INCOTERMS® 2020 are 11 rules issued by the International Chamber of Commerce (“ICC”). If you’re thinking: How can they issue them? They don’t make law. You would be right. They are not laws. They are terms that have been used historically in international sale of goods contracts, which are widely understood/interpreted by courts and people who deal with logistics issues. Therefore, when they are included in a contract for the international sale of goods, they provide a lot of clarity and predictability.
They provide clarity by defining who (seller or buyer) will pay for and manage shipping, insurance, customs clearance, duties, documentation and where delivery takes place. As you can imagine these are pretty important terms in an international contract as goods get damaged during shipment, good gets stalled at borders and insurance claims can be time-consuming. In fact, the issues that can arise from shipping goods internationally can take a sale of goods contract from being a great deal to being a money pit.
The 11 terms fall into two categories: 1) 7 terms deal with logistic issues when any mode of transportation is used (sea, air, land) or the transportation is multi-modal, and 2) 4 are used when sea, OR land, OR inland waterways are used. Each of the 11 terms have their own acronym, like EXW, FOB, FAS, etc. It sounds complicated but experienced sellers and buyers know what each term means and when/how to use them.
The main point to remember is that INCOTERMS® 2020 are only used in international contracts for the commercial sale of goods. Goods are defined as tangible, not intangible, goods. That is, any good that you can actually touch and requires shipment, would fall into this category.
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