From our book: “Successful exporting – negotiating the dangers of the deep”.
“DD” – Deep Diver – pressures you throughout the book with the most challenging in-depth questions.
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You may expect that the tried and tested logistics that work within your home markets will operate smoothly abroad. They have been cost efficient, reliable and punctual. And you and your teams are used to the paperwork.
In reality, even a local delivery can be a challenge – “swimming with fins” – and now your products or services need to reach your customer at a more remote location – where long-distance “diver propulsion vehicles” are needed. The further distant your delivery point is, the more vulnerable and exposed you will be to unforeseen factors such as geology, the weather and man-made obstacles which are more likely to disrupt a usually familiar operation. These conditions are often beyond your control, e.g. hurricane, earthquake, flooding, political turmoil, security challenges, industrial unrest, changing tariffs and legislation, terrorism, drones, theft, hijacking, etc. They are all unpredictable and significant barriers to a reliable delivery process.
To monitor the movement of goods there are various systems and processes in place. International delivery terms are structured via “Incoterms” (International Commercial Terms), which are set by the International Chamber of Commerce (ICC), to clarify who is responsible for which stage of the process. They take account of international commercial law and are widely used by the export community. Incoterms 2010 include 11 rules, each of which is denominated by a combination of 3 letters. Each rule corresponds to pre-defined commercial terms that explain for each party the tasks, costs and risks associated with the international transportation of goods, e.g. F.O.B. (Free On Board), C.I.F. (Cost Insurance and Freight), D.D.P. (Delivered Duty Paid), E.X.W. (EX Works) etc. An incoterm is not a legally binding commitment on its own and should be part of a more comprehensive sales contract incorporating, for example, insurance cover, payment terms, packaging and the choice of currency.
Payments are usually made during, and/or after the delivery process, i.e. when goods or services have finally reached customers, which match their expectations. Of course, there may be circumstances in which a new prospect has agreed to pay a pre-production deposit. Payment upfront may be required when there is a doubt about their credit worthiness. The task of managing the synchronisation of payments with the various stages of delivery is in itself a crucial factor in developing and maintaining your ongoing relationship with new and existing customers.
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