International Commercial Terms (Incoterms®)


This is the first in a series of three articles on Incoterms®. This first article gives you an introduction to the Incoterms rules, what they are and why they are used – with regard to international shipping.

The Incoterms® rules are a set of rules created by the International Chamber of Commerce (ICC). On their website the ICC states:

The Incoterms® rules have become an essential part of the daily language of trade. They have been incorporated in contracts for the sale of goods worldwide and provide rules and guidance to importers, exporters, lawyers, transporters, insurers and students of international trade.


In regard to international shipping the Incoterms® rules help buyers and sellers identify who responsible for shipping / transportation costs and also who is responsible for the risk of loss or damage during the different parts of this process.


The following link will take you to the ICC website which gives you the wording for each of the eleven current Incoterms®


This Way Up recommends that any business, whether buying or selling goods to be shipped, ensures that they include Incoterms® in their sales contracts or at least comes to an arrangement, with their supplier/customer, on which Incoterm(s) to use prior to entering into the shipping process. This will ensure that it is clear who is responsible for the costs associated with each part of the shipping / transportation process. It will also ensure, if the worst should happen, during shipping / transportation, that it is clear who the risk lies with rather than a potential dispute arising between buyer and seller as to who should be responsible.


Please also see the following related articles:
Part 2: The 11 Incoterms®
Part 3: Incoterms®: Their common (mis)use in international shipping and preventing costly errors