Have you often wondered what the acronyms on a commercial invoice mean? Things like DDP, FOB, CIF? These are all referred to as INCO terms or International Commercial Terms and are a set of defined terms for use in international trade and therefore have direct relevance to import and export with regards to shipping and international cargo.
The most recent set of terms were published in january 2011 and are intended to eliminate any ambiguity when dealing with international trade. They clearly identify not only the responsibilities of each party both in terms of transport arrangements but also clearly define the risks and costs borne by both parties. For example, EXW or Ex Works is the term used to define that all responsibilities for costs and transport rest with the buyer, so the goods must not only be picked up from the sellers manufacturing or storage facility but they must also be insured and all duty and import costs are met by the buyer. At the other end of the scale an import that is DDP (or Delivery and Duty Paid) is one where the entire costs rest with the seller. The buyer can rest assured that the price they have paid includes not only the goods but the shipping and any import duty and customs clearance charges associated with these goods.
These terms are particularly important where a letter of credit is used to pay for high value consignments, where a third party (usually a bank or other financial institution) is acting as an escrow or intermediary for the funds and will only release them once certain conditions have been met. In this case the clearly defined risks and costs as set out by INCO terms are an important part of the conditions of releasing payment. If you require any assistance with either import or export please contact us, we’re here to help!