Incoterms are commercial codes established by the International Chamber of Commerce. Each one is composed of three letters that represent the prevailing business-to-business practices in contracts involving the purchase and sale of goods, defining the main obligations, costs, and risks assumed by the parties regarding the delivery of the merchandise and logistics.
There are four key aspects that these terms regulate in an international sales contract:
1) The distribution of expenses: it establishes until what moment and place the seller assumes the costs of the commercial exchange.
2) Transfer of risk: determines from what moment and place the risks are the responsibility of the importer.
3) The place of delivery of the merchandise: designates the exact place where the seller delivers the merchandise to the buyer.
4) Customs formalities: defines who is in charge of customs formalities at origin.
The incoterms revised to 2020 by the ICC are the following:
