Incoterms is an abbreviation of the phrase " International Commercial Terms" It is a term trademarked by the International Chamber of Commerce. 

Understanding Incoterms can ensure a smooth transaction and avoid potentially costly mistakes. Use internationally recognized incoterms to clarify the tasks, cost, and risk for buyers and sellers in these transactions. 

Incoterms, a widely-used term of sale, is a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities. 

Many would argue that clearly defined language in a contract is sufficient to ensure all parties maintain their obligations in international trade. However, language barriers and connotations of terms in one location may not be reflective or understood in another location. 

An Actual Overview of Incoterms 2022

For example, in each incoterm rule, a statement is provided as to the seller's responsibility to provide the goods and commercial invoice in conformity with the contract of sale. Likewise, a corresponding statement is provided which stipulates that the buyer pays the price of goods as provided in the contract of sale. Each Incoterm rule has a statement stipulating which party is responsible for obtaining any export license or other official authorization required for export and for carrying out the formalities necessary for the export to proceed.

Similarly, each rule has a corresponding statement as to which party is responsible for obtaining any import license or other official authorization required for import and for carrying out the customs formalities required for the import of goods. These statements also specify which party bears the cost of handling these tasks. Similarly, each incoterm rule specifies which party to the transaction, if any, is obligated, to contract for the carriage of the goods. Another point addressed in each incoterm rule is which party, is obligated, to provide cargo insurance coverage. These statements also specify which party bears the cost of bearing the costs of any pre-shipment inspections.

A final example is cargo delivery. Each incoterm rule specifies the seller's obligations for cargo delivery and clarifies when delivery takes place. Each rule also specifies when the risk of loss or damage to the goods being exported passes from the seller to the buyer by reference to the delivery provider. 

What Incoterms Do Not Cover    

• address all the conditions
• identify the goods being sold and list the contract price;
• reference the method or timing of payment negotiated between the seller and the buyer
• when the title, or ownership of the goods, passes from the seller to the buyer;
• specify which documents must be provided by the seller to the buyer to facilitate the customs clearance process in the buyer's country;
• address liability for the failure to provide the goods in conformity with the contract of sale delayed delivery or dispute resolution mechanisms.