The Incoterms rules have become an essential part of the daily language of trade. They have been incorporated in contracts for the international sale of goods and provide rules and guidance to importers, exporters, lawyers, transporters, insurers and students of international trade.
The purpose of Incoterms is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree.
Frequently, parties to a contract are unaware of the different trading practices in their respective countries. This can give rise to misunderstandings, disputes and litigation, with all the waste of time and money that this entails.
In order to remedy these problems, the International Chamber of Commerce first published in 1936 a set of international rules for the interpretation of trade terms, first conceived in 1921.
These rules were known as “Incoterms 1936”. Amendments and additions were later made in 1953, 1967, 1976, 1980, 1990, 2000 and presently in 2010 in order to bring the rules in line with current international trade practices.
As of 1 January 2011 the eighth edition, “Incoterms 2010”, shall have effect. Among other changes therein affected all of the five terms in section D are obsoleted and replaced with the following three: DAT (Delivered at Terminal), DAP (Delivered at Place), and DDP (Delivered Duty Paid). Such new terms apply to all modes of transport.
Rules for any mode or modes of transport:
- EXW Ex Works
- FCA Free Carrier
- CPT Carriage Paid To
- CIP Carriage And Insurance Paid To
- DAT Delivered At Terminal
- DAP Delivered At Place
- DDP Delivered Duty Paid
Rules for sea and inland waterway transport:
- FAS Free Alongside Ship
- FOB Free On Board
- CFR Cost And Freight
- CIF Cost, Insurance and Freight
It should be stressed that the scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold (in the sense of “tangibles”, not including “intangibles” such as computer software) as they help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers.
The current Incoterms 2000 rules are endorsed by UNCITRAL.