Guide to International Commercial Terms In International Trade

In the international sale of goods, there is a customary usage of special trade terms.

The problem with these terms is that they end up having different meaning in different countries with respect to obligation of the seller and the buyer.

In an effort to help avoid misunderstanding between the parties to these contracts as well as promote uniformity in law, the International Chamber of Commerce (ICC) has published INCOTERMS®.

Contracts for the international sale of goods should indicate the terms of sale, preferable with one of the 11 incoterms.

Remember incoterms are only applicable in contracts of international sale of goods if the parties have incorporated then into their contracts.

Sales contracts involving goods that are not shipped under negotiable marine bill of lading should also specify when (time and place) and/or how ownership passes from seller to buyer

Is it possible to conduct international transactions without all these?

Often international transactions are conducted without the benefit of an international sales contract.

What happens is, the seller provides a quotation (which can be in the form of pro-forma invoice), the buyer responds to this with a purchase order.

In most cases this is sufficient to end up with repeat sales between the parties who are well acquainted and have developed a basis for their dealings.

The problem with this arrangement is that when problems in the form of unanticipated disputes occur, the parties get stuck. Hence the need for incoterms