Incoterms (International Commercial Terms) are globally recognized rules published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international trade. These terms clarify who bears the costs, risks, and responsibilities for transportation, insurance, customs clearance, and delivery at various stages of shipment. Understanding and correctly applying Incoterms in logistics contracts reduces disputes, ensures smooth international shipments, and enables clear cost and risk allocation between trading partners. Examples include FOB (Free on Board), CIF (Cost, Insurance, and Freight), and DDP (Delivered Duty Paid).
Characteristics:
- Defines responsibilities of buyers and sellers in trade
- Specifies risk and cost allocation during shipment
- Standardizes international shipping practices
- Reduces disputes and improves contractual clarity
