The Incoterms rules are a set of standard packages of terms and conditions relating to the sale of physical goods that need to be transported. First published by the ICC in 1936, the Incoterms rules are revised from time to time. The latest revision, Incoterms 2010 came into force on 1 January 2011, replacing the previous version Incoterms 2000.
The Incoterms rules focus on these two key aspects of the transaction:
- Which party – buyer or seller – is responsible for arranging and paying for transport (and associated activities such as loading or unloading), import and export procedures, insuring the goods etc.?
- At what point in the journey does responsibility for the consignment transfer from seller to buyer? This becomes important if the goods are lost or damaged in transit
By agreeing to use an Incoterms rule, the buyer and seller achieve precision and clarity in defining their obligations and responsibilities.
Note that the Incoterms rules do not attempt to cover all aspects of the commercial agreement – there are important matters such as transfer of title and how the goods are to be paid for, on which the Incoterms rules are silent.