Incoterms® (International Commercial Terms)

Incoterms® (International Commercial Terms) are a set of predefined international rules for the interpretation of trade terms used in international sales contracts. They are published by the International Chamber of Commerce (ICC).

Incoterms® are used to define the responsibilities of buyers and sellers in an international sale. They define who is responsible for paying for transport, insurance, and other costs, as well as when the risk of loss transfers from the seller to the buyer.

There are 11 Incoterms®, each with a different set of rules. The most common Incoterms® are:

• EXW (Ex Works): The seller delivers the goods at their own premises, and the buyer is responsible for all costs and risks from that point on.
• FCA (Free Carrier): The seller delivers the goods to a carrier nominated by the buyer, but the buyer is responsible for all costs and risks from that point on.
• CPT (Carriage Paid To): The seller pays for the carriage of the goods to a named destination, but the buyer is responsible for all risks from that point on.
• CIP (Carriage and Insurance Paid To): The seller pays for the carriage and insurance of the goods to a named destination, but the buyer is responsible for all risks from that point on.
• DAP (Delivered at Place): The seller delivers the goods to the buyer's premises, but the buyer is responsible for unloading the goods.
• DDP (Delivered Duty Paid): The seller delivers the goods to the buyer's premises and pays all costs and risks up to that point, including import duties and taxes.

Incoterms are not set or controlled by any specific government. As such, they are a very useful tool for finding common ground in international relations and trade agreements.

Related articles: 

What Are Incoterms®? - USA Customs Clearance 

The Importance of Incoterms® and Why You Need Them - USA Customs Clearance