Incoterms

Incoterms (International Commercial Terms) are a set of globally recognised trade rules, guidelines and shipping conditions published by the International Chamber of Commerce (ICC). Originally published in 1936, Incoterms have been regularly updated to reflect changes in the international trade industry. The latest revision came into force on 1 January 2020. Although not mandatory, Incoterms provide a common language for buyers and sellers to agree on contractual transactions. Incoterms rules help to clarify:

• The interpretation of contractual clauses common to import / export transactions
• How costs and risks are allocated to the parties, as well as an overview of the timeframe
• Specific instructions to other parties involved throughout the agreement (financial institutions, carriers, forwarders, customs brokers and others)

In short, Incoterms are a useful set of guidelines to help buyers and sellers understand the responsibilities and liabilities of each party well before a shipment takes place.

Recognised and accepted by governments around the world, Incoterms help define the key obligations and responsibilities of trading partners:

• Transport costs: Defines who pays what transport cost at each stage of the shipment.
• Point of delivery: Establishes the place of exchange of goods from seller to buyer.
• Import/export formalities: Single licence procedure to designate the parties legally responsible for the import/export of goods.
• Insurance fees: Identifies who is responsible for insurance costs.

Incoterms allow for better communication of specific contract provisions. Clearer communication reduces the risk of misinterpretation between parties.

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