Incoterms

Incoterms® (International Commercial Terms) are a set of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They define the responsibilities of buyers and sellers for the delivery of goods under sales contracts, particularly regarding transport, costs, and risk transfer.

Common Incoterms include:

• EXW (Ex Works): Buyer bears almost all costs and risks.
• FOB (Free On Board): Seller responsible until goods are loaded on the vessel.
• CIF (Cost, Insurance, and Freight): Seller pays for cost, insurance, and freight to the destination port.
• DDP (Delivered Duty Paid): Seller bears all costs and risks to deliver goods to the buyer's named destination, cleared for import.

Understanding and correctly applying Incoterms in purchase orders and contracts is critical for procurement professionals involved in global sourcing to avoid disputes regarding liability, cost allocation, and risk transfer during international shipments.