Culture and language may be different around the world but if you use Incoterms you’ll have no trouble understanding other global traders.
FOB? CIF Gdynia Poland?? FCA Mumbai Port Incoterms 2000??? You must have seen them used on many import/export websites, what do they mean? Incoterms are used by import-export traders worldwide to stipulate the terms of their sales contracts, what they mean
Traders from all over the world find that communicating with each other becomes more straightforward once Incoterms (International Commercial terms) are used.
Both parties in any trade deal need to be clear what their costs and obligations are, hence it is important they fully comprehend the agreed terms of sale.
They allow the different parties taking part in an import/export deal to be clear when and where ownership and payment obligations transfer from one to the other. Points of great interest in any transaction occur when ownership and payment responsiblities transfer from one party to the other. Incoterms make it clear when these points are reached.
So the system allows all parties to easily determine which of them takes financial responsibility what aspect of the trade and who takes on certain risks at different points during the transaction process.
A standardised system was created by the Paris based International Chamber of Commerce (ICC) in 1936.|
In 1936, in order to end confusion, the International Chamber of Commerce (ICC) compiled a list of the terms that were in most common use.
The definitions were established from the position of the seller. Whilst they are used to agree where responsibility changes hands geographically, please note that they do not deal with ownership of the goods being sold.
In brief, these terms are a way of describing when the buyer begins to pay for the shipments, ranging from the factory gates, (EXW – Ex Works) where the buyer pays for insurance, shipment and all fees, so the seller doesn’t pay for anything, right through to delivery on the buyer’s doorstep (DDP – Delivery Duty Paid) where the seller takes on all of the cost of delivery.
This list of thirteen 3 letter abbreviations is known as Incoterms and is copyright of the International Chamber of Commerce. There are strict rules about what they actually mean and how they should be used.
The International Chamber of Commerce, ICC, recommends that ‘Incoterms 2000′ be referred to whenever the terms are used and it is generally recommended that the actual place where the handover of responsibilities takes place is included with the Incoterms.
Correct usage is: CIF Manchester Incoterms 2000.
Although they are not legally binding, their general recognition means they should be specified as soon as possible in any negotiation and should definitely be written into the contracts to avoid misunderstandings later on. A good understanding of how to use Incoterms should help you avoid some of the major problems connected with international trade.
And here they all are:
EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU, DDP.
To learn the full meaning of these terms we suggest you go here: Incoterms
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