The Incoterms® are a set of standard contract terms for international sales contracts. Rather than dealing with all aspects of an international sales contract, the Incoterms® focus on the aspects of
- the place of delivery,
- the passing of the risk,
- the costs of shipping and insurance.
Examples for frequently used Incoterms® clauses are
- “EXW” (“Ex Works”), meaning that goods are made available for the buyer for pick-up at the seller’s premises or some other designated location,
- “FOB” (“Free on Board”), meaning that delivery takes place when the goods are boarded onto a chosen vessel at the designated port of shipment, or upon acquisition of goods already boarded. From the moment the goods are on board the vessel the associated risks shift to the buyer,
- CIF (“Costs Insurance Freight”), meaning that delivery takes place when the goods are boarded onto a vessel, or upon acquisition of goods already boarded. The passing of the risk takes place when the goods are boarded. Additionally, the seller is obliged to contract and pay for costs and freight until the designated port of destination; and to contract and pay for insurance against the buyers risk of loss or damage throughout the transit.
Incoterms® are only complementary to the legal framework otherwise applicable to an international sales contract (i.e., the CISG or domestic sales law). They are not meant to substitute the applicable law, as they do not provide for a complete regulation of the sale.
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