How do you monitor and evaluate the performance and efficiency of your Incoterms?

1 Step 1: Choose the right Incoterms for your situation

The first step to monitor and evaluate your Incoterms is to choose the right ones for your situation. There are 11 Incoterms, each with different implications for costs, risks, and obligations. You should consider factors such as the mode of transport, the destination country, the value of goods, the level of control, and the contractual relationship with your buyer or seller. For example, if you are shipping by sea or inland waterway, you can use FAS, FOB, CFR, or CIF Incoterms, but if you are shipping by any mode of transport, you can use EXW, FCA, CPT, CIP, DAP, DPU, or DDP Incoterms. You should also consult with your logistics provider, your insurance company, and your legal advisor to ensure that you understand the implications and requirements of each Incoterm.

2 Step 2: Communicate clearly and consistently with your trading partner

The second step to monitor and evaluate your Incoterms is to communicate clearly and consistently with your trading partner. You should include the Incoterms in your sales contract, invoice, packing list, bill of lading, and any other relevant documents. You should also specify the version of the Incoterms you are using (such as Incoterms 2020) and the named place of delivery or destination (such as FCA New York). You should avoid using vague or ambiguous terms, such as "FOB port" or "CIF destination", as they may lead to confusion and disputes. You should also confirm with your trading partner that they understand and agree to the Incoterms and that they have the necessary resources and capabilities to fulfill their obligations.

3 Step 3: Track and document the delivery process

The third step to monitor and evaluate your Incoterms is to track and document the delivery process. You should use reliable and secure methods to track the movement and status of your goods, such as electronic data interchange (EDI), radio frequency identification (RFID), or global positioning system (GPS). You should also keep records of all the documents and evidence that prove the transfer of risk and ownership, such as receipts, certificates, inspections, and signatures. You should also be prepared to deal with any delays, damages, losses, or claims that may arise during the delivery process, and to communicate with your trading partner and other parties involved in a timely and professional manner.

4 Step 4: Analyze and improve your Incoterms performance

The fourth step to monitor and evaluate your Incoterms is to analyze and improve your Incoterms performance. You should measure and compare the actual costs, risks, and benefits of using different Incoterms, such as transportation costs, insurance premiums, customs duties, taxes, fees, penalties, and disputes. You should also collect feedback from your trading partner, your logistics provider, your insurance company, and your customers on their satisfaction and expectations regarding the delivery process. You should then identify the strengths and weaknesses of your Incoterms strategy, and look for ways to optimize it for future transactions. You should also stay updated on the changes and trends in the international trade environment, and adapt your Incoterms accordingly.

5 Here’s what else to consider

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