Demystifying Incoterms® to boost your exports

Chances are you’ve heard of them, or maybe you haven’t. If you are an exporter, importer, or both, Incoterms® are a valuable tool that can help you pierce new markets and offer your clients a competitive, world-class supply chain.

What are they?

International Commercial Terms (Incoterms®) are international rules that define the obligations of the seller and buyer when it comes to shipping. They outline both parties’ obligations, costs, and risks involved.

Incoterms® were first published in 1936 by the International Chamber of Commerce. We currently use the 2010 version, published on January 1, 2011, which extends their application to any trade that occurs within a country (they were previously only used to regulate international transactions).

Why should you use them?

International shipping can be tricky because every country has its own language, culture, customs regulations, and judicial system in addition to setting its own non-tariff trade barriers. Intercoms® are the perfect solution to overcome this challenge: they are internationally recognized and serve as a common language for companies who export internationally. Hello predictability, goodbye stress!

What should you pay attention to?

Even if Incoterms® have long ago proved their worth, including in the United States, some American companies still rely on their own trade rules (RAFTD or UCC), even those these have been “replaced” by Intercoms®. This can lead to costly misunderstandings.

How do you recognize them?

There are 11 Incoterms®, each abbreviated by three letters. Incoterms® are very clearly outlined in a contract. Here are two examples: “FCA 380, St-Antoine W., Montreal, Quebec, Incoterms® 2010” and “DDP 10 Downing Street, London, England, Incoterms® 2010”. The terms used define the following: the Incoterm® code (ex. FCA), the agreed location (ex. 380 St-Antoine W., Montreal, Quebec), and then “Incoterms® 2010”.

In brief, there is an advantage to including this trade condition in your sales contract as long as you are aware of the elements that do not fall under Incoterms®.

Update your knowledge of Incoterms® 2010 and optimize your current and future trade deals, your contracts, and your international payments.

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