Question

International Business

- Identify and describe the 4 categories of Incoterms.

Answer 1

Incoterms, short for International Commercial Terms, are three-letter trade terms established by the International Chamber of Commerce to facilitate cross-border trade.

The latest edition is the Incoterms 2010, which consists of a total of 11 Incoterms aimed to guide buyers and sellers with the shipment process by determining the responsibilities of each party during each leg of the transportation.

These are sorted into four different groups, C, D, E, and F, which are categorized according to the delivery location of the goods and the responsibility for payment at different stages of the international transport.

Incoterm groups

Incoterms Group C

Condition: The seller bears all costs to the destination port (including international transport) however, risk transfer will be made once the goods are loaded on the means of transport.

Incoterms Group D

Condition: The seller bears all risks and costs necessary to bring the goods to the destination country.

Incoterms Group E

Condition: The buyer is responsible for collecting the goods at the seller’s warehouse and bears all associated risk and cost.

Incoterms Group F

Condition: The seller is responsible for bringing the goods to the buyer’s predefined transport medium; the buyer then accepts cost and risk responsibility from that point onwards.