Incoterms
Incoterms, which is an abbreviation of “international commercial terms”, represent trade related terms published by the International Chamber of Commerce.
These terms are used in both international and domestic commercial contracts. The main purpose of the Incoterms is to make international trade easier and help exporters/importers from different countries to understand one another. The first Incoterms version was created in 1936. The International Chamber of Commerce updates the Incoterms from time to time, to adjust them to current trade practices. Considering the updates, traders should indicate in the contracts which version of Incoterms they are using (for example, Incoterms 2010). Incoterms are internationally recognized, thus helping exporters/importers understand their obligations in any transaction.
For example, Incoterms provide terms and definitions for all transport modes:
EXW (Ex works) - is a term meaning that the buyer brings upon himself the risks for bringing the goods to their final destination (including payment for the transportation and insurance).
FCA (Free carrier) - term meaning the seller delivers the goods, cleared for export, at a named place. It is the Buyer's obligation to receive the seller's arriving vehicle unloaded.
CPT (Carriage paid to) - term meaning that the risk and insurance costs pass to buyer, after the goods are delivered to carrier by the seller (who pays transportation cost to destination).
DAT (Delivered at terminal) - term indicating that the seller delivers the goods to a terminal, and the seller assumes all the risk and transportation costs until the goods have arrived to the terminal. Thereafter, the buyer assumes the risks and transportation costs of the goods from the terminal to the buyer's final destination.
There are also terms especially created for inland waterway/sea transport, for example:
FOB - (Free on board) – term meaning that the buyer/seller delivers the goods on a designated vessel. The buyer/seller may assume all the risks and transportation costs.
CIF - (Cost, insurance and freight) – term meaning that the seller must deliver the goods to a specified vessel or port. The seller must also pay for insurance and transportation. The buyer assumes risks related to transportation once the goods are loaded onto the vessel.
