Do you speak Inco?
INCO Terms, or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce and consist of 13 three letter trade terms. But do you know what they mean and how to use them? If not, then keep reading!
Incoterms are typically used in sales contracts to clearly define the roles between seller and buyer in an international transaction involving transportation and delivery of goods, for example:
- Who takes care of insurance of the goods, licenses, permissions and all other formalities?
- Who arranges transport and who is liable for the delivered goods?
- When does the cost and risk change from seller/sender to buyer/receiver?
The terms do not themselves constitute a contract or determine anything, but they work as a common “language” in international sales contracts and are accepted by governments and legal authorities and thus reduces any uncertainties arising from interpretations and definitions in different countries.
When making international sales contracts and delivering products across borders it is important to be aware of the meaning of these terms in order to know e.g. who is liable for the delivered goods with regards to customs clearance etc., what the duties of the buyer and seller is, as there is a certain financial expenses in this connection and lastly, to determine when responsibility for the goods passes from seller to buyer. If used strategically, the terms can also be the final leverage to close a deal.
Some terms are only valid for sea transport, whereas others cover only ground and some cover both. Here is a quick guide to them all: