Trade terms, also known as trade terms and price terms, are terms used by both parties in international goods trading to indicate the scope of obligations, risks and responsibilities assumed by both parties. The trade terms expressed by trade terms are mainly divided into two aspects: first, to explain the price composition of the goods, whether it includes the main subsidiary expenses other than the cost, namely freight and insurance; second, to determine the delivery conditions, that is, to explain the responsibilities, expenses and risks assumed by both parties in the delivery of goods.
Trade terms play a very positive role in promoting the development of international trade. In summary, there are mainly three points.
1. It is conducive to the negotiation and conclusion of transactions between buyers and sellers
Since each trade term has its specific meaning, as long as the buyer and seller agree on which trade term to trade, they can clarify the responsibilities, expenses and risks that each party should bear in the delivery of goods. This simplifies the transaction procedures and shortens the time for negotiation and transaction, which is conducive to the buyer and seller to quickly reach a transaction and conclude a contract.
2. It is conducive to the calculation of prices and costs by both parties.
Since trade terms are factors that indicate the composition of commodity prices, when both parties determine the transaction price, they must consider which ancillary costs are included in the trade terms adopted, which is conducive to price comparison and cost calculation by both parties.
3. It is conducive to the performance of contracts and the resolution of disputes.
When the buyer and seller negotiate a contract, if some contract terms are not clearly stipulated, resulting in disputes arising from the performance of the contract that cannot be resolved according to the provisions of the contract, in this case, the general interpretation of the relevant trade terms can be used to deal with it. Because the general interpretation of trade terms has become an international practice, it is a kind of code of conduct that everyone follows.