Comprehensive analysis of international trade terms and their conventions

Incoterms, also known as price terms, are specialized terms developed to clarify the costs, risks and responsibilities that buyers and sellers should bear during the transaction process. These terms are not only related to all-round responsibilities such as loading and unloading goods, transportation insurance, customs declaration, and tax payment, but also help to standardize the division of expenses and avoid increasing trade costs due to detailed disputes. The “Incoterms” (INCOTERMS) formulated by the International Chamber of Commerce is the most widely used trade term in the world. Its latest revised version is the 2010 version (INCOTERMS 2010), and it plays an important guiding role in international trade.

Main types of Incoterms

In international trade, FOB (Free On Board), CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) are the most commonly used terms. These terms provide a concise way to help both parties clarify responsibilities and risks in the transaction contract, thereby avoiding repeated discussions and increasing transaction costs. In addition, the United States’ “1990 Revision of Foreign Trade Definitions” explains various terms, especially FOB, and breaks down the responsibilities and obligations under different modes of transportation [][]2.

The nature and role of international trade practices

International trade practices are a series of behavioral norms formed after years of practical accumulation, which play an important normative role. These practices are developed to reduce trade disputes and are not mandatory, but can be considered legally binding in contracts if agreed by all parties. For example, the 1932 Warsaw-Oxford Rules clarify the nature of the CIF sales contract and the responsibilities of the parties, and can be adopted voluntarily by both parties. If there is a conflict, the contract shall prevail. Similarly, the Incoterms 2010 also emphasizes the terms that should be clearly used in contracts to reduce the possibility of disputes.

Uniform practices for letters of credit

With the expansion of international trade, the use of letters of credit as a payment method has become more and more common. In order to standardize the rights and obligations of all parties involved in letters of credit, the International Chamber of Commerce launched the Uniform Customs and Practice for Commercial Documentary Credits (UCP) in 1933, and subsequently revised it many times to adapt to the modern trade environment and technological development. . Among them, “UCP600” is the currently applicable version, and its simplified version of the terms helps improve the convenience and clarity of operation.

To sum up, Incoterms and practices provide norms and guarantees for international economic activities, reduce the possibility of disputes, and promote the smoothness and facilitation of global trade. Understanding and properly using these tools will have a positive impact on the trading activities of all parties.