Guide

International Commercial Contracts - Incoterms

Incoterms and contracts

The International Chamber of Commerce (ICC) originally published the very first set of Incoterms in 1936. Since that first publication, they have been updated in 1953, 1967, 1980, 1990, 2000 and most recently in 2010. Incoterms 2010 came into force on in force 1 January 2011.

Because Incoterms are standard definitions, they are used in contracts to reduce confusion and avoid traders having difficulty understanding the import requirements and shipping practice used in other countries.

Using the correct Incoterms clarifies the contracts you have with your suppliers or customers. 'Incoterms' is a protected ICC trade mark and only the original texts of Incoterms are to be considered as authoritative for incorporation into contracts. You should use the current version, Incoterms 2010, and note this in the contract. These terms should also be used on any paperwork linked to the contract, such as invoices or statements. Failing to state that you are using Incoterms 2000 could result in a dispute.

Most contracts from 1 January 2000 will refer to Incoterms 2000, unless the seller and the buyer agree to use an earlier version. Contracts dated before 1 January 2000 are still binding under Incoterms 1990 (ICC Publication No. 460). As of January 2011, the ICC recommends Incoterms 2010 are used.

The sales contract between the buyer and seller should also state which country's legal system will be used in case of a dispute. If both parties' countries are signed up to the UN Convention, this will provide the legal framework for settling the dispute. Incoterms will provide the legal backbone to settling the dispute.