Legal, Financial, and Strategic Forces in Cross-border Delivery Terms

ABSTRACT

Drawing on three-dimensional (HS6 product-destination-year) data on delivery terms in exports from Turkey, this study comprehensively explores the determinants of INCOTERMS clauses in three dimensions: legal, financial, and strategic. We show that a larger share of foreign sales occurs on high seller risk responsibility delivery terms when the export destination has better regulations, easier customs clearance, and high financing costs. Our findings also suggest the influence of bargaining power and experience on delivery terms. That is, the share of exports transacted on high supplier responsibility terms decreases with the number of export destinations served but increases with the number of products shipped to a particular export market in the past.

KEYWORDS:

• INCOTERMS
• delivery terms in exports
• international logistics
• customs

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. For detailed information on INCOTERMS’ brief history, revisions, and challenges with their practice, see Stapleton, Pande, and O’Brien (2014).

2. Habiyaremye and Avsar (2020).

3. We used 2015 figures to have consistent comparison across countries.

4. This is a common practice in political economy literature, for example see Busse and Hefeker (2007).

5. These variables are used in logarithms to reduce the dispersion.

6. Alvarez, Faruq, and Lopez (2013).

7. Similar robustness check is conducted in Rose and Spiegel (2011).

8. An example in this category is the information shared in the US Department of Commerce’s website about specific INCOTERMS conditions in Brazil (7/13/2020).