International commercial terms

International commercial terms (INCOTERMS)

INCOTERMS are different price quotations, terms and conditions employed in international transactions specifying who is to incur or not to incur certain duties during importation of commodities between the importer and exporter.

Importance of INCOTERMS

1. They are useful in identifying the duties and obligations of each party i.e exporter and importer.
2. They are indicating the lines of demarcation of duties and an obligation i.e where the exporter ends and where the importer begins.
3. They are influencing both the importer and exporter to do their utmost to fulfill the terms and conditions agreed upon hence better performance.
4. They are governing the methods and responsibilities as well as accountability in affecting payments of costs to be incurred e.g terms of delivery decide who pays the costs of transportation and incidental charges.

The following are some INCOTERMS:

1. F.O.R (Free on rail) Which include expense of packing and delivery up to the railway station in the exporter's country.
2. FRANCO Include all expenses such as import duty, carriage and delivery charges, dock charges and delivery up to the importer's premises.
3. F.O.B (Free on board) Which include all expenses such as packing, loading charges, export duties etc to be covered by the exporter for taking goods until they are delivered on board the ship.
4. F.A.S (Free along side ship) The price consists of all expenses such as dock charges packing and carriage to be covered until the goods are placed along side the ship.
5. C.& F (Cost and freight) The quotation refers to mean that the exporter bear all expenses of carriage, export duties, freight charges, loading charges, etc except insurance up to the port of destination.
6. C.I.F (Cost, Insurance, Freight) Covering all expenses under C.& F quotation plus insurance.
7. C.I.F.I (Cost, insurance, freight and interest) Covering all expenses under C.I.F quotation plus interest on the value of goods.
8. C.I.F.& E (Cost, insurance, freight and exchange) Covering all items of expenses under C.I.F risks of exchange fluctuations.
9. C.I.F.& C (Cost, insurance, freight, interest and commissions) Covering all expenses as per C.I.F.I quotation plus the commission of importer's agent.
10. C.I.F.F.O (Cost, insurance, freight and free out) This means that the seller is responsible for all charges until the goods have been discharged at the port of destination.
11. Free docks The price include all expenses until the goods reach the docks.
12. Ex-ship (free overboard) Which include all expenses up to the port of destination.
13. Price in bond Which cover all expense till the goods are delivered to the port of destination.
14. Ex godown (ex works) It is the responsibility of the buyer or importer to collect the goods from the go down or the works of the seller or exporter by meeting all expenses and take care all risks. It is also called ex-factory.
15. Sale free on wharf (F.O.W.) This is a case where by the seller makes that the goods are transported to the nearest stipulated wharf and incur all the transportation costs up to that port.
16. Sale, cost, insurance, freight and free out (C.I.F.F.O) This means the exporter is responsible for all charges until the goods have been discharged at the port of destination.
17. Delivery dock (DD) Include the cost of carriage to the docks.