A working knowledge of Incoterms can be a source of competitive advantage to anyone seeking an entry-level job in global marketing. What are "Incoterms," and how are they classified? How are Incoterms applied in global marketing?

What will be an ideal response?

The internationally accepted terms of trade are known as "Incoterms." They are classified into four different categories. Ex-works (EXW) refers to a transaction in which the buyer takes delivery at the premises of the seller; the buyer bears all risks and expenses from that point on. Another category of Incoterms is known as F-Terms in which there are different sets of terminologies. Free carrier (FCA) is a widely used term in global sales since it is suited for all modes of transport. Under FCA, transfer from seller to buyer is affected when the goods are delivered to a specified carrier at a specified destination. FAS (free alongside ship) are the Incoterm for a transaction in which the seller places the shipment alongside, or available to, the vessel upon which the goods will be transported out of the country. The seller pays all charges up to that point. With free on board (FOB), the responsibility and liability of the seller do not end until the goods have cleared the ship's rail. Several other Incoterms are known as "C-Terms" such as when goods are shipped (CIF). Cost, insurance, and freight represents the risk of loss or damage to goods that is transferred to the buyer once the goods have passed the ship's rail. In this sense, CIF is similar to FOB. If the terms of the sale are cost and freight (CFR), the seller is not responsible for risk or loss at any point outside the factory. A currency adjustment factor (CAF) is assessed to protect the seller from possible losses from disadvantageous shift in the currency exchange rates. All import charges are assessed against the landed price of the shipment (CIF value). Thus, these terminologies help in identifying who is responsible for what prices and at what point of exchange. In fact, different Incoterms for larger orders are used as incentives.