If you’re working in the export business chances are you may already be acquainted with the “International Commercial Terms” of the trade. But for those unfamiliar with the processes or for people who are yet to begin their exportation journey, Incoterms may be confusing, prompting questions like what are they (the Incoterms) or how are they important?
In this article, we will delve further into this aspect of the global trading business and look at Incoterms in a simpler light. Some Info graphs have been included to make it easier for us to discover exactly what Incoterms are.
History:
The ICC or International Chamber of Commerce, the governing body of business worldwide, introduced the first version of Incoterms in 1936, a version that has since been updated multiple times to suit the changing tides and trends of business and trade. There are eleven (11) Incoterms in the current version, known as Incoterms 2010, each a three-letter term that relates to international transactions and common sales practices.
Importance:
“used in international sales contracts to clearly establish the basis on which the seller will invoice the buyer. The terms identify the additional costs, over and above the cost of the goods that the seller can include in their invoice. Their use in sales contracts act as a form of legal shorthand to clearly identify the responsibilities of both parties.”
Simply put, Incoterms help to define exactly the extent of tasks, the form of risks and of course the costs that are associated with the exportation or delivery of goods around the globe. It pertains to both the sender and the receiver of the products, identifying the roles, rules and responsibilities that will govern both ends in the transportation process so that the understanding of legal contracts is made much clearer and the conduct of business easier.
The TERMS … in Info Graphics:
Here are the eleven (11) Incoterms that are currently in use, with seven (7) rules placed for any other mode of transport and four (4) specifically placed for sea and inland waterway transport of products. Now we could spend a few more pages describing each one, but perhaps the best approach is to show you what Incoterms are through the best info graphs around, starting with this one from SCM Operations on ‘How to Use Incoterms the Right Way’. Click on the image to view the larger, full version.
This next info graph is from TU-SCMA and describes the ICC Official Rules for the Interpretation Trade. Click on the image to view a larger version.
Consilium introduces Incoterms as something simple. They even have a video introducing the terms in their site so visit them to see more.
This Incoterms poster was posted by DAD IN TRANSIT and supplies a very simple form of understanding Incoterms as illustrated by Onship Logistics. Click on the image to view a larger version.
Esedra Brokers provides this next info graphic on the Incoterms clause, with vivid illustrations to better understand the sellers and buyers obligations throughout the process. Click on the image to view a larger version.
Yet another colourfully illustrated info graph, Greenwich International provides a clear go on how risks, costs and insurance should be perceived. Click on the image to view a larger version.
The next info graph shows the Incoterms as they are grouped, illustrated by viewgoods.com. Click on the image to view a larger version.
The last of our info graphs is another minimalistic approach to the discussion of Incoterms by Sea-Rates.com. Click on the image to view a larger version.
