The Most Commonly Used Incoterms for Toy Business
Incoterms 2020
CIF (Cost, Insurance, and Freight)
FOB (Free on Board)
The most common trade terms used for toy international business are the Incoterms, which are a standardized set of terms that define the responsibilities of buyers and sellers in international trade. The current version of Incoterms is Incoterms 2020, which includes 11 trade terms.
FOB (Free on Board)
CIF (Cost, Insurance, and Freight)
FOB (Free on Board)
Under this term, the seller is responsible for delivering the goods to the port of shipment and loading them onto the vessel. Once the goods are on board, the buyer is responsible for all costs and risks associated with the shipment.
CIF (Cost, Insurance, and Freight)
CIF (Cost, Insurance, and Freight)
CIF (Cost, Insurance, and Freight)
Under this term, the seller is responsible for delivering the goods to the port of destination and paying for the cost of insurance and freight. The buyer is responsible for all other costs and risks associated with the shipment.
EXW (Ex Works)
DDP (Delivered Duty Paid)
CIF (Cost, Insurance, and Freight)
Under this term, the seller is only responsible for making the goods available at their premises. The buyer is responsible for all costs and risks associated with the shipment, including loading the goods onto the transportation vehicle.
DDP (Delivered Duty Paid)
DDP (Delivered Duty Paid)
DDP (Delivered Duty Paid)
Under this term, the seller is responsible for delivering the goods to the buyer's premises and paying for all costs and duties associated with the shipment.
DAP (Delivered at Place)
DDP (Delivered Duty Paid)
DDP (Delivered Duty Paid)
Under this term, the seller is responsible for delivering the goods to a specified place, such as a warehouse or distribution center. The buyer is responsible for all costs and risks associated with the shipment from that point forward.
In addition to the Incoterms 2020, there are several other common trade terms
- FCA (Free Carrier): Under this term, the seller is responsible for delivering the goods to a carrier that is specified by the buyer. Once the goods are loaded onto the carrier, the buyer is responsible for all costs and risks associated with the shipment.
- CIP (Carriage and Insurance Paid To): Under this term, the seller is responsible for delivering the goods to a carrier that is specified by the buyer and paying for the cost of insurance. The buyer is responsible for all other costs and risks associated with the shipment.
- DAT (Delivered at Terminal): Under this term, the seller is responsible for delivering the goods to a specified terminal, such as a port or warehouse. The buyer is responsible for all costs and risks associated with the shipment from that point forward.
- CFR (Cost and Freight): Under this term, the seller is responsible for delivering the goods to the port of destination and paying for the cost of freight. The buyer is responsible for all other costs and risks associated with the shipment.
- DDU (Delivered Duty Unpaid): Under this term, the seller is responsible for delivering the goods to the buyer's premises, but the buyer is responsible for paying for any duties or taxes associated with the shipment.
Toy Business Payments Can Be Made Using Various Methods
Letter of Credit (L/C)
Documentary Collection (D/C)
Telegraphic Transfer (T/T)
L/Cs are a widely used payment method in toy business, especially for high-value transactions.
A letter of credit is issued by a bank and guarantees that the seller will receive payment as long as the terms and conditions of the credit are met. This provides security for both the toy manufacturer and the buyer, as the buyer is assured that the goods will be delivered before payment is made, and the toy manufacturer is assured of payment once the goods have been shipped.
Telegraphic Transfer (T/T)
Documentary Collection (D/C)
Telegraphic Transfer (T/T)
T/Ts are a popular payment method for the toy business, especially for medium-sized transactions.
T/Ts involve the electronic transfer of funds from the buyer's bank to the toy manufacturer's bank, typically through an intermediary bank. This method is relatively fast, secure, and can be used for both large and small transactions.
Documentary Collection (D/C)
Documentary Collection (D/C)
Documentary Collection (D/C)
This method involves the toy manufacturers using a bank to collect payment from the buyer. The bank acts as an intermediary and ensures that the shipping documents are exchanged for payment.
Advance Payment (AP)
Cash in advance (CIA)
Documentary Collection (D/C)
This is when the buyer pays the toy manufacturer in full before the toy goods are manufactured and shipped. This term is often used for custom orders or when dealing with a new toy manufacturing supplier.
Cash in advance (CIA)
Cash in advance (CIA)
Cash in advance (CIA)
This payment method involves the buyer making payment before the goods are shipped. This method provides the most security for the toy manufacturer, as they receive payment before the goods are delivered.
