Incoterms

AAA

DEFINITION of 'Incoterms'

Trade terms published by the International Chamber of Commerce (ICC) that are commonly used in both international and domestic trade contracts. Incoterms, short for "International Commercial Terms," are used to make international trade easier by helping traders in different countries understand one another. Incoterms were first developed in 1936 and are updated from time to time, in order to conform to current trade practices. Because of these updates, contracts should specify which version of Incoterms they are using (e.g., Incoterms 2010).

BREAKING DOWN 'Incoterms'

Trade terms used in different countries may appear identical on the surface, but actually have different meanings as they are used domestically. Incoterms are internationally recognized and thus help to prevent confusion in terms of foreign trade contracts, by helping sellers and buyers understand their obligations in any transaction. Examples of Incoterms include "DAT" (Delivered at Terminal), "DDP" (Delivered Duty Paid) and "CIF" (Cost, Insurance and Freight).

RELATED TERMS
  1. Cost, Insurance and Freight - CIF

    A trade term requiring the seller to arrange for the carriage ...
  2. Continuous Bond

    A financial guarantee commonly used in international trade that ...
  3. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named ...
  4. Free Alongside - FAS

    A trade term requiring the seller to deliver goods to a named ...
  5. Ex Works - EXW

    A trade term requiring the seller to deliver goods at his or ...
  6. Cost and Freight - CFR

    A trade term requiring the seller to arrange for the carriage ...
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  3. Economics

    Do Cheap Imported Goods Cost Americans Jobs?

    Flooding the market with cheap products can mean job losses and even market collapse - but dumping isn't as threatening as it seems.
  4. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  5. Economics

    A Look at Greece’s Messy Fiscal Policy

    Investigate the muddy fiscal policy, tax problems, and inability to institute austerity that created the Greek crises in 2010 and 2015.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI South Africa

    Learn more about the iShares MSCI South Africa fund, which is an NYSE-listed exchange-traded fund offered and managed by BlackRock.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI EAFE Small-Cap

    Read an in-depth analysis of the iShares MSCI EAFE Small-Cap Fund, a well-managed exchange-traded fund that tracks small-cap international stocks.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Global ex-US Real Estate

    Take an in-depth look at the Vanguard Global ex-U.S. Real Estate ETF, an international property fund tilted toward Asian markets.
  9. Economics

    Is the Yuan a Yawn or a Nightmare for Investors?

    China’s decision to change the method of setting its currency exchange rate caused global shock waves last week.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares International Select Dividend

    Learn how the iShares International Select Dividend ETF provides investors an opportunity to gain exposure to high-quality companies outside the United States.
RELATED FAQS
  1. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  2. How does the International Chamber of Commerce define the term 'Free on Board' (FOB)?

    The International Chamber of Commerce (ICC) is one of world's largest business organizations and has published a set of trade ... Read Full Answer >>
  3. What determines if an international trade is Ex Works (EXW) or Free on Board (FOB)?

    "Ex works" (EXW) and "free on board" (FOB) are international trade terms that dictate the responsibilities of buyers and ... Read Full Answer >>
  4. How are transportation costs and risks assigned in an Ex Works (EXW) trade?

    An ex works (EXW) trade agreement is part of the Incoterms rules and requires the sellers of goods to make the goods readily ... Read Full Answer >>
  5. What does 'Incoterms' mean in relation to Ex Works (EXW) trades?

    Ex works is part of the published Incoterms and outlines the obligations of transportation to buyers and sellers. The International ... Read Full Answer >>
  6. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

    Ex Works (EXW) and Free on Board (FOB) are Incoterms used to describe situations where sellers deliver goods. Ex Works describes ... Read Full Answer >>
  7. Are there international maritime laws that govern delivery duty paid?

    Aspects of maritime law are relevant to international trade. However, delivery duty paid (DDP) only determines which party ... Read Full Answer >>
  8. Is there a way to insure delivery duty paid?

    Delivery duty paid (DDP) cannot be insured, although insurance of goods during transport is one of the seller’s responsibilities ... Read Full Answer >>
  9. Is there a way to profit from arbitrage trades on delivery duty paid?

    It is not possible to profit on Delivery Duty Paid (DDP) in arbitrage trades since DDP is not bought and sold; it is just ... Read Full Answer >>
  10. Are the laws on delivery duty paid different in every country?

    Laws and regulations on delivery duty paid (DDP) vary between countries, but they are overall very similar. Regulations regarding ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!