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What are Incoterms®?

Incoterms® is short for International Commercial Terms and are a set of 11 rules defining who's responsible for what during international transactions.

Incoterms® are internationally recognised and have become an essential part of the daily language of trade since they were first published in 1936. They are maintained and developed by the International Chambers of Commerce (ICC).  They provide rules and guidance to importers, exporters, lawyers, transporters, insurers and everyone involved in trade, and as such are regularly used in contracts for the sale of goods all over the world.

Find out what they outline and how they help avoid costly misunderstandings between the sender and receiver.

What do Incoterms® outline?
They summarise the tasks, responsibilities and risks relating to an international shipment.
They define what the sender and receiver agreed upon before shipping and prevent misunderstandings regarding the shipping costs – like finding out the sender didn’t insure the goods or having to pay the shipping costs when they arrive.

Where do I state them?
They’re a requirement on every commercial invoice.

What are the different types?
Incoterms® have a number of rules to choose from. And the terms can differ a lot. For example, Ex Works states the buyer or receiver is responsible for all costs and risks during the shipping process. While Delivered Duty Paid, known as DDP, states the seller or sender is responsible for the costs and risks.

incoterms

Why are they important?
Incoterms® rules clarify the tasks, costs and risks involved in the delivery of goods by sellers to buyers, their use significantly helps to avoid costly misunderstandings. An added advantage is that they are also recognised by UNCITRAL (the United Nations Commission on International Trade Law) as providing the global standard for the interpretation of the most commonly used terms in foreign trade.

For customs clearance, Incoterms® are important as they determine who bears the transport cost. In most countries transport cost must be included in the customs base on which duty and taxes are due. A clear awareness of the Incoterms® principles coupled with their correct use and application can therefore really help you and your customers avoid problems in exporting and importing goods.

Full information on all Incoterms® rules, guidance notes, training resources and packages and other useful background and explanatory details can be found at http://www.iccwbo.org/products-and-services/trade-facilitation/incoterms-2010/the-incoterms-rules/

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This Q&A is provided for information only and the answers do not have a contractual value. For additional information, you can refer to FedEx Conditions of Carriage for EMEA available at fedex.com.

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