3 Tactics to Save Money and Limit Risk Under Incoterms

As national economies and supply chains become increasingly globalized, International Commercial Terms, or Incoterms, demand closer attention because of the heightened risk of overspending. But with an effective Incoterms management process, the risk of valuable transportation dollar loss and severe legal backlash is eliminated. 

Despite their immense importance for the flow of international goods, Incoterms frequently do not receive the attention they deserve. In the rush of everyday logistics workflows, these diverse terms can quickly become overwhelming, with cost and liability details falling between the cracks as companies scale.

When market conditions nose dive, companies limit expenses and risk as much as possible. Actively overseeing, understanding, and enacting the proper Incoterms helps companies pay only the required costs and avoid high-risk contracts—setting themselves up for ambitious growth.

Incoterms clarity for company growth

An accurate picture of company finances may seem fundamental. Still, it’s one of the most powerful tools companies possess, helping forecast profits and boosting the confidence of senior decision-making.

International trade prices and expenses are a vital consideration of the financial picture. The cost and liabilities of Incoterms are complicated to manage if a company is shipping a wide variety of products in today’s uncertain global supply chains. There are three steps shippers can take to succeed with Intercoms in today’s volatile climate.

  1. Start the process with purchase orders.

Cost and liability awareness begins with purchase order initiation. For example, a Japanese manufacturer agrees to sell their product to a company in the US using the Free On Board (FOB) Incoterm. As the seller, the manufacturer is responsible for costs and liabilities until the cleared shipment is loaded on a vessel headed to a specific US port. But, if the manufacturer believes it’s obligated to deliver the product to the customer’s front door, there’s an extra cost for 200 miles of delivery.

Additionally, moving goods entails risk—including damaged, late, or lost shipments. If the shipper doesn’t understand their liability, they may face unexpected freight costs and expensive damages—especially if they move high-value or luxury goods. With every new purchase order, shippers need to outline what the Incoterms entail, so they know the exact costs.

  1. Align all relevant stakeholders. 

Visibility is only as effective as those who share it. International trade involves many external parties and partners—from carriers to outsourced logistics support and many internal stakeholders. For every agreement, companies must define those involved in downstream supply chain management and clarify Incoterms’ responsibilities.

For example, if the Incoterm is Delivery Duty Paid (DDP), the party dispatching goods is responsible for all transportation charges—carriage, delivery, taxes, duties, etc. If shippers don’t want to neglect these necessary costs, they must relay the Incoterms contract details to all internal parties—purchase, finance, logistics, and legal teams. 

  1. Standardize workflows to save and scale. 

Even standardized agreement terms need active management and a standardized process, especially as companies grow. Efficient workflows produce beneficial, reliable outcomes and accelerate the tasks that help companies expand. 

A predictable Incoterms process containing these steps means logistics teams won’t scramble to understand costs and other Incoterms obligations. These essential steps also allow shippers to handle increased complexity and confidently expand operations.

Visibility with logistics technology 

Contract management is complicated, especially when supply lines and customer relationships span the globe. But with visibility and awareness, managing invoices and identifying cost-cutting opportunities is achievable. 

At CTSI-Global, Freight Audit and Payment solutions perform invoice validation and cost allocation for shippers—double-checking company costs against tax codes and Incoterms. With invoices and Incoterms always on hand, shippers have complete visibility into shipping costs.

Achieve your scaling ambitions with built-in Incoterms oversight. Contact CTSI-Global today.