INCOTERMS

Sending goods from one country to another, as part of commercial transaction, can be risky business. If they are lost or damaged, or if delivery does not take place some other reason, the climate of confidence between parties may degenerate to the point where a lawsuit is brought. However, above all, sellers and buyers in international contracts want their deals to successfully complete.

In import and export trade, merchants wishing to have commercial transactions should specify that their contracts are governed by internationally accepted rules pertaining to where the responsibility for the goods is transferred from the seller to the buyer. This gave rise to the development of earlier INCOTERMS.

What are INCOTERMS?

INCOTERMS are rules governing the placing of goods at the disposal of the buyer at the named point of delivery for their loading on the conveyance (vessel, aircraft). The INCOTERMS, likewise establish the relationships of the seller and the buyer insofar as:

1. Duties and responsibility is concerned.
2. Specific charges to be shouldered.
3. All risks of the goods from the date of expiration of the period fixed that should be borne.
4. Assistance required in obtaining documents which are issued in the country of origin.

If, when drawn up their contract. buyer and seller specifically refer to one of the International Chamber of Commerce (ICC) Incoterms, they can be sure of defining their respective responsibilities, simply and safely. In so doing they eliminate any possibility of misunderstanding and subsequent dispute.

Purpose of INCOTERMS:

1. To provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. The uncertainties of different interpretation of such terms in different countries can be avoided or at least reduced to a considerable degree.
2. To provide a set of international rules for the interpretation of trade terms.
3. To remedy problems related to misunderstanding, disputes and litigation considering the waste of money that entails.

- From the hand-out given by Mr. Henry R. Austria

For the List of Incoterms click here to download it in a microsoft word document.

Get more information about Incoterms in Wikipedia.