INCOTERMS in International Trade Agreements
Drafting contracts properly in international trade agreements is essential in commercial law. Drafting and reviewing obligations set out in international commercial agreements varies according to the applicable law. This is why International Chamber of Commerce introduced to the commercial life a set of notions that determines delivery and payment methods and are integrable into contracts. These notions, also known as INCOTERMS across the world, determine delivery and payment methods while also being updated according to the latest technological and commercial developments.
Today most common delivery terms are as follows; Ex-Works(EXW) meaning the place of the production of goods, Free Carrier(FCA) meaning the place of delivery agreed by the parties, Free Alongside Ship(FAS) meaning the board of the ship, Free on Board(FOB) meaning the deck of the ship is the place of delivery. Cost-Insurance-Freight(CIF) means that all costs, insurance and freights are to be born by the seller up to the country of delivery. For INCOTERMS to be applicable, the parties need to refer to the INCOTERMS in the contract clearly beyond any doubt. For example; in a contract mentioning CIF delivery terms, clearly writing down CIF/Antalya-Incoterms 2000 will clear any doubts on the place of delivery and avoid any potential disputes regarding thereof.
While there are many payment terms in international commerce, only a few of these are commonly used in daily life. The most commonly used payment terms are as follows; Letter of Credit(L/C) meaning a letter of payment guarantee issued by a bank, Documentary Collection(CAD) meaning payment upon the submission of the transfer documents concerning the exported goods to the bank, Open Account(CAG) meaning the shipment of the goods and the documents to the buyer before the fees are collected.