Incoterms or International Commercial Terms are terms established by the International Chamber of Commerce. They are used in international trade to define the obligations and responsibilities of the buyer/exporter and seller/importer of a product.
There can sometimes be misunderstandings in international negotiations due to different interpretations of trade in different countries. Incoterms are intended to avoid this confusion as they establish rules at an international level.
The International Chamber of Commerce published a set of international rules regarding the interpretation of commercial terms for the first time in 1935. These rules became known as Incoterms in 1963 although they have been changed and added to over the years, the latest version being that of 2010.
For Incoterms to apply, it must state in the sales contract that both parties agree to be bound by the ICC Incoterms 2010, publication no. 175.
What are the Incoterms 2010?
The latest version of the Incoterms defines 11 terms divided into 4 groups:
Incoterms Grupo E
The seller is only responsible for making the cargo available to the buyer at their warehouse. The buyer must organise collection and sea freight or air freight to their country covering all of the costs.
- EXW: Ex Works.
Grup F Incoterms
The seller prepares and delivers the cargo to an agreed port and the buyer is responsible for the international carriage of the cargo to their country.
- FCA: Free Carrier.
- FAS: Free Alonside Ship.
- FOB: Free On Board.
Grup C Incoterms
The seller takes care of transport and costs up to the port of discharge where the buyer must collect the cargo.
- CPT: Carriage Paid To…
- CIP: Carriage and Insurance Paid To…
- CFR: Cost And Freight
- CIF: Cost Insurance And Freight.
Grup D Incoterms
The seller delivers the cargo to a given point in the destination country.
- DAT: Delivered At Terminal.
- DAP: Delivered At Place.
- DDP: Delivered Duty Paid.
What are the obligations according to the Incoterms?
The obligations will depend on the agreed responsibilities. The delivery costs will be covered according to the terms negotiated.