Rules of Incoterms – which to choose?

The answer to the question: rules of Incoterms – which to choose? – depends on the parties to the transaction. They must firmly decide what should be placed in the basis of the contract – rules Incoterms-2000 or rules Incoterms-2010.

What Incoterms is

Incoterms is an abbreviation from Engish of International Commerce Terms (International trade rules). They were first adopted by the International Chamber of Commerce (ICC) in 1936. Later amendments and additions were made in the rules Incoterms repeatedly. The last edition of Incoterms (Incoterms-2010) is effective from January 1, 2011.

In fact, this is the set of the common terms in the foreign trade and logistics, designed to make international trade rules uniform and therefore understandable to all the participants of the supply contracts. This helps to prevent conflict situations, and if they arise – to take judicial decisions by the same rules, and therefore avoid unjustified loss of time and money due to the fact that the commercial law of one country is often very different from the same law of the counterparty.

In other words, the rules of Incoterms is a document that contains the basic rights and obligations of the contracting parties: the responsibility of the shipper, the carrier’s liability and responsibility of the consignee, depending on the selected mode of supply, and it also defines the rules for transportation (supply), according to which you can:

  • allocate the cost of the shipping of goods between the buyer and seller, as well as to determine the moment of the transition of the responsibilities on the payment for these costs;
  • оdetermine when the risk of loss or damage to the goods is a true fact;
  • determine the date of the delivery of the goods (the actual provision of goods by the seller to the buyer or the carrier hired by them).

However, it should be stressed that Incoterms rules do not establish the time of the transfer of the property right to the goods, as well as the consequences for each of the parties of the contract for the complete or partial failure to perform its obligations. These issues are regulated in the pre-trial or court order on the basis of the rules of the private international law or the provisions of Vienna Convention.

Rules of Incoterms – which to choose?

Currently rules of Incoterms are valid in the international trade in the last two editions – Incoterms-2000 and Incoterms-2010. Their selection is not essential for the execution of the contract, but only in one case: at the stage of the making of transaction it is necessary to specify (and in the future to be guided by it at its performance), what version of the rules and what mode of the delivery is chosen.

At the conclusion of the transaction, you can also use the standard contract forms, in which it is already stated what version of the rules the participants will be guided by.

An indication to the range of the option of the rules – the rules of Incoterms-2000 or the rules of Inkorterms-2010 and of the mode of the delivery is crucial for the participants in the transaction, as it helps in the performance of the contract to avoid the confusion and to prevent the disputes and other problems.

In addition, such indications of the supply agreement substantially facilitate the solution of the possible disputes and disagreements in the ICC arbitration. However, only in the case if the parties of the transaction have registered the possibility of such recourse to the arbitration in the contract.

Incoterms are without any errors

Do not think that Incoterms have an inclusive value. In particular, you should not assume that Incoterms govern more traffic than the terms of the contract of the sale. And secondly, the opinion that Incoterms cover all the obligations of the parties of the transaction, including the responsibility of the shipper, the carrier’s liability and responsibility of the consignee.

International Chamber of Commerce has repeatedly stressed that Incoterms govern only the relations of the seller and the buyer under the contract of the sale and only on the certain aspects.

Our experts perfectly know all the nuances of the international commercial law and civil law, know Incoterms and are always ready to help to avoid the possible risks when making and executing the transactions for the supply from abroad of any cargo by any mode of transport.