Trade Terms are standardized rules in international trade that define the responsibilities, costs, and risk allocation between buyers and sellers during the delivery of goods, typically based on the Incoterms established by the International Chamber of Commerce (ICC). Their core function is to clarify: who arranges transportation, insurance, and customs clearance; who bears the costs; and when and where the risk transfers from seller to buyer. Common terms include FOB, CIF, EXW, DDP, etc. Usage scenarios cover quotations, contract signing, letters of credit, and document preparation. Precautions: Different versions (e.g., Incoterms 2010 vs. 2020) may interpret the same term differently, so the version must be specified in the contract; the choice of terms should consider the mode of transport (e.g., FCA for multimodal transport, FAS only for waterway transport); trade terms are not equivalent to payment terms and must be distinguished. The difference from payment terms is that trade terms govern the transfer of goods ownership, while payment terms govern the flow of funds.
📝 Examples
1. This export uses CIF terms; we are responsible for chartering and booking space and paying freight and insurance, but the risk transfers to the buyer when the goods pass the ship's rail at the port of shipment. (Note: Under CIF, the seller bears transport and insurance costs, and risk transfers early.)
2. If you wish us to bear all costs and risks of import customs clearance and door delivery, we suggest switching to DDP terms instead of the current FOB terms. (Note: Under DDP, the seller has the greatest responsibility; under FOB, the buyer handles transport and insurance.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner