What are Incoterms®?
In the ever-changing game of international trade, it’s important to stay up to date to ensure you continue to operate within the rules of the game.
Whether you are filing a purchase order, packing a shipment, preparing a certificate of origin or are involved in any way in the global import or export trade, there are rules to guide you, and these rules are called Incoterms® 2020.
Why use Incoterms® rules in international trade?
Although other clauses for global trade exist around the world, such as the Harmonised Tariff Schedule of the United States, Incoterms® rules are global in their reach. Similarly, Incoterms® rules do not include trade terms codified for national purposes, such as the “less than truckload shipping” (LTL) rule of the United States. Unlike national trade policies, Incoterms® rules are universal, providing clarity and predictability to business.
What does “Incoterms®” stand for?
“Incoterms®” is an acronym standing for international commercial terms. “Incoterms®” is a trademark of International Chamber of Commerce, registered in several countries.
The Incoterms® rules feature abbreviations for terms, like FOB (“Free on Board”), DAP (“Delivered at Place”) EXW (“Ex Works”), CIP (“Carriage and Insurance Paid To”), which all have very precise meanings for the sale of goods around the world.
These terms hold universal meaning for buyers and sellers around the world. If you are a financial analyst in the City of London, then you might associate the acronym “FCA” with the United Kingdom’s Financial Conduct Authority. However, for importers and exporters around the world, FCA is the initials used for “Free Carrier,” or the seller’s obligation to deliver the goods to the carrier nominated by the buyer at the seller’s premises or another named place.