What are Incoterms?
<p “=”” style=””International Commercial Trade Terms, or Incoterms for short, are selling terms buyers and sellers use so they can communicate which party is responsible for the tasks, costs, and risks associated with transferring the goods to the buyer when trading internationally. These are legally binding agreements published by the International Chamber of Commerce (ICC), and followed by virtually all countries./pp “=”” style=””>Every 10 years, the ICC updates the Incoterms to ensure that they stay consistent with the current process of international trade. Incoterms were last updated on January 1st, 2020, and include 11 unique types. <p “=”” style=””When buyers are purchasing products internationally, sellers will often include a three-letter abbreviation of one of the 11 Incoterms to define what the terms of the trade shall be. These terms represent various tasks, costs, risks, and logistics of getting goods whether by sea freight, air freight, and land freight./pp “=”” style=””>Every Incoterm defines the following responsibilities and obligations:
- Point of delivery – This section outlines where the goods will be transferred from the seller to the buyer.
- The responsible party for transportation costs – The section defines which party will cover the freight costs. This component is often characterized as Freight Prepaid or Freight Collect.
- Export and import requirements – Each term defines whether the seller or buyer is responsible for covering the costs and facilitating the export and import of the cargo.
- The responsible party of freight insurance – In some Incoterms, freight insurance is a requirement. Each Incoterm will define who must pay for freight insurance.