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International Commercial Terms, known as INCOTERMs, are a series of international sales terms widely used and accepted throughout the world. They divide transaction costs and responsibilities between a buyer and a seller.
Incoterms are connected to the steps in the delivery of the products from the seller to the buyer, such a carriage of products, export and import clearance responsibilities, who pays for the which cost, and who faces the risk for the products at different locations in the transport process. Incoterms are always linked with geographical locations.
Incoterms were devised and published by the International Chamber of Commerce (ICC) and endorsed by the United Nations Commission on International Trade Law (UNCITRAL)
The four basic groups of INCOTERM are as follows
| “E” Terms | The goods are placed at the disposal of the buyer at the seller’s premises / factory |
| “F” Terms | The buyer is responsible for the cost and risk of the main international carriage |
| “C” Terms | The seller pays for the main international carriage, but does not bear the risks during that carriage |
| “D” Terms | The seller bears all costs and risks up to the delivery point atr the agreed destination, which may be in buyer’s country or even at the buyer’s premises |
Some of the incoterms are as follows
| EXW | Ex Works | The seller makes the goods available at this premises |
| FCA | Free Carrier | The seller hands over the goods, cleared for exports, into the custody of the first carrier (named by the buyer) at the named place, and is applicable for all modes of transportation |
| FAS | Free Alongside Ship | The seller must place the goods alongside the ship at the named port, cleared for exports. Suitable for maritime export only |
| FOB | Free On Board | The seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship’s rail. The seller must clear the goods for export. Maritime transport only |
| CFR | Cost and Freight | The seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship’s rail. Maritime transport only |
