What are Incoterms?
Incoterms is the abbreviation of “International Commercial Terms,” a set of codes, rules, or conditions related to the transportation and delivery of goods. The International Chamber of Commerce (ICC) is responsible for defining and revising Incoterms. The ICC last updated Incoterms on January 1, 2020. Incoterms may seem confusing and daunting to independent eCommerce sellers who did not pursue a career in shipping regulations.
However, Incoterms are a common language for all eCommerce Sellers, which is essential when selling products or services abroad or operating across customs borders. Incoterms are composed of 11 rules that define the different shipment stages and the people responsible at each point.
Why should eCommerce Sellers care about Incoterms?
Have your shipping costs gone up without notice? Did you receive a change in shipping terms email notice? Did the packaging responsibilities or container requirements change? Are you now responsible for loading and unloading goods during cross-border transit? Are you involved in a dispute over damaged goods? Or perhaps, you had to purchase shipping insurance? Like many sellers, it is likely your shipment has been delayed, and you may be having problems communicating with a transporter. Or possibly a freight company? Maybe you have a bill of landing you don’t understand. Any of these issues can lead to your shipment sitting in a harbor or a free-trade zone.
How transporters and eCommerce sellers may handle, these are prescribed in the suggested language in Incoterms. In other words, Incoterms is like a dictionary or catalog of worldwide accepted terms for shipping. Shippers pull from Incoterms to set their shipping terms. Those receiving the shipment may want a say or at least understand the terms (i.e., the liability of loss or damages at the port, responsibility for delays, customs practices, etc.)
Incoterms and the Supply Chain
The importance of knowing Incoterms for eCommerce sellers, means that everyone is aligned on the shipping procedure, especially when multiple parties or stakeholders are involved. In addition, since Incoterms are universally accepted, there is almost a guarantee of timely payment of goods, services, and duties while the buyers, carriers, and suppliers remain protected. Overall, Incoterms remain a powerful tool in the quest to mitigate issues with the supply chain when properly coordinated with other elements of a sales agreement, trade terms, contracts of carriage, and insurance.
What Incoterms Is Not
Even though Incoterms reflect commercial practices, eCommerce Sellers need to understand that it is not part of sale contracts and is not meant to be a replacement. Incoterms do not transfer the ownership of goods or intellectual property rights. Additionally, they do not deal with export or import ban matters or act as a remedy for breach of contract. Instead, Intercoms terms are negotiated and folded into relevant contracts and rights agreements. An eCommerce attorney can help sellers understand and, if necessary, negotiate shipping terms. While shipping is not the sexiest part of an eCommerce business, eCommerce sellers must know what they are getting into. Otherwise, a significant investment may be lost at sea.
Contact EmergeCounsel today for a free consultation to discuss how we can help your eCommerce business.
Part of EmergeCounsel International eCommerce Series