Open Account (OA)
Cash in advance (CIA)
Cash in advance (CIA)
This payment method is used when the toy manufacturer and the buyer have an established relationship and a high degree of trust. Under an open account arrangement, the toy manufacturer extends credit to the buyer and allows them to make payment at a later date, typically 30-60-90 days after the goods have been delivered.
Other payment (OP)
PayPal, Visa, Mastercard, and American Express are also commonly used payment methods in the toy business, especially for smaller orders, samples order or transactions conducted online.
- PayPal: This is a popular online payment system that allows businesses and individuals to make payments and money transfers over the Internet. It's particularly useful for international transactions, as it can handle currency conversions and offers some level of buyer and toy manufacturers protection.
- Visa, Mastercard, and American Express: These are credit card networks that allow buyers to make purchases on credit, with the understanding that they will pay the amount back, usually with interest. These are often used for smaller transactions and offer the advantage of convenience and buyer protection.
However, for larger transactions and those conducted between businesses, the terms mentioned above (such as Advance Payment, Letter of Credit, Telegraphic Transfer, etc.) are more common. These methods offer more security for both parties and can handle larger amounts of money.
The selection of the payment method is based on several factors, including the business relationship between our toy manufacturer and buyer, as well as the level of risk each party is willing to assume.
A Comprehensive Guide to Importing Toys from Other Countries
Importing toys from other countries can be a profitable strategy for your toy business, as it allows you to access a diverse range of products at competitive prices. However, navigating the complexities of international trade can be challenging. Below outline the key steps to successfully import toys from other countries.
- Identify Potential Suppliers: Begin by researching and identifying potential toy manufacturers and suppliers in the countries you wish to import from. Utilise B2B platforms like Toys.Bisiness, trade shows, and industry networks to find reliable toy manufacturers and suppliers that align with your business requirements.
- Verify Compliance with Regulations and Safety Standards: Ensure that the toys you plan to import comply with the safety standards and regulations in your country. In the United States, this means adhering to the Consumer Product Safety Improvement Act (CPSIA) (ASTM), while in the European Union, toys must comply with the Toy Safety Directive (EN 71) (CE) and (UKCA) in the UK. Request compliance certificates from your toy manufacturers and suppliers to verify that their products meet these requirements.
- Obtain Necessary Import Licenses and Permits: Depending on your country and the type of toys you're importing, you may need to obtain import licenses or permits. Consult with your local customs authority or an import-export consultant to determine what documentation is required for your specific situation.
- Negotiate Terms and Conditions: Negotiate the terms and conditions of your agreement with the toy manufacturers and suppliers, including pricing, payment terms, lead times, and shipping arrangements. Establish a clear contract to avoid misunderstandings and ensure a smooth import process.
- Choose the Appropriate Incoterms: Incoterms are a set of international rules that define the responsibilities of buyers and sellers in international trade. Select the appropriate Incoterm for your transaction, such as FOB (Free on Board), CIF (Cost, Insurance, and Freight), or EXW (Ex Works), to clarify the division of costs and responsibilities between you and your toy manufacturers and suppliers.
- Arrange for Shipping and Logistics: Choose a reliable freight forwarder or shipping agent to handle the transportation of your imported toys. They will help you navigate shipping routes, customs clearance, and any other logistical challenges that arise during the import process.
- Obtain Insurance Coverage: Protect your investment by obtaining insurance coverage for your imported toys. This ensures that you're compensated in case of damage or loss during transit.
- Prepare for Customs Clearance: Work with a customs broker or clearance agent to ensure that your imported toys pass through customs smoothly. They will help you prepare the necessary paperwork, such as the commercial invoice, packing list, and bill of lading, and ensure that your shipment complies with all import regulations.
- Pay Applicable Duties and Taxes: Upon arrival of your shipment, you will need to pay any applicable duties and taxes. Your customs broker or clearance agent can help you calculate these costs and ensure that they are paid on time.
- Arrange for Final Delivery: Once your toys have cleared customs, arrange for their transportation to your warehouse or store. This may involve coordinating with a local trucking or courier service to ensure timely delivery.
Importing toys from other countries can be a complex process, but with proper planning and organization, it can be a rewarding strategy for your toy business. By following the steps outlined in this article and working with experienced professionals, you can successfully navigate the challenges of international trade and expand your product offerings with unique and competitively priced toys.