Incoterms

Imagine you want to buy a toy from a store far away. The toy store has to send the toy to your home, but they have to use a big truck, a plane, a ship or a train to complete the journey. Incoterms are rules that explain who should pay for what and who is responsible for certain things during this process.

For example, if the incoterm is EXW (Ex Works), it means the store is only responsible for giving you the toy when it is ready at the store. It doesn't have to organize the transportation, and you have to pay for everything related to transportation, like the truck or plane to bring the toy home.

On the other hand, if the incoterm is CIF (Cost, Insurance and Freight), it means the store has to organize everything, including the transportation, insurance, and loading and unloading the toy from the truck, plane or ship. You only have to pay for the price of the toy and the freight cost.

In short, incoterms are like rules to explain who is responsible for what and who has to pay for what when buying or selling something far away.