- MBS QUICK FACTS:
- Nationally recognized since 1999
- Accreditation by the German Council of Science and Humanities
- Study Location: Munich
- Top scores in numerous rankings
Incoterms are a set of contractual provisions developed for international trade in goods. They are used to standardize and speed up trade between companies from different countries. Incoterms are an internationally recognized system of transport protection provisions approved by the United Nations. They are used to determine which party bears responsibility for the cost of transportation and insurance. Most Incoterms are based on the "contract for work and services," which determines the performance of the seller. This performance also determines the shifting of liability in the event of a defect in the goods.
In logistics, Incoterms are often used to regulate the rights and obligations when shipping goods. These are a set of international agreements that seem somewhat complicated at first glance. However, once you understand the rules, it is easy to use Incoterms. The rules for Incoterms were originally determined by the International Chamber of Commerce (ICC) and have been protected by the WIPO Convention for over 60 years.
There are a total of eleven different Incoterms, which are divided into three categories. The first category includes the four Incoterms for maritime and inland trade, the second category contains the three Incoterms for air transport and finally the third category contains the four Incoterms for road or rail transport. Incoterms (International Commercial Terms) are an international set of commercial terms that determine how the costs and responsibilities of buying and selling goods are divided between the buyer and seller. They were originally issued in 1936 by the International Chamber of Commerce Committee. The current version of the Incoterms, known as Incoterms 2020, was published on January 10, 2020 and contains 11 different clauses. The 11 Incoterms can be divided into 4 groups. Each of these term classes has specific instructions about the costs, responsibilities and risks of the seller and the buyer:
It is important to note that each country has its own legal requirements when it comes to importing/exporting goods. Therefore, before buying or selling products abroad, one should make sure that one has all the necessary information about the respective legal system. In addition, one should also ensure that one has considered all relevant fees and taxes before entering into a contract.
The use of Incoterms is crucial to clarify rights and obligations between buyer and seller in international trade contracts. When choosing the right Incoterms, a number of factors must be taken into account, such as the type of transport or the structure of the supply chain network. Incoterms are included in the commercial contract between buyer and seller and describe the obligations of both parties in terms of transportation, insurance, duties, shipping documentation, customs formalities, etc. Incoterms also determine when the risk of loss of goods passes from the buyer to the seller. The difference between Incoterms lies mainly in which tasks the buyer and which tasks the seller have to take over. Depending on which Incoterm is used, one party may have to take on some or all of the logistics tasks - from organizing transportation to preparing necessary documents. When selecting a particular Incoterm, buyers and sellers should carefully consider and ensure that it meets their specific needs. The wrong Incoterm can cause costly mistakes and create significant legal problems. Therefore, it is important to work with an expert who can help you select the right Incoterm. In addition, it is very important that buyers and sellers know the regulations of their respective countries. It is not advisable to carry out international trade transportation without a thorough knowledge of all relevant laws and regulations regarding customs duties and taxes. It is therefore advisable to involve specialized consultants or law firms to ensure that the laws are complied with. In summary, the correct application of Incoterms provides you with all the information about the delivery process, as well as rights and obligations of all parties involved - from the manufacturer to the end user.
Incoterms define the responsibilities and rights of the parties in an export or import transaction. There are different types of Incoterms used for different trade practices. Depending on the nature of the transaction, the terms may vary, so it is important to be aware of the relevant Incoterms before entering into a contract.
The differences between the Incoterms are mainly in the rules and responsibilities regarding transportation and customs clearance. Some Incoterms describe where the goods are shipped from, others describe when the buyer receives the goods and whether the buyer is responsible for customs clearance. Some types of Incoterms are also used to determine which costs must be paid by the seller or the buyer.
In most cases, Ex-Works Incoterms differ from the Free Carrier Incoterm in that the buyer is given more responsibility for transportation and customs clearance. With the Free Carrier-Incoterm, the buyer is allowed to hire a freight forwarder or courier service himself. In contrast, with Ex-Works-Incoterm, the seller must deliver the goods directly to the buyer and is responsible for all delivery costs incurred. Another difference exists between the Cost Insurance and Freight (CIF) Incoterm and the Free On Board (FOB) Incoterm: The CIF Incoterm states that the seller is responsible for all delivery costs incurred as well as insurance costs; in contrast, with the FOB Incoterm, the buyer is responsible for all delivery costs incurred as well as insurance costs.
The handling of tax matters can also vary depending on the type of transaction. In the Delivery Duty Paid (DDP) incoterm, the seller steps into the role of payer; therefore, he must pay for all necessary tax duties and also handle all related documentation. With all this work, it is his responsibility to ensure that all legal requirements are met, and no mistakes are made.
In contrast, for Delivery Duty Unpaid (DDU) Incoterms, the buyer must handle the fiscal matter himself. There are other differences between the various Incoterms depending on the transaction - therefore, interested parties should inform themselves about their respective details before concluding any contract in order to exclude legal consequences for the protection of all parties!
In logistics, Incoterms are used to regulate the responsibility for the transport of goods between the buyer and the seller. The Incoterms determine who bears which costs and when the goods are handed over. In addition, the Incoterms provide information about where the goods are unloaded and whether the buyer must transport the goods himself or pick them up. The most commonly used Incoterms are DAP (Delivered at Place), DDP (Delivered Duty Paid) and FOB (Free on Board).
In practice, Incoterms are used for a wide range of commercial transactions. Below are some examples where these rules are applied.
Incoterms are important because they inform the seller and buyer of an international transaction, who will bear which parts of the transportation and customs costs. It is important that both parties determine the Incoterms by mutual agreement before entering into the contract. There are 11 Incoterms in total, divided into 3 groups:
Our bachelor's and master's degree programs provide you with relevant knowledge and skills you need for a successful career.
Did you find this article helpful? Do you have any suggestions or questions about this article? Did you notice something or is there a topic you would like to learn more about in our dictionary? Your feedback is important to us! This helps us to constantly improve our content and deliver exactly what you are interested in.
Contact editorial office