Incoterms® and Commercial Contracts

Where do you find the Incoterms® rules?

The Incoterms® rules are found in international sale contracts and any of the common documents that may evidence such contracts, such as a pro forma invoice or purchase order.

The legal nature of the Incoterms® rules is frequently misunderstood. The Incoterms® rules are creatures of contract, not legislation. The Incoterms® rules apply to a contract whenever the parties can demonstrate that they both intended the Incoterms® rules to apply. That is why it is important to explicitly incorporate the Incoterms® rules.

There are, however, important exceptions. If trade customs, general sales conditions, commercial usages or previous contractual dealings indicate that the parties intended to use the Incoterms® rules, then the Incoterms® rules may apply even in the absence of a specific mention in the sales contract. Under some legal systems, great weight is given to customs of trade and there may be a presumption that the Incoterms® rules constitute a custom of trade. In such countries, courts or arbitrators might take judicial notice of an Incoterms® rule to resolve a case, although no Incoterms® rule had been incorporated into the contract.

In which parts of the world are the Incoterms® rules most commonly used? Are there any regions or countries where the Incoterms® rules are not allowed by law, or not found in practice?

The Incoterms® rules have been longest known and understood in Europe. This may be due historically to the large number of exporting countries in Europe and the fact there is a high amount of intra-European trade. ICC is encouraged to see that understanding and use of the Incoterms® rules has been growing exponentially around the world, with newly opened countries, such as Myanmar, requesting training to bring their traders up to speed on this essential feature of commercial commerce. There is hardly a country in the world whose traders are unfamiliar with the idea of the Incoterms® rules – the challenge for ICC now is to educate users around the globe about how to use them most effectively.