The Incoterms 2010 rules are standard sets of trading terms and conditions designed to assist traders when goods are sold and transported.
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.
Using the correct Incoterm is crucial and a key part of any international trade contract. The regulations clearly specify upon which party the risk and obligations of the contract fall upon during shipment. An out-of-date contract could see you liable for costs that would have otherwise been born by your supplier.
The Incoterms rules are created and published by the International Chamber of Commerce (ICC) and are revised from time to time. The most recent revision is Incoterms 2010 which came into force on 1st January 2011.