Incoterms are an internationally recognized set of terms that define the responsibilities and obligations of the parties involved in the transport of goods. Incoterms are used to clearly communicate the division the cost of carriage and risks associated with the international transportation and delivery of goods between the seller to the buyer.
It is important to note that the Incoterms of a contract for sale pertain only to the delivery terms (carriage freight costs) and insurability of the product. Incoterms do not address the transfer of title and will not apply to the terms of the insurance contract or to the terms of financing. Incoterms also will not address the consequences of a breach of contract or exemptions of liability.
The International Chamber of Commerce (ICC) developed Incoterms in 1936 and updates them periodically to conform to changing trade practices. As the ICC has announced plans to update the Incoterms again in 2020, contracts should specify the version of Incoterms used (e.g., Incoterms 2010 (the most recent version)).