Incoterms Rules

International Trade and Incoterms

Sales contracts generally incorporate the internationally-recognised terms of sale known as the Incoterms Rules. Published by the International Chamber of Commerce, the Incoterms Rules allow buyers and sellers to transact business with the certainty that each understands:

  1. various obligations of the seller and the buyer,
  2. the point at which the risk of loss of or damage to the goods passes from the seller to the buyer, and
  3. which party bears various costs associated with the shipment.

The risk transfer point, also called the delivery point, is important in relation to marine cargo insurance underwriting and claims, because it is a factor in establishing insurable interest. (Another factor is title; but the Incoterms Rules do not deal with payment or the passing of title.)

Letters of Credit

Because banks will only release funds to sellers on presentation of documents that match the applicable terms of sales, where sales are made against letters of credit, care should be taken to ensure that the incorporated Incoterms Rules that are appropriate for the method of carriage. For example, CIF terms are not generally suitable for containerised shipments.

For more information on the Incoterms Rules, contact your NMU Development Underwriter.


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