Incoterms (International Commercial Terms) are a set of trade rules issued by the International Chamber of Commerce to define the responsibilities of sellers and buyers globally to reduce confusion in cross-border trade.
Incoterms are 11 internationally recognised rules that define things like who is responsible for managing shipment and who is responsible for customs clearance. The aim is to enable smooth trade and transactions.
This article will provide an explainer of the 11 Incoterms.
There are seven Incoterms for Any Mode of Transport:
There are four Incoterms for Sea and Inland Waterway Transport:
Incoterms are designed to clearly define who is responsible for goods at different points of importation and exportation.
When explicitly incorporated by parties into a sales contract, Incoterms become a legally enforceable part of that sales contract.
In each Incoterm, a statement is provided for the seller’s responsibility to provide goods and a commercial invoice. A corresponding statement stipulates that the buyer pay the price of goods as provided in the contract of sale.
The limitation with Incoterms is they do not address all conditions of a sale, and they do not address liability or dispute resolution. Instead, they are a framework that importers and exporters can use to ensure smooth transactions.