What are Incoterms?
Incoterms, or International Commercial Terms, are a set of international rules for the interpretation of trade terms used in international commercial contracts. They are published by the International Chamber of Commerce (ICC). The latest version of Incoterms is Incoterms 2020, which was published on January 1, 2020.
Incoterms provide clarity and certainty about the responsibilities of the buyer and seller in international trade. They cover a range of issues, including who is responsible for packing and loading the goods, who is responsible for paying for insurance, and who is responsible for any loss or damage to the goods in transit.
There are 11 Incoterms including when risk transfers from Seller to Buyer:
How to Choose the Right Incoterm
The right Incoterm for a particular transaction will depend on a number of factors, including the mode of transport, the location of the buyer and seller, and the type of goods being shipped.
For example, if the goods are being shipped by sea, the seller may prefer to use the FOB term. This means that the seller is responsible for loading the goods onto the ship and paying for the freight to the buyer's port of destination. The buyer is then responsible for unloading the goods and any further transportation costs.
If the goods are being shipped by air, the seller may prefer to use the FCA term. This means that the seller is responsible for delivering the goods to the carrier's warehouse and paying for the freight to the buyer's destination. The buyer is then responsible for any further transportation costs.
Benefits of Using Incoterms
There are a number of benefits to using Incoterms, including:
Clarity and certainty about the responsibilities of the buyer and seller
Reduced risk of disputes
Improved efficiency in international trade
In summary, Incoterms are an important part of international trade. By understanding Incoterms, you can reduce the risk of disputes and improve the efficiency of your international trade transactions.
Here are some additional tips for using Incoterms:
Always use the latest version of Incoterms.
Be sure to understand the full implications of the Incoterm you are using.
If you are unsure about which Incoterm to use, consult with our trained logistics staff.