What are Incoterms® Rules?


Incoterms® are a standard set of rules developed by the International Chamber of Commerce for the delivery of goods. Incoterms® indicate which party (buyer or seller) to a sales contract bears the risk, costs and responsibilities at any given time during the delivery of goods in a particular international transaction. The ICC currently approves eleven Incoterms®, and each Incoterm® has a unique allocation of risk, cost and responsibility for both buyer and seller.

What Does Incoterms® stand for?

The word ‘Incoterm®’ is an acronym composed of ‘In’ for international and ‘co’ for commercial, and when combined stands for “international commercial terms”. However, the commercial part of Incoterms® can be misleading. Incoterms® have nothing to do with other commercial terms such as methods or terms of payment, your service provider, or the point at which ownership passes from the seller to the buyer. Incoterms® are concerned only with delivery and relate only to the seller and the buyer, i.e. the two parties that have entered into a contract of sale.


Why Should you use the ICC Incoterms® Rules?

International trade often requires goods to be transported across thousands of kilometres via different modes of transport to a foreign buyer who may not speak the same language as you. International negotiations would be prolonged and complex if you were required to negotiate and establish who bears the risk, costs, and responsibilities at any given point during the delivery of goods on every international transaction. The ICC developed the Incoterms® rules to streamline these negotiations and make global trade more efficient. Buyers and sellers can now negotiate on which of the eleven Incoterms® rules will be included in the sales contract and eliminate the need for additional negotiation on aspects relating to delivery.

Incoterms 2020

Where can I find out more about the Incoterms® 2020 Rules?

This article is the first volume of our “know your Incoterms®” series. Incoterms ® play a vital role in international trade, but few exporters and importers genuinely know how to use them effectively. In collaboration with the International Trade Institute of Southern Africa, Trade Forward Southern Africa has created a free and comprehensive online training course that provides training on all eleven Incoterms ®, including FOB, CIF and DDP. Click the links below to sign up for free and get started.

To sign up to the School of Export CLICK HERE.

If you already have a profile, CLICK HERE to login to begin the module.

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