Trade terms. In every international trade transaction certain questions must be answered:
-who will arrange and pay for the carriage of the goods from one point to another?
-who will bear the risk if these operations cannot be carried out?
-who will bear the risk of loss of or damage to the goods in transit?
All of these questions are concerned with actually transporting the goods from the seller to the buyer. TRADE TERMS SET OUT THE RIGHT AND OBLIGATION OF EACH PARTY WHEN IT COMES TO TRANSPORTING THE GOODS.
Each term means a different division of costs, risks, and responsibilities between the buyer and seller.
Uncertainty about these obligations could be very harmful for the contracting parties. Lack of precision would almost inevitably lead to disputes, including litigation, and to a considerable increase in “overhead” expenditures in everyday operations.
In order to be genuinely useful, trade terms should have international application and should make the obligations of both parties very clear and explicit. This is the aim of INCOTERMS and it is carried out very admirably.