“Most human beings have an almost infinite capacity for taking things for granted.”  Aldous Huxley

One characteristic the best exporters have in common is a commitment to meeting all the agreed upon expectations of the buyer.  While this may sound obvious, the devil is in the details.  Best intentions aside, an exporter’s (or importer’s) downfall could lie in assuming that they both understand and agree on the terms of sale – these details are simply taken for granted.

For example, your goods are damaged during transport – where does the risk of loss transfer?  Who’s responsible for loading and unloading the goods?  Who’s responsible for paying the import duties?

These and other aspects of the agreement are considered the terms of sale and should clearly be set forth in the written contract using Incoterms®.  Dating from 1936, Incoterms® are pre-defined, globally accepted commercial terms which clearly communicate the tasks, costs and risks associated with commercial transportation and delivery of goods between the buyer and seller.   A veritable alphabet soup of transport acronyms, they help traders avoid costly misunderstandings.  The latest version, “Incoterms® 2010”, sets forth 11 terms of trade.  Some apply to all types of international sales and some are designed specifically for goods shipped by sea or another body of water.

Note, when you are quoting internationally, international and domestic terms of sale can have different meanings.  Also, in global trade, “delivery” refers to the seller fulfilling the obligation of the terms of sale or to completing a contractual obligation. “Delivery” can occur while the merchandise is on a vessel on the high seas and the parties involved are thousands of miles from the goods.

 Incoterms® 2010:  Who’s Responsible for What?*

Acronyms Unlocked:

EXW: EX-Works  // FOB: Free On Board  // FCA: Free Carrier // CIF: Cost, Insurance & Freight

CPT: Carriage Paid To // CIP: Carriage & Insurance Paid To // DDP: Delivered Duty Paid

FAS: Free Alongside Ship // CFR: Cost & Freight // DAT: Delivered At Terminal // DAP: Delivered At Place

* This table by no means spells out all the obligations under each term.

Incoterms® and Incoterms® 2010 are registered trademarks of the International Chamber of Commerce.