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Frequently
Asked Questions |
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- What are Incoterms?
- Incoterms are International rules
for the interpretation of trade terms. "Incoterms" is an abbreviation of International Commercial Terms,.They define exactly the responsibilities and risks of both the buyer and seller including while the merchandise is in transit.
Why are they used for?
The basic purpose of each INCOTERM is to clarify how functions, costs and risks are split between the buyer and seller in connection with the delivery of the goods as required by the sales contract. Delivery, risks and costs are known as the critical points.
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- Each term clearly specifies the responsibilities of the seller and the buyer. The terms range from a situation in which everything is fundamentally the responsibility of the buyer to the other extreme where everything is fundamentally the responsibility of the seller.
The goal of the INCOTERMS is to alleviate or reduce confusion over interpretations of shipping terms, by outlining exactly who is obligated to take control of and/or insure goods at a particular point in the shipping process.
There are actually three questions the Incoterms answer:
Costs
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- who is responsible for the expenses involved in a shipment at a given point in the shipment's journey?
Control
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- who owns the goods at a given point in the journey?
Liability
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- who is responsible for paying damage to goods at a given point in a shipment's transit?
Description
Each INCOTERM refers to a type of agreement for the purchase and shipping of goods internationally. There are 13 different terms, each of which helps users deal with different situations involving the movement of goods.
The ICC has designed the names of the Incoterms so that they can be usefully grouped by their first letter:
E This group has only one term, EXW (ex works). It requires the buyer to take the delivery of goods at Seller’s facility.
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- F This group requires the Seller to deliver the goods to a specific location for shipment
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- C This group requires the Seller to contract for carriage of the goods but the risk of loss or damage to the goods, or additional costs caused by events in transit are borne by the Buyer.
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- D This group requires the Seller to deliver the goods at a specific destination. Thus, the risks of loss or damage remain with the Seller until
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For a comprehensive export guide, you can purchase The Export Handbook.
The handbook takes you through the practical aspects of exporting essential for both experienced and novice exporters. It covers Export Procedures and Documentation, Customs Export Regulations, Internet Commerce, Banking and Finance, Export Risk and Credit Insurance, Marine Insurance, Shipping and Air Cargo, Freight Forwarding, Export Packaging and Resources for International Trade.
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