What are Incoterms and why are they used?
Buying and selling goods internationally can be challenging, which is why the International Chamber of Commerce (ICC) developed the Incoterms.
The Incoterms (International Commercial Terms) are simply rules that specify which party in the supply chain is responsible for certain duties, expenses, and hazards related to the shipment of products.
The Incoterms have been in use for more than 60 years and are acknowledged by all international courts and organizations.
Their primary goal is to decrease or eliminate uncertainty caused by varying interpretations of the rules in different countries. Because of this, theIncoterms are frequently used in contracts all over the world to clearly state what is expected of allinvolved parties.
Understanding the Incoterms is essential, since they will be invoked in the event of a misunderstanding or legal conflict. Any logistics expert will recognize this note on the box or document.
Within these regulations, some phrases have particular definitions. Among the more significant ones are:
- Delivery – The moment in the transaction in which the risk of loss or damage to the goods is transferred from the seller to the buyer
- Arrival – The moment up to which the transport of goods is paid
- Free- Obligation of the seller to deliver the goods to the designated place where the carrier picks them up
- Carrier – Any person/company who undertakes to carry out or provide goods transportation by contract
- Forwarder – A company that arrangesor assists in making arrangements for shipping of goods
- Prepared for export – Transmitting the sender’s export declaration and obtaining an export permit
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