INCOTERMS is an abbreviation for International Commercial Terms, which are a set of standardized trade terms used globally in commercial transactions. They were first introduced by the International Chamber of Commerce (ICC) in 1936 and have been revised periodically to reflect the changing trends and practices in international trade.
INCOTERMS define the responsibilities, costs, and risks associated with the delivery of goods from the seller to the buyer. They establish clear guidelines and eliminate ambiguities in international trade contracts, ensuring that both parties involved have a common understanding of the terms and conditions.
The INCOTERMS are comprised of three-letter codes, such as FOB (Free on Board), CIF (Cost, Insurance, and Freight), and EXW (Ex Works), which pinpoint the specific obligations of the buyer and the seller in terms of transport, insurance, customs formalities, and other aspects of the transaction. By clearly defining who is responsible for various activities and expenses, INCOTERMS help avoid disputes and misunderstandings.
These trade terms are widely used and recognized by businesses, freight forwarders, and customs authorities worldwide. They provide a universal language for conducting global trade and play a crucial role in facilitating international commerce by clarifying the rights and obligations of each party involved in a transaction.
It is important for businesses engaged in international trade to understand and correctly reference the applicable INCOTERMS in their contracts to ensure a smooth and efficient process, and to minimize potential risks and costs associated with the transportation and delivery of goods.
