What are Incoterms?
Incoterms are standard trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade. Among the best known Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To). Most contracts made after 1 January 2000 will refer to the latest edition of Incoterms, which came into force on that date. The correct reference is “Incoterms 2000”. Correct use of Incoterms goes a long way to providing the legal certainty upon which mutual confidence between business partners must be based. To be sure of using them correctly, trade practitioners need to consult the full ICC texts, and to beware of the many unauthorized summaries and approximate versions that abound on the web.
Incoterms are 13 standardized definitions of commonly used shipping and trade terms that cover control of goods and financial responsibilities such as payment of cargo insurance and freight. Incoterms provide traders with a common set of rules outlining each partys obligations, thus reducing misunderstandings.
Incoterms provides a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. It relates to namely the contract of sale. It also deals with a number of identified obligations imposed on the parties such as the seller’s obligation to place the goods at the disposal of the buyer or hand them over for carriage or deliver them at destination-and with the distribution of risk between the parties in these cases.
