International trading can pose many problems especially when it comes to the different ways business is carried out between countries. In business, you always want both parties to be on the same page to avoid any potential confusion.
The World Trade Organization (WTO) has produced a list of the most commonly used international trade terms. They provide a comprehensive overview and information ranging from a variety of different international trade terms relating to tariffs, trade associations, licensing and much more. It is recommended you review the list to increase your level of understanding and look up trade related words here.
Fortunately, the International Chamber of Commerce (ICC) additionally provides a series of harmonized “Incoterms” to help ease understanding when it comes to sales contracts. The Incoterms are a 3 letter international trade terms that relate to the most common sales practices. These international trade terms have gone through much iteration and, currently, it is in its eighth version – the “Incoterms 2010.” Furthermore, classification standards for the underlying goods and the industries that they are originating from exist.
Taken together, the international trade terms and incoterms 2010 create a standardized form of communication so that both parties in a trade agreement are on the same page. Incoterms 2010 is produced to avoid misunderstandings between parties, as well as make negotiations and coordination in business much easier.
Incoterms are essential abbreviations commonly used in international trade.
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Know the existing rules – but feel free bargain about alternative rules
with your business partners.
You should be aware that the uses of Incoterms are not always necessary, they are only recommended to help you and reduce the level of confusion that international trading may cause. If there is a scenario you want that is not encompassed by an Incoterm you are more than able to expressly request it from the supplier. However you should seek out the advice from a logistics professional to ensure the contract is suited to your needs.