Reviewed by Aug 27, 2020| Updated on
What are Incoterms?
Incoterms means International Commercial Terms. These are a series of the pre-defined commercial terms published by the International Chamber of Commerce (ICC) concerning the international commercial law. ICC owns the "Incoterms" as its registered trademark.
They are mostly used in international commercial transactions or procurement processes, and their use is encouraged by trade councils, courts, and international lawyers.
In 1923, the first work published by the ICC on international trade terms was issued. In 1936, the first edition, known as Incoterms, was published. The Incoterms rules were altered several times between 1953 and 2010. The ninth version, known as Incoterms 2020, was published on 10th September 2019.
The latest version is a collection of three-letter terms of trade applicable to specific contractual sales practices. The Incoterms rules primarily communicate the roles, costs, and risks associated with global or foreign goods transportation and supply.
Importance of Incoterms
Incoterms notify sales contracts which specify the relative obligations, risks, and costs of delivering the goods by the seller to the buyer. Yet, they do not conclude a contract themselves, decide the price payable, currency or credit terms, rule contract law, or establish where the title to the goods is transferred.
Governments, legal authorities, and professionals worldwide recognize the Incoterms rules for defining the widely used words in international trade.
Their objective is to reduce or eliminate uncertainties developing from the differing interpretations of the rules in different countries. Usually, they are incorporated into sales contracts across the globe regularly.
Definition of Terms under Incoterms
Some popular terms have special meaning under Incoterms and are given below:
Delivery: The transaction point where the risk of loss/damage to the goods is transferred from the seller to the buyer.
Arrival: The point stated in the Incoterm to which the carriage has been paid.
Free: Seller has an obligation to deliver the goods to a named place for transfer to a carrier.