Jake Merritt has many years practical business experience. He is currently a staff writer for the online b2b marketplace Import-Export-Guide.com which you can visit to learn more about Incoterms
and to find Import Export Trade Leads.
Can't understand Japanese and you couldn't handle basic school French? Not to worry, you'll have no trouble understanding traders around the world once you've got your head around Incoterms.
No doubt you've seen them used in many places and wondered what they could mean - FOB, CIF Manchester, CIF Mumbai.
Import-Export traders use Incoterms to specify their sales terms. So if you're serious about doing business overseas you'll want to have good knowledge of them.
Traders the world over find that communicating with each other becomes more straightforward with Incoterms (International Commercial Terms).
Because buyers and sellers must understand exactly what their costs and obligations are during any trade deal, both parties need to know what the terms of the deal are. Important points in any deal occur when ownership and payment responsiblities transfer from one to the other. Incoterms make it clear when these points are reached. So what is basically determined is who pays for what during the delivery and who assumes what risks.
In 1936, in order to reduce confusion, the International Chamber of Commerce (ICC) compiled a list of the terms that were most commonly used by the international trading community.
The terms were written 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.
The terms range from EXW (Ex Works) which is the situation where the buyer pays for insurance, shipment and all fees to the other extreme - DDP (Delivery Duty Paid) where the seller pays all the costs of delivery.
Copyright of the 13 abbreviated terms belongs to the ICC.
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: CPT Mumbai Incoterms 2000.
The terms are accepted all over the globe so, whilst they are not legally binding, you should use them in all your negotiations and reference them in your contracts to avoid any misunderstandings.
Take the time to understand what the Incoterms mean and how they are applied - you'll end up having a smooth trading career.
And here they all are:
EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU, DDP.
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