Incoterms: Business Terms when importing and exporting
INTRODUCTION
The main objective of the following article is to know the importance of the term iconterms. Incoterms are international trade terms that clearly define and share the obligations, expenses and risks of international transport and insurance, both between the exporter and the importer. These terms are recognized as international standards by customs authorities and courts in all countries.
When traders enter into a contract for the purchase and sale of goods, they are free to negotiate specific terms in their contract. These terms include the price, quantity, and characteristics of the goods. Each contract. The Incoterm selected by the merchants of the transaction, will determine who will pay the cost of each segment of the transport, who is responsible for loading and unloading the merchandise, and who bears the risk of loss at any given time during international shipping.
There are currently 13 Incoterms in use. All current Incoterms are described below. It can be said that EXW, FOB, CIF, and DDP are the most frequently used Incoterms.
Main features of Incoterms
The most important aspects of the international sale that are treated in the Incoterms, refer to:
• 1. Delivery: The conditions of delivery of the merchandise oblige to specify the place and the moment in which that circumstance will be verified, avoiding to establish any condition that is difficult or impossible to fulfill. The delivery obligation shall be extinguished when the seller has complied with all the acts incumbent on him to make the goods subject to the contract available to the buyer. However, delivery terms must be negotiated between the parties. The greater or lesser experience in buying or selling can lead the buyer to import in CIF condition and the seller to export in FOB condition.
• 2. Risks: The risks that the merchandise runs can occur from the completion of the sales contract until the moment of delivery. The different clauses that make up the Incoterms remove all uncertainty regarding the moment in which the risks are transmitted from the seller to the buyer. Incoterms offer a solution in this regard when contracts are not dealt with the issue of risk transfer.
• 3. Expenses: The distribution of expenses is specially dealt with in the Incoterms. It is the seller who must bear the expenses originated by the merchandise until the moment in which, according to the contract, the delivery of the same is verified. In certain clauses the seller can also take care of the shipping costs. All other expenses that the seller can assume are accessories to the delivery operation.
Classification of Incoterms
The Incoterms contain a total of 13 different positions or types of contracts and are classified into two groups:
Output Group
Group E
• EXW «EX WORK» (factory)
Group F
• FCA «FREE CARRIER»
• FAS «FREE ALONGSIDE SHIP» (free on the side of the vessel)
• FOB «FREE ON BOARD»
Group C:
• CFR «COST AND FREIGHT» (cost and freight)
• CIF «COST, INSURANCE AND FREIGHT» (cost, insurance and freight =
• CPT «CARRIAGE PAID TO …» (carriage paid up to
• CIP «CARRIAGE AND INSURANCE PAID TO …» (transportation and insurance paid up to …):
Group arrival.
Group D:
• DAF «DELIVERED AT FRONTIER» (delivered at the border)
• DES «DELIVERED EX SHIP» (delivered on the ship)
• DEQ «DELIVERED EX QUAY»
• DDU «DELIVERED DUTY UNPAID» (delivered without payment of duties)
• DDP «DELIVERED DUTY PAID» (delivered with payment of rights)
CONCLUSION
«Incoterms are the most important instrument when it comes to exports and imports, because it allows traders from different countries to understand one another and this facilitates international trade»
.
«Thanks to the creation of incoterms, the international commercial practices were improved and reinforced, so that merchants would be more possible or feasible to solve problems related to contracts, goods, operations, in short everything that has to do With the purchase of goods, and a great support for the negotiations from one country to another «
