Understanding Incoterms: The Key to Conflict-Free International Trade

In international trade, a difference in the interpretation of responsibilities can translate into losses, penalties, or delays. To prevent this, the International Chamber of Commerce (ICC) developed INCOTERMS, a set of standardized rules that precisely define the obligations, costs, and risks between buyer and seller in an international sales transaction.

These terms establish:

• Who pays for transportation and insurance.

• At what point the risk of the goods is transferred.

• Who handles customs procedures.

• The exact location of the delivery.

There are currently 11 INCOTERMS (2020 version), divided between those applicable to any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, and DDP) and those exclusively for maritime or river transport (FAS, FOB, CFR, and CIF).

Knowing and correctly applying INCOTERMS is not just a good practice: it is a risk mitigation strategy. At Dragon de Fuego, we advise exporting and importing companies on selecting the most appropriate term for their operations, protecting their interests and ensuring international compliance.