Incoterms: What are they, what types exist and what are they for?

Sometimes misunderstandings arise in international negotiations due to the different interpretations of each country. For this reason, a standardization of the rules is required, to avoid this type of inconvenience.

So Incoterms were born, or International Commercial Terms, which are established rules in international trade about the conditions of delivery of the freights.

These rules are intended to define the responsibilities and obligations that must be assumed by both the buyer, who exports the product and the seller, who imports the product.

Keep reading this article if you want to know more about the Incoterms!
We hope to solve all your doubts!

What types of Incoterms exist?

The first standards of international sales contracts were published for the first time by the International Chamber of Commerce in 1935, being recognized as Incoterms in 1963. Over the years, modifications have been executed to these rules, taking place the last version in 2010. In this last modification 11 terms are divided into 4 groups, where each incoterms is abbreviated by acronyms of three letters.

The following Incoterms are distinguished:

Group E

The seller only has the obligation to make the merchandise available to the buyer in his store. For its part, the buyer takes charge of the collection and transport to the destination, assuming all expenses.

EXWEx Works

Group F

The seller prepares and delivers the freights to the agreed port, being the buyer who assumes the international transportation to the country of destination.

FCAFree Carrier
FASFree Alongside Ship
FOBFree On Board

Group C

The seller takes charge of the transport to the port of discharge, assuming the expenses, being the buyer the one in charge of pick the merchandise up.

CPTCarriage Paid To
CIPCarriage and Insurance Paid To
CFRCost and Freight
CIFCost Insurance and Freight

Group D

The seller is in charge of delivering the freights to a specific point in the country of destination.

DATDelivered at Terminal
DAPDelivered at Place
DDPDelivered Duty Paid

What are the Incoterms for?

The advantages of Incoterms are numerous. On the one hand, they allow defining clearly what are the rights and obligations of the parties involved in an international negotiation. It ensures the commitment of both parties to the contract.

They help us to determine the responsibilities of both parties regarding the payment of the transport, the insurance of the freight and the procedures required in the contract, specifying the moment of the process in which the responsibility passes from the seller to the buyer.

Its relevance is due, finally, to the fact that this standardization of rules in international contracts has legal recognition throughout the world.

From Swiss Air & Road Cargo AG we will be glad to advise and indicate you he most appropriate Incoterms options for the benefit of your business. Visit our website and do not hesitate to contact us!


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