What are Incoterms?




Incoterms (International Commercial Terms) or Trade Terms are key segments of international contracts of sale. As it were, Incoterms are the selling terms that the purchaser and seller of products both consents to. They obviously state which tasks, expenses and risks are connected with the buyer and the seller. It also states when the seller’s costs and risks are transferred onto the purchaser. Thus, the main advantage of Incoterm is that buyers and sellers to rapidly, and without required to compose lengthy descriptions into their contracts or invoices, comprehend which of them has which responsibilities or obligations with respect to transport.

Incoterms have two components – the term used and a name place. For example, DDU Bangalore.

As per the Incoterms used, determines the division of costs and risks between the two parties and at what point the responsibility shifts from seller to buyer.

Following are the list of Incoterms,

EXW - Ex Works
FCA - Free Carrier
FAS - Free Alongside Ship
FOB - Free On Board
CFR - Cost and Freight
CIF - Cost, Insurance and Freight
CPT - Carriage Paid To
CIP - Carriage and Insurance Paid To
DAT - Delivered At Terminal
DAP - Delivered At Place
DDP - Delivered Duty Paid




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masika: First I would like to give a big thanks for your work on howtoexportimport.com, I believe many of us beginners in the export business are grateful to the contents that are made available for learning. On my side I would like to know the most popular/beneficial incoterms used by aricultural commodities exporters. I have recently started this business and have taken the time beforehand to learn about its aspects, but I haven't been able to get insights from experienced people on how to actually move forward with this. there are a number of things that still confuse me but first I would like to know each cost that is related to a given incoterm.

hardik: I am a huge fan of yours. I have been gathering knowledge through your website for years. And it has helped me a lot. I had a query regarding the INCOTERMS. Can you please let me know where I can understand these terms easily? As the more I read, on different websites and books, the more confused I become. Everything gets mixed up. Whenever I go for an interview and I am asked about INCOTERMS, I am either unable to explain the interviewer or I give a wrong answer. Can you please help me with this issue? Hope to hear from you soon.

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