Incoterms® Explained
What are Incoterms®?
Developed by the International Chamber of Commerce (ICC), Incoterms® are a series of international trading terms defining costs and responsibilities between the buyer and seller of commercial goods. An acronym for INternational COmmerce TERMS, Incoterms® rules are contractually binding, widely recognised by governments, legal authorities and agencies across the globe. They are intended to minimise or eliminate any uncertainties which can otherwise arise in the interpretation of rules, standardising definitions and clearly communicating tasks, costs and liabilities between trading parties.
Incoterms® consist of a series of three-letter abbreviations for common terms of trade (i.e. FOB – Free On Board). Each provides contrasting emphasis on the buyer or seller for the provision of tasks (i.e. delivery to destination) and associated costs.
Who Uses Incoterms®?
Primarily the buyer and seller of goods utilise Incoterms® for the negotiation of domestic and international trade contracts. This extends to third parties for the provision of associated services, such as financial institutions, freight forwarders, carriers, lawyers, etc.
Why are Incoterms® Important?
Incoterms® rules are designed to simplify trade contracts and reduce the likelihood of disputes between the buyer and seller of goods. Where challenges may otherwise exist, Incoterms® offer an internationally recognised standard which transcends language, customs and legal systems. This saves time and effort throughout the sales negotiation process, removing the need for customised and lengthy trade contracts defining obligations which are predefined within the Incoterms® rules.
Overview
The International Chamber of Commerce has produced a brief video to help explain Incoterms® and their use:
History
Initially published in 1936, Incoterms® rules are periodically revised to keep pace with developments in international trade. Incoterms® 2010 is the latest version, which launched in September 2010 and came into effect on the 1st January 2011. Contracts made under previous versions (i.e. Incoterms® 2000) remain valid beyond this date.
Where Can I Find Incoterms®?
Incoterms® 2010 (the latest version of Incoterms® rules) are available for purchase from the International Chamber of Commerce. Champion Freight offers a free reference chart and glossary summarising costs, risks and responsibilities based on the 11 various Incoterms® and each step of the logistics journey.
Glossary & Chart
Ensure you’re using the right terms. View the latest Incoterms® chart and glossary.
