Incoterms (International Commercial Terms) are a set of rules developed by the International Chamber of Commerce (ICC) to govern the responsibilities and risks between buyers and sellers in international trade. They serve as standardized trading conditions and help to avoid misunderstandings and ensure the smooth conduct of international business.
Incoterms define the allocation of costs, responsibilities and risks between buyer and seller in relation to the transportation, insurance and customs clearance of goods. They specify who is responsible for organizing and paying for the transport, insurance coverage during the transport and customs clearance.
There are a total of 11 Incoterms rules covering the various stages of transportation and delivery. Here are the main Incoterms rules:
- EXW (Ex Works): The Seller shall make the goods available for collection by the Buyer at the agreed place. All costs and risks are transferred to the buyer from that moment.
- FCA (Free Carrier): The seller delivers the goods to a location agreed upon by the buyer and seller, such as a warehouse or port. The seller bears the costs until the delivery to the carrier.
- CIF (Cost, Insurance, and Freight): The seller delivers the goods to the port of destination and bears the costs of transportation and insurance to that destination. The buyer bears the costs of unloading and further transport costs in the country of destination.
- DAP (Delivered at Place): The seller delivers the goods to the agreed destination in the country of destination, but does not bear the costs of unloading. The buyer assumes the costs and risks from the moment of delivery.
These are just a few examples of the Incoterms rules that cover various aspects of international trade. Each Incoterms rule clearly defines the responsibilities of the buyer and seller with respect to the transportation, insurance, customs clearance and delivery of the goods. It is important to select the correct Incoterms rule according to the specific requirements and agreements in an international trade transaction.