Overview of INCOTERMS

The INCOTERMS rules or International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international commercial transactions.
INCOTERMS are a set of rules which define the responsibilities of buyers and sellers for the delivery of goods under sales contract for domestic and international trade.
They are authoritative rules for determining how costs and risks are allocated to parties and can significantly reduce misunderstanding among traders, thereby minimise trade disputes and litigations.
They facilitate trade by promoting common understanding of the specific tasks of trading parties.

The are a series of three-letter trade terms related to common sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs and risks associated with the transportation and delivery of goods.
The Incoterms rules are accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade.
They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries.

Purpose of INCOTERMS

They outline when and how delivery of goods take place depending on which term is used.
They address specific questions related to:
- Delivery of physical goods from the sellers to buyers across international borders.
- Carriage of goods;
- Export and import clearance responsibilities;
- Who pays what;
- Who arranges what
- Who has risks for the loss/damage of goods at different locations in total logistic chain.

They define roles of buyers and sellers or exporters and importers in the transport arrangement of the transportation of the goods
They establish who bears risks in case of any loss or damage to goods at any specific point in an international journey.
They establish parties’ obligations relating to procurement and preparation of documents ensuring delivery of goods.
They provide solutions and give certainty over costs and reduce risk of disputes and disagreements.
They eliminate inconsistencies in language by all giving parties the same definition of specific terms within the trade agreement.