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Incoterms® for Food Importers: Creating a Recipe For Your Success

In the 11 item menu of Incoterms®, there are some specific clauses that are essential to making your shipments palatable. The food industry is one of time pressure as many food items have specific sell-by dates. Conditions for shipping food commodities also must be pristine, which put additional pressures on supply chains. If shipping raw materials is an art, using the right Incoterms® for Food Importers is a science.

Let’s dig in, shall we? We’ve discussed at length the huge opportunities financially within shipping, and today we’ll dig into Incoterms® for Food Importers. Using the right combination of Incoterms® and understanding their purposes is the closest thing to a guaranteed recipe for success. While we can’t change or negotiate Incoterms for you, we can educate and give you a heads up on this area so you feel more informed and supported.

Your most important shipping buffet

Not all Incoterms® are created equal for Food Importers; some are more advantageous than others. Industry knowledge leaders typically recommend DAP (Delivered At Place Unloaded, formerly Delivered At Terminal), DAP (Delivered At Place), and DDP (Delivery Duty Paid). This demands responsibility from the buyer for customs formalities in the arrival country, transportation inland to the owner’s premises, and unloading of the freight. This is a great option for buyers who don’t know the country from which they are purchasing. In this scenario, the seller takes care of “customs and logistics formalities at origin, main transport, insurance and unloading at the terminal of the country of arrival.”

When it comes to Food Importing, perhaps the most important Incoterm® is DPU. The wording was altered from Delivered At Terminal because buyers can and often do request that their goods be unloaded at a destination that is not a terminal. With the DPU Incoterm® , the seller is responsible for assuming all risks and costs associated with the goods until they have been unloaded. DPU stands for “Delivered at Place Unloaded”. Unlike any other Incoterm®, the seller is responsible for unloading the goods and only once they have been fully unloaded are the risks and costs of importing goods then transferred to the buyer. It can be an expensive distinction, given the precision, timing and logistics involved with food products, especially frozen or refrigerated goods.

Diving a bit deeper into DDP for Food Importers (Delivery Duty Paid)

We have spent some time looking specifically at DDP – Delivery Duty Paid as a generic term that you’re likely to encounter in your shipping business, regardless of whether you’re the seller or the buyer. With Food Importers, DDP squarely defines the sellers’ responsibility to deliver shipments securely and in good shape, the goods to the location agreed upon by the buyer. The seller is responsible for paying all costs of transporting the goods to the destination. Crucially within DDP’s terms, the seller is accountable for customs clearance of the goods in the buyer’s country, including payment of duties and taxes, and securing all required authorizations from that country’s border and customs legal requirements. That is a lot of responsibility to bear, and rightly so. This Incoterm® puts the greatest responsibility on the seller, while the buyer holds the bare minimum liability. The buyer holds no risk or obligation until the goods have been delivered in full to the designated destination. One of the ICC’s (International Chamber of Commerce) main goals when creating and maintaining Incoterms® was to clearly lay out responsibilities for both parties, the sellers and the buyers, regardless of where in the world the shipping transactions take place. If the rules and requirements in the arrival country are misunderstood, DDP terms “can pose a great risk, both in terms of delays and unpredicted fees, and should be used with caution.”

Food for thought – you can always ask an expert

We’re trying to help break Incoterms® into digestible pieces so that you, whether a seller or a buyer, feel setup for success with your Food Importing business. We encourage you to read these articles and those that we link to, and have them on hand as you plan your shipments. However, sometimes it helps to speak to a real person who can answer any of your questions that are specific to your needs. A & A have been recognized as globally leading customs brokers, specifically in all things shipping and customs. If it would help you feel excited and confident in your next venture, and you should feel excited and confident, there’s so much money to be made and it’s highly attainable, give us a call. We’re here to listen, answer questions, and help you feel certain that you’re choosing the right Incoterms® for your Food Industry business.

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NOTE: All details pertaining to CARM R2 processes are based on the current information available at the time of writing. As this is subject to change, it’s recommended you periodically check in with the CBSA or your customs broker.