the DDP incoterm, the seller must undertake all the necessary import customs formalities in the buyer’s country, e.g. paying GST or VAT or Duties. Therefore, it is important to check if they have the capability to complete the task fully.

Selecting the incoterm for your transaction can be a difficult choice, which is why we developed a free tool to help you make the best decision for your business. Check out our Knowledge centre for more information on which incoterm is more appropriate for your needs and details on customs procedures.