International Trade Rules

Purpose of INCOTERMS:

1. Providing rules for interpretation. INCOTERMS provides a set of international rules for interpreting the chief terms used in foreign trade contracts, and for the optional use of businessmen who prefer the certainty of uniform international rules to the uncertainties of different interpretations of the same terms in different countries.
   
   
2. Keeping pace with trade practices. Parties to a contract often are unaware of the differences between trading practices in their respective countries. The existing diversity of interpretation is a constant source of friction in international trade, leading to misunderstandings, disputes and references to the courts with all the waste of time and money that these entail. To help traders overcome this friction, the International Chamber of Commerce first published a set of international rules in 1936 for the interpretation of trade terms — known as INCOTERMS 1936. Amendments and additions were later made in 1953, 1967, 1976, 1980, 1990 and 2000 to provide an up-to-date set of rules that were broadly in line with current international trade practices.
   
   
3. Overcoming barriers. The chief difficulties faced by importers and exporters are:
   
   • Uncertainty as to which country’s laws apply to their contracts
     
   • Difficulties arising from inadequate information
     
   • Difficulties arising from diversity in interpretation
     
   These handicaps to trade can be much reduced by the use of INCOTERMS.