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Incoterms, i.e. International Commercial Terms

Incoterms, i.e. International Commercial Terms

You have probably noticed that many offers include certain abbreviations, which might be difficult to understand for those who encounter them for the first time. They usually appear next to the price and location of the stock. These are most often trading terms and conditions, so called “incoterms”, denoting the range of responsibility of the buyer and the seller while trading the goods. They indicate the costs related to the logistics, as well as the party to be charged with them. If you are not familiar with these abbreviations, please have a look below for the explanation of the most popular ones:

  • EXW (Ex Works) - given most often with a name of the country or city, e.g. EXW Poland, EXW London. It means that the seller only bears the responsibility for delivering the products to the appointed place, or preparing the products for collect in person by the buyer. Everything else is up to the buyer.
  • FOB (Free On Board) - given post often with the name of a port, e.g. FOB Shanghai. It means that the seller is responsible for the delivery and having the goods loaded on the ship. As off that moment, the buyer holds all the responsibility for the products. 
  • CIF (Cost, Insurance and Freight) - the seller is responsible for the costs of delivery and loading of the goods, as well as basic insurance ofthe products.
  • CIP (Carriage and Insurance Paid to) - this is an equivalent of CIF in any other type of shipping that is not ship transportation.
  • Loco - a term used mainly in Germany, Poland and the neighbouring countries, having a very similar meaning to EXW; the seller bears responsibility for delivering the goods to the designated location, which is usually their own warehouse, and preparing the products for transportation. All other issues, such as loading the goods onto a means of transportation or insurance, depend on the buyer.
  • Franco - the seller is responsible for shipping the products to the destination place designated by the buyer, usually their warehouse, shop, etc. 

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Merkandi

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