So What are Incoterms...?

 Hello viewers, welcome to Info Thirst today. We are going to talk about incoterms and understand how it works. Before we get into the topic we would like you to Follow us by clicking the follow button. Now that you have done that...So let's dive into it…

The Incoterms also known as International Commercial Terms are a procession of predetermined commercial terms published by the International Chamber of Commerce relating to international commercial law.

In simpler words, these are eleven recognized rules by all organizations internationally, widely-used terms of sale, and they describe the responsibilities of the one who is selling and the one who is buying. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.

Let's say you order a cake for 10 Euros, now there are two ways either you order and collect it from the shop or you can opt for home delivery but it will cost you 2 Euros more for delivery charges. Now on the other hand if you opt for ‘order and collect’ option there are a number of risks involved like you dropping the cake or icing getting spoiled and eventually you will also end up paying some amount of transit cost(although still comparatively less than 2 Euros). This is a classic example of DDP and ExWorks.

In DDP the seller takes all the risk till the goods reach your buyer’s premises and in ExWorks once goods leave the premises, selling his goods is no more his responsibility. So among these two which do you think is the better option? Well it is a bit subjective and depends upon the situation. If you want to just get away with the hassle of tedious insurance so that you can focus on other important business operations, buyers can opt for DDP but if you have better deals in terms of transportation and resources to handle all the paperwork it makes more sense to opt for ExWorks. There are similar incoterms for local transactions where DDP is similar to FD (Free Delivery), once you know and understand international incoterms local ones are self explationary. This was just the example of 2 incoterms there are many more which are shown in the below chart. 

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