Study Incoterms Here

"Incoterms" are definitions of terms used among traders in international trade. Banks need these terms defined since the banks are usually moving the money from the buyer to the seller. Before the bank does so, it asks under what conditions do we, the banks, transfer payments?

Interestingly, the banks arrived at these definitions among themselves, and require their customers, the traders, adopt these terms in doing business worldwide.

In essence the terms define what is included in the price. Does the price quoted include the goods sitting in the factory overseas, the goods sitting on the docks overseas, or perhaps on the ship? The goods sitting on the docks in the importers home town? The terms will define this.

As an aside, these terms are used worldwide, all cultures all places, and are completely voluntary. There is no government oversight or involvement. It is a good example of spontaneous order coming from peaceful commerce among diverse groups.

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