Meaning of Incoterms

Incoterms are the International Commercial Terms which is a universal set of trade terms that are made in order to keep a happy medium between both importer and exporter equally.


The set of incoterms which is currently used was published in 2000. Whereas the first publication of incoterms was made in 1936. They were established by ICC which is International Chamber of Commerce in Paris.

Incoterms Charts – Small

Reasons of needing incoterms

Incoterms are very essential component in order to keep friendly relations between the importers and exporters as it provides a set of rules that makes the trade to be done in a standardized manner. If there is no set of rules for trade, which means no incoterms, there will be a constant conciliation between buyers and sellers. In this way, the international trade will not be that much efficient as it is needed to be and currently is because of incoterms.

Incoterms Charts

Incoterms Document

Incoterm charts are also needed by the traders in making import and export because incoterms are a great source of saving money and making more profit through trade instead of trading without any standardized set of rules.


Incoterms are also needed in order to avoid any kind of tussle or cheating between the buyers and sellers. As they have signed the incoterms before making trade, they have to follow them. This leads to the peaceful trade between the two countries. Without incoterms, it is very likely to happen that the two parties start fighting on some issue of cost or any other such issue which may lead to severe one and hence resulting in great enmity between the countries.

Number of incoterms

Incoterms 2013

Incoterms are thirteen in number. These incoterms are divided into categories so that they can be easily understood and hence followed by both trading parties.

Incoterms are categorized in the following manner

Departure term

Only one term is included in this category which is EXW. It means Ex Work.

Terms of unpaid main carriage

In this category, there are three terms which are

  • FCA which are Free Carrier Terms.
  • FAS which are the terms of Free Alongside Ship
  • FOB which means Free On Board terms

Terms of paid carriage

  • CFR that means Cost and Freight Seller terms
  • CIF which are Cost, Insurance and Freight Terms
  • CPT, it is the Carriage Paid To CFR
  • CIP which is the Carriage and Insurance Paid

Arrival terms

  • DAF which is Delivery At Frontier
  • DES that is Delivery Ex Ship
  • DEQ which is Delivery Ex Quay
  • DDU, the Delivered Duty Unpaid
  • DDP, the Delivered Duty Paid

These are incoterms that are used at universal level and are quite beneficial for making international trade in an efficient manner.

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