Incoterms
What are Incoterms, and why does a trade lender read them?
ONE OF 366 TERMS · FREE · NO SIGNUP
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
Incoterms are the ICC's standard three-letter trade terms, such as FOB and CIF, that a sale contract uses to say where the seller delivers, when the risk of loss passes to the buyer, and who pays for carriage and insurance. A lender reads them to see where an exporter's risk in the goods ends and who must insure the cargo: under FOB and CIF the risk passes once the goods are on board the ship, and under CIF the seller has to buy only minimum cover. They do not decide when ownership passes, which the sale contract has to settle on its own.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// WORKED IN
// NEXT TO IT
- Borrowing base
- Dilution (receivables)
- Advance rate
- Eligible receivables
- Concentration limit
- Recourse (receivables finance)
- Invoice discounting
- Trade credit insurance
- Performance bond
- Standby letter of credit (SBLC)
- Documentary collection
- Letter of credit (LC)
- Sub-limit
- Open account
- Discrepancy (letter of credit)
- Documents against acceptance (D/A)
- Early settlement discount
- Aged debtors report
- Collection account
- Availability (borrowing base)
- Usance letter of credit
- Cross-ageing
- Trust receipt
- On-demand guarantee
- Virtual accounts
- Borrowing base certificate
- Selective invoice finance (spot factoring)
- Contra debtor (contra)
- Progress claim (payment claim)
- Supply chain finance (reverse factoring)
- Dynamic discounting
- Slow-moving stock
- Unapplied cash (unallocated receipts)
- Banker's acceptance
- Confirmed letter of credit
- Red clause letter of credit
- Back-to-back letter of credit
- Transferable letter of credit
- Shipping guarantee
- Bill of lading (B/L)
- Pre-shipment finance (packing credit)
- Post-shipment finance
- Forfaiting
- Aval
- Export credit agency cover (ECA cover)
- Advance payment guarantee (APG)
- Bid bond (tender guarantee)
- Counter-guarantee
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