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Incoterms

Language is one of the most complex and important tools of International Trade. As in any complex and sophisticated business, small changes in wording can have a major impact on all aspects of a business agreement.

Word definitions often differ from industry to industry. This is especially true of global trade. Where such fundamental phrases as "delivery" can have a far different meaning in the business than in the rest of the world.

For business terminology to be effective, phrases must mean the same thing throughout the industry. That is why the International Chamber of Commerce created "Incoterms" in 1936.

Incoterms are designed to create a bridge between different members of the industry by acting as a uniform language they can use. Each Incoterm refers to a type of agreement for the purchase and shipping of goods internationally.

There are 13 different incoterms terms, each of which helps users deal with different situations involving the movement of goods. For example, the term FCA is often used with shipments involving Ro/Ro or container transport; DDU assists with situations found in intermodal or courier service-based shipments.

Incoterms also deal with the documentation required for global trade, specifying which parties are responsible for which documents.

Determining the paperwork required to move a shipment is an important job, since requirements vary so much between countries.

Two items, however, are standard: the commercial invoice and the packing list.

Incoterms were created primarily for people inside the world of global trade. Outsiders frequently find them difficult to understand. Seemingly common words such as "responsibility" and "delivery" have different meanings in global trade than they do in other situations.

More about Incoterms

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