Incoterms
'Incoterms' (international commercial terms) is a series of standard international terms that defines buyer and seller responsibilities in foreign trade contracts. The terms, compiled by The International Chamber of Commerce (ICC), aim to avoid misunderstanding and are principally used in agreements about the delivery of goods. Each Incoterm outlines who is responsible for transport, insurance, duties and clearance.
The thirteen separate Incoterms are split into four distinct groups:
- Group E - where the goods are made available to the buyer at the seller's premises;
- Group F - where the seller must deliver the goods to a carrier appointed by the buyer;
- Group C - where the seller must contract for the carriage of the goods without assuming risk of loss of, or damage to the goods or additional costs due to events occurring after shipment;
- Group D - where the seller has to bear all costs and risks required to bring the goods to the place of destination.
Though Incoterms offer a useful guide to responsibilities for the goods at each point of the transport process, it is not possible for them to be fully comprehensive due to variations decided by the custom of particular trades and/or ports. Care should be taken when applying the rules to account for these eventualities.
Critical Points chart
The graphic shown here attempts to illustrate 'Critical Points' in International Transport’ in relation to the application of Incoterms 2000 to sales and purchase contracts.
This is Stemcor’s own graphic guide to critical points in international transport. For a more precise definition you should consult Incoterms 2000. In some cases, the parties to a contract may wish the trade terms to operate differently and can vary them by adding words that extend the definition of an Incoterm. Common examples of variants are FOB “Stowed” and CFR “Free Out” or “Liner Out”.
Traders wishing to use these rules should specify that their contracts will be governed by the provisions of Incoterms 2000, clearly indicating any agreed variations thereto. Incoterms 2000 are available from local Chambers of Commerce or from the ICC website.
Incoterms give no guidance for such variations. There are, for example, no authoritative definitions of expressions such as “Liner Out” or “Liner Terms” and allocation of costs for these terms differs from place to place. Where trade terms are expanded, it is important to clarify in the contract to what extent each party is responsible for carriage, risks and costs.
Whilst every effort has been made to ensure the accuracy of information contained in the graphic, Stemcor can accept no responsibility for errors or omissions.
