What is Incoterms

What is Incoterms?

Incoterms responds to issues related to the transportation of goods from the seller to the buyer. This word is written as Incoterms in Latin and in Iran it is called Incoterm. The word Incoterms is a combination of three English words “International Commercial Terms”.

Incoterms deals with issues such as clearance of goods, transportation of goods, import and export of goods, getting to know the person responsible for paying the costs and who bears the risk of moving and transferring goods during the import process. Incoterms was prepared and compiled by the International Chamber of Commerce.

History of Incoterms

Incoterms was published for the first time in 1936 by the International Chamber of Commerce or ICC. In 1936, these rules became known as Incoterms.

Since then, Incoterms has become an accepted contract standard around the world. The rules of Incoterms are periodically corrected and updated in order to be fully universal. Incoterms have been updated and revised so far in 1953, 1967, 1976, 1980, 2000, 2010 and 2020.

Incoterms rules

• Determining the costs of both sides of the contract
• Determining the limits and size of the responsibility of the parties
• Determining possible business risks between the seller and the buyer
• Prevention of any disputes caused by misinterpretation of terms in commercial contracts.

Incoterms terms

Incoterms terms are classified into 4 main categories:

• Group E or its other name which is EXW.
• Group F, which includes FCA – FAS – FOB.
• Group C, which includes CFR-CIF-CPT-CIP.
• Group D, which includes DAF – DES – DEQ – DDU – DDP.

In what fields of business has Incoterms entered?

• Importation
• Export
• Shipping
• Clearance
• Determination of payment responsibility
• Determining the risk of goods transportation in all stages of goods transfer from the seller to the buyer.

Important general concepts in Incoterms

• Arrival: In this situation, shipping costs are paid.
• To clear for export: getting the cargo export clearance certificate and receiving the export license
• Freight Forwarder: A company that participates in freight or signs a freight contract is called Freight Forwarder.
• Free: In this situation, the seller undertakes to deliver the goods to the intended place so that they can be transported.
• Delivery: It is a situation in the transaction in which the risk of damage or loss of the goods is transferred from the seller to the buyer.
• Terminal: A terminal is a covered or non-covered place such as a container garage, warehouse, parking lot, etc.
• Carrier: In transportation, a carrier is someone who undertakes the responsibility of transporting all goods with any type of vehicle in the transportation contract.

Conclusion

In this article, we explained what Incoterms is. Incoterms responds to issues related to the transportation of goods from the seller to the buyer. We also talked about the history of Incoterms, Incoterms terms, etc. Click to see other articles in the field of transportation.

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