Legal Definitions - Incoterm

Definition: Incoterm (short for International Commercial Terms) is a set of standardized trade terms used in international transactions to define the responsibilities and obligations of buyers and sellers regarding the delivery of goods. These terms specify who is responsible for the cost, risk, and insurance of the goods during transportation.

Examples:

• FOB (Free on Board): The seller is responsible for delivering the goods to the port of shipment and loading them onto the vessel. The buyer is responsible for the cost, risk, and insurance of the goods from the port of shipment to the final destination.
• CIF (Cost, Insurance, and Freight): The seller is responsible for delivering the goods to the port of destination and paying for the cost and freight of the goods. The buyer is responsible for the insurance of the goods and any additional costs incurred after the goods have been loaded onto the vessel.
• EXW (Ex Works): The buyer is responsible for collecting the goods from the seller's premises and for all costs and risks associated with transporting the goods to the final destination.

Explanation: These examples illustrate how Incoterms define the responsibilities and obligations of buyers and sellers in international transactions. FOB specifies that the seller is responsible for loading the goods onto the vessel, but the buyer is responsible for the cost, risk, and insurance of the goods during transportation. CIF specifies that the seller is responsible for paying for the cost and freight of the goods, but the buyer is responsible for the insurance of the goods and any additional costs incurred after the goods have been loaded onto the vessel. EXW specifies that the buyer is responsible for collecting the goods from the seller's premises and for all costs and risks associated with transporting the goods to the final destination.