OUTLINE

NOTES

• INCOTERMS: customs, but different from customary law in Public Int. Law

<aside> 💡 THEORIES

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Overview of INCOTERMS

History

• Incoterms (the International Rules for the Interpretation of Trade terms) are a set of standard terms on shipment used in int. sale contracts
• Published by Paris-based International Chamber of Commerce → the ICC only combined the already-established customs
• Objective: simplify & clarify the most commonly used trade terms used in foreign trade → avoid the uncertainties of different interpretations in different countries

Scope

• Rights & obligations of parties (seller & buyer) to the contract of sale in the delivery of the goods (tangible assets)

  → Obligations, costs & risks involved in delivery

  • Obligations of each party → INCOTERMS has no regulation for remedies of breaches of obligations (governed by the contract & the law governing the contract)
  • The allocation of costs: closely related to the allocation of obligations
  • The allocation of risks: the moment the risks will be transferred from the seller to the buyer → the person who bares the risks has to buy insurance

• Not

  • Apply to the contract of carriage (between shipper & carrier)
  • Apply to the contract of insurance (even though CIF, CIP impose obligation of seller to pay for insurance coverage)
  • Transfer of title to the goods (largely governed by national laws)
  • Breaches of contract, remedies & exemptions of liability
  • Time, place & method of payment

Use of Incoterms

• Incoterms are int. trade customs → parties must explicitly incorporate in the sale contract, otherwise judges & parties cannot refer to the Incoterms while solving disputes
• New versions of Incoterms shall not terminate the validity of previous versions → parties must specify the exact version to be applied
• Incoterms do not make up a complete contract of sale → negotiate additional terms in the contract (e.g. prices, the law governing…)
• Choose the appropriate Incoterms rule: depending on the goods, means of transport, additional obligations (e.g. insurance: only obligated in CIP, CIF)
• Specify the place/port as precisely as possible → helps to avoid uncertainties & misunderstanding
• Incoterms cover legal obligations of parties, do not indicate trader should do something because it is prudent/advisable
• Incoterms 2020 may be applied for both domestic & int. sale contracts
• Chart

Order of articles within each Incoterms 2020 rule