Incoterms: Meaning, impact on Procurement and what companies should look out for

Incoterms play a central role in international trade in goods - and yet they are often an underestimated lever in the day-to-day business of many purchasing departments. They not only determine who is responsible for transportation, risk or customs formalities, but also directly influence the cost structure and operational handling of procurement processes.

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It is therefore crucial for companies in the industrial SME sector to understand the importance of Incoterms - and to use them specifically for strategic purchasing decisions.‍‍

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‍Whatare Incoterms?

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‍‍Incoterms(International Commercial Terms) are standardized clauses for regulating delivery terms in international trade. They are published by the International Chamber of Commerce (ICC), last updated in 2020 The eleven currently valid Incoterms clearly define which party (buyer or seller) is responsible for transportation, insurance, risks, costs and customs clearance - and at what point these responsibilities are transferred.‍

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In Procurement , they ensure an internationally standardized contractual basis, reduce misunderstandings and create transparency - provided they are interpreted correctly and applied consistently.‍‍

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‍WhyIncoterms are relevant for Procurement

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For buyers, Incoterms are far more than legal footnotes. They influence specific operational issues:‍

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• Who bears the responsibility in the event of damage during transportation?‍

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• Which party organizes customs clearance and is entitled to deduct input tax?‍

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• Where do the cost obligations begin and end from a purchasing perspective?

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• How can potential additional costs due to unclear responsibilities be avoided?‍

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Incorrectly selected or unclear Incoterms can lead to unexpected additional costs, logistical delays or tax disadvantages - for example, if the buyer acts as the importer but does not have access to import documents.‍‍‍

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‍Examples: EXW, DAP and DDP in comparison

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‍‍Apractical understanding of Incoterms starts with the three most common clauses in B2B business:‍

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• EXW (Ex Works):‍
  ‍Theseller provides the goods, the buyer assumes all obligations from the factory gate. Advantage: full control. Disadvantage: high logistical and customs costs for the buyer.‍

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• DAP (Delivered at Place):
  The seller organizes transport to the agreed location, the buyer only takes care of import processing. This variant offers a good balance of transparency and division of responsibility.‍

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• DDP (Delivered Duty Paid):
  The seller bears all costs and risks until the goods are delivered duty paid to the buyer. Convenient for Procurement - but often associated with higher prices or hidden surcharges.

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Which option makes sense in a specific case depends heavily on internal resources, customs expertise and the desired level of control in Procurement .

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‍Influenceon customs obligations and cost structure

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‍‍Aparticularly critical point in international Procurement: the Incoterms have a direct influence on customs duties and input tax deductibility. The buyer can only claim input tax if it acts as the legal importer. If this is not properly regulated in the contract, it is not only tax disadvantages that arise - traceability and documentation within the scope of compliance or CBAM requirements also suffer.‍

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In addition, if responsibilities are not clearly defined, additional costs can arise due to delays, subsequent handling fees or increased storage costs. A strategic approach to Incoterms has a preventative effect here.‍‍

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‍Whatcompanies should consider now

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For a future-proof purchasing organization, Incoterms should not only be viewed as a contract annex - but should be actively integrated into the purchasing strategy:‍

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• Create clarity: Consciously choose and document Incoterms and communicate them consistently both internally and externally

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• Know your customs processes: Who assumes which duties? Are there internal competencies or do external partners need to be involved?

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• Use supplier discussions: Negotiate Incoterms in a targeted manner - and align them with pricing, risk assumption and logistical requirements

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• Use digital support: Solutions such as Tacto enable the structured recording of Incoterms at item level - and help to identify risks and cost drivers at an early stage

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Conclusion

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‍‍Incotermsare far more than just standard formulations - they are a strategic tool for Procurement. Those who understand them and use them correctly reduce risks, optimize processes and secure tax and logistical advantages. Particularly in an international context, where political uncertainties are increasing and customs regimes can change quickly, the correct application of Incoterms is a decisive factor for success.

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Whether transport, costs or risk - choosing the right Incoterms has a decisive influence on how efficiently and securely your procurement processes run. In our compact overview, you will find out who takes responsibility and when, and how you can avoid cost traps and uncertainties by using Incoterms correctly. Understand, compare and use them strategically in Procurement now!