Incoterms, short for International Commercial Terms, are a set of predefined commercial terms published by the International Chamber of Commerce (ICC). They are the global standard for defining the responsibilities of buyers and sellers in international trade contracts. For any procurement professional or exporter, a clear understanding of Incoterms is absolutely essential. They are the language of international trade, clarifying who pays for what, where the risk of loss or damage to the goods transfers from the seller to the buyer, and who is responsible for arranging and paying for transportation and insurance. Without a clear and agreed-upon Incoterm, a transaction can be plagued by misunderstandings, disputes, and unforeseen costs. The Incoterms are revised periodically, with the latest version being Incoterms 2020. It is crucial to ensure that the correct version is cited in a contract, as they can change. The terms are divided into two main categories based on the mode of transport: those that can be used for any mode of transport, and those that are specifically for sea and inland waterway transport.
The most widely used Incoterms are those in the F” (Free Carrier) and “C” (Cost and Freight) groups. For example
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