The purpose of International Commercial Terms (Incoterms) is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Each Incoterms rule specifies:
- The obligations of each party (e.g. who is responsible for services such as transport; import and export clearance etc)
- The point in the journey where risk transfers from the seller to the buyer
- So by agreeing on an Incoterms rule and incorporating it into the sales contract, the buyer and seller can achieve a precise understanding of what each party is obliged to do, and where responsibility lies in event of loss, damage or other mishap.
- The Incoterms rules are created and published by the International Chamber of Commerce (ICC) and are revised every 10 years. The most recent revision is Incoterms 2020 which came into force on 1st January 2020.