What are Incoterms® and how to utilise them?
Incoterms®, or International Commercial Terms, are a set of standard international terms established by the International Chamber of Commerce (ICC) and used in international sales contracts. These terms govern the responsibilities and obligations of seller and buyer with respect to the delivery of goods.
Perhaps the simplest way to explain what incoterms stand for is really just the answer to the question that trading parties ask between each other, “will you bring the goods, or should I come and collect them?” So the agreed Incoterm® provides for the issue of who is responsible for what part of the transportation and who will bear what costs (note that these two issues are not always exactly at the same point in the timeline!).
There are 11 Incoterms® that are divided into two categories: Incoterms® for transport by sea or inland waterway, and Incoterms® for transport by road, rail or air. The most commonly used Incoterms® are EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance and Freight) and DDP (Delivered Duty Paid). We will list these, in brief, for you:
EXW (Ex Works)
Means the seller makes the goods available at its own location and the buyer is responsible for transporting the goods.
FOB (Free on Board)
Means the seller is responsible for loading the goods onto the vessel and the buyer is responsible for transporting the goods.
CIF (Cost, Insurance and Freight)
Means that the seller is responsible for loading the goods onto the vessel, insurance costs and transportation of the goods to the destination.
DDP (Delivered Duty Paid)
Means that the seller is responsible for transporting the goods to the destination, including all customs fees and import duties.
It is important to note that Incoterms® apply only to the delivery of goods and not to their payment. Payment terms must be arranged separately!
In an international trade, it is imperative to understand and use Incoterms® properly. It is essential for efficient and smooth delivery of goods. So it is advisable to properly understand and include these terms in contracts.
In conclusion:
Incoterms® are an important part of international trade because they regulate the responsibilities and obligations of seller and buyer regarding the delivery of goods. Thus, it is important to properly understand and apply these terms in international trade to ensure efficient and smooth delivery of goods.
If you would like to know more or Incoterms® and their proper use, please do not hesitate to contact us without any obligation!
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.
The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterm® Rules may be obtained from the ICC website [insert hyperlink]. Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above.