What are Incoterms?

What exactly are Incoterms?

Published by the International Chamber of Commerce (ICC) and revised on a ten-yearly basis, Incoterms define the transactional obligations and responsibilities of a buyer and seller.

Incoterms

These universally recognized rules exist to aid communication and reduce confusion for parties engaged in international commercial transactions.

Incoterms define the following responsibilities:

How to choose the right Incoterm for your business

While freight forwarders can always advise you about which incoterm to use, the decision will ultimately be in the hands of your business.

It’s important to understand how each term affects an international sales agreement. Banks and financial institutions need assurances that all the parties involved in a contract are aware of their obligations and liabilities.

Things to consider

As an exporter, you should consider if your business has the capacity to pay the costs and bear the risks of transportation to the point of delivery, or if it would be better to limit those obligations within the borders of your country, where you have more control over logistics.

As an importer, if you have developed a strong logistics team and network with your freight forwarders, then you might wish to have control of insurance and transportation arrangements, because you can maintain transparency and perhaps benefit by consolidating shipments in the exporting countries.