Incoterms stand for international commerce terms and came about in the year 1936 due to the large number of discrepancies in understanding of business partners who intend to do business together and also to minimize litigation matters and court proceedings.

These Inco Terms consisted of abbreviated general and specific terms used for International Trade consisting of only three letters per word.

It is essential to remember that these terms are to be defined by the parties intention and do not serve as a general consensus to any terms that are to be agreed upon prior to such agreement only between parties involved. It is imperative to remember that people all over the world have not only many cultures and their different ways and techniques of doing business, but there is the major concern of language barrier.

For this reason, it was necessary that Inco terms was needed and then subsequently was drafted and utilized in contracts and day to day transactions and understandings.

Initially, there were 13 terms to describe and cover just about everything involved in International Trade on a more basic level. However, recently, in the year 2010, after many updates and edits, a final list was released on January 1, 2011 of a list of 11 Inco Terms.

The various Incoterms are listed below and are divided into two classes:

Terms for any Transport mode

EXW – Ex Works

FCA – Free Carrier

CPT – Carriage Paid

CIP – Carriage and Insurance Paid To

DAT- Delivered at Terminal

DAT – Delivered at Place

DDP – Delivered Duty Paid

Maritime-Only Terms

FAS – Free Alongside Ship

FOB – Free On Board

CAF – Cost and Freight

CIF – Cost Insurance and Freight


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