Glossary

Incoterms

Definition

Incoterms, short for International Commercial Terms, are a set of globally recognized trade terms published by the International Chamber of Commerce (ICC). They are used to define the rights, responsibilities, and obligations of buyers and sellers involved in international trade, specifically concerning the delivery of goods. Incoterms provide a common framework for understanding the allocation of costs, risks, and responsibilities between parties during various stages of the shipping process. They are regularly updated, with the most recent version being Incoterms 2020.

— sennder Team

FAQ

Incoterms play a crucial role in international trade by providing a standardized set of terms and definitions that help prevent misunderstandings and disputes between buyers and sellers. They clarify the responsibilities of each party concerning the shipment of goods, such as the payment of transportation costs, insurance, customs clearance, and the point at which risk transfers from the seller to the buyer.
Some common Incoterms include: - EXW (Ex Works): The seller makes the goods available at their premises, and the buyer is responsible for all transportation costs, risks, and export/import procedures. - FCA (Free Carrier): The seller delivers the goods to a specified carrier or location chosen by the buyer, and the buyer assumes responsibility for transportation costs and risks from that point forward. - FOB (Free on Board): The seller is responsible for getting the goods on board a ship at the agreed port of shipment, and the buyer assumes responsibility for all costs and risks once the goods are on board. - CIF (Cost, Insurance, and Freight): The seller arranges and pays for transportation and insurance to the named destination port, but risk transfers to the buyer once the goods are loaded on the ship.
Incoterms are typically updated every 10 years to reflect changes in international trade practices and regulations. The most recent update was in 2020, resulting in the Incoterms 2020 version.
Example or usage in road freight logistics

A buyer and seller agree on the Incoterm "CIF" for an international shipment of goods. The seller is responsible for arranging and paying for transportation and insurance up to the destination port. However, once the goods are loaded onto the ship, the risk transfers to the buyer, who is then responsible for any potential loss or damage that may occur during the remainder of the shipment process.

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