Incoterms 2020, a widely-used terms of sale, are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specifies who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
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The Incoterms 2020 are a set of 11 individual rules issued by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions. Of primary importance is that each Incoterms rule clarifies the tasks, costs and risks to be borne by buyers and sellers in these transactions. Familiarizing yourself with Incoterms will help improve smoother transaction by clearly defining who is responsible for what and each step of the transaction.
The Incoterms 2020 rules are updated and grouped into two categories reflecting modes of transport. Of the 11 rules, there are seven for ANY mode(s) of transport and four for SEA or LAND or INLAND WATERWAY transport.
What Incoterms Do Not Cover
As noted above, Incoterms are generally incorporated in the contract of sale, however they do not:
- address all the conditions of a sale;
- identify the goods being sold nor list the contract price;
- reference the method nor timing of payment negotiated between the seller or buyer;
- when 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 at the buyer’s country; and
- address liability for the failure to provide the goods in conformity with the contract of sale, delayed delivery, nor dispute resolution mechanisms.
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