Basics of Incoterms

1388361357w8dh9Perhaps you have heard of Incoterms. If you engage in international freight shipping, then you certainly have heard this term. It is important to understand the basics of Incoterms. By definition, the word Incoterms stands for International Commercial Terms. The International Chamber of Commerce developed it many decades ago. A recently updated version was created in 2010. Essentially, Incoterms are rules that buyers and sellers follow for transporting cargo internationally. Specially, the Incoterms deal with who is going to pay for the transportation costs.

In all cases, the seller always pays for the export packing and labeling. The other shipping expenses depend on which Incoterm is used. These are examples of the some of the basic Incoterms.

With Ex Works, the buyer of the cargo pays for everything else involved in shipping, minus the export packing and labeling which, as always, the shipper pays for. With Free Carrier, the seller takes care of the export clearance expenses and the buyer does everything else. Under the term of Carriage Paid To, the seller pays for everything, including ocean freight shipping rates, until the freight reaches the destination. With Delivered At Place, the seller pays for the insurance, unloading and the terminal charges. With Delivered Duty Paid, the seller pays for almost everything, minus the unloading of the cargo at the destination.

The specific Incoterm to use should be negotiated between seller and buyer prior to the final agreement. Parties should consult a trusted freight forwarder who understands all of the specifics involved for shipping with Incoterms.

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