'Whale Knows' - The Importance of Incoterms

'Whale Knows' - The Importance of Incoterms

In this series, our staff members go through the most commonly asked questions in importing, exporting and freight forwarding. In this blog post, Natalia, our Business Development Manager, explains the importance of Incoterms in trading.


What are Incoterms?

Incoterms are an international set of agreements between two parties about a shipment and where the responsibilities of the shipment lies between the two parties. As the shipment makes it journey from point A to B, or from supplier to buyer, it is exchanged through many parties, through different ports, and sometimes even different countries. Along the way, if something happens to the shipment, there needs to be an agreement as to who is responsible for the goods. Incoterms is the agreement between the two parties (supplier and buyer) regarding this responsibility.

The Incoterms rules are created and published by the International Chamber of Commerce (ICC) and are revised from time to time. The most recent revision is Incoterms 2010 which came into force on 1st January 2011. The 11 rules, part of this revision, set the standards of trading terms and conditions designed to assist traders when goods are sold and transported.

Read up on the 11 Incoterms 2010 Rules

Why are Incoterms important?

As you may already suspected, Incoterms are crucial for smooth trading between supplier and buyer. It minimizes conflict between the two parties when a mishap occurs, as the terms of risk and responsibility for the shipment are agreed beforehand. These terms also help the parties to understand the complex process of international trade, and the risks associated with it.

Often, our customers puzzle over the importance of the Incoterms' meanings when we explain the terms to them. Nevertheless, being on the same page on the transfer of risk can be very important as it allows greater communication and satisfaction as expectations are set right from the beginning between the freight forwarder, supplier, and buyer.

Another reason why Incoterms are so important for international trade, is the fact that international laws are vastly different and there are no set rules for insurance, payments or responsibility for goods. Having a standardized international set of agreements therefore helps the supplier and buyer understand their roles in recovering goods and helps the freight forwarder ensure smooth delivery.

Incoterms are important in reducing the chances of misunderstandings between different parties. When you entrust your cargo to Whale, rest assured we are taking care of your shipment. Understanding and agreeing on the Incoterms rules is a great way to speed up the process, and it will also help you to understand the process of your shipment at all times.

If you liked this blog post, stay tuned as our staff introduces more commonly asked issues on our Whale Knows series. Subscribe to our blog to get sent free updates weekly! And if you still have questions regarding Incoterms, contact Natalia or one of our friendly Customer Success Managers here.


Whale Logistics are Australia’s leading Freight Forwarder and Logistics company located in Sydney and Melbourne. We deliver digital services such as Australian customs parcel tracking, parcel delivery box, and comprehensive ocean, air and road freight solutions. For cost competitive and innovative ocean freight solutions, please click the link below to contact a Whale Logistics Freight Specialist today for a quote.

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