Incoterms 2010

International Commercial Terms (Incoterms) are the set of rules and internationally accepted standards that are used worldwide in international contracts for the sale of tangible goods.


Notes: Incoterms cannot be used in sales of intangible goods. Although incoterms are widely used in international trade transactions, it is possible to use them with domestic sales, as well.
Incoterms are created by a task force, whose members are selected from the Commission on Commercial Law and Practice of ICC, International Chamber of Commerce. 

Incoterms have been regularly revised by ICC in order to keep them up to date in today's rapidly changing business environment.

History of Incoterms

History of International Commercial Terms can be grouped under two main headings:
  • Pre-Incoterms Era:  Pre-incoterms era begins with the ICC's efforts to understand trade terms' usage in different countries in year 1920.
In 1920, ICC started a study in a multinational scale, covering 13 countries, to understand the usage of the most common trade terms. Three years later the committee, which conducted the study, published the results. In this paper ICC defined 6 common trade terms. In 1928 ICC published second studies results covering trade terms' usage in more than 30 countries.
These two major efforts of ICC, which took place in the pre-incoterms era, later on resulted the publication of first incoterms rules in 1936.
  • Incoterms Era:  Incoterms era starts with the publication of first Incoterms rules in 1936 (Incoterms 1936) and still continuous as of I am writing this article in December 2014.
Incoterms have been updated regularly by ICC. Incoterms versions so far are Incoterms 1936, Incoterms 1953, Incoterms 1967, Incoterms 1970, Incoterms 1980, Incoterms 1990, Incoterms 2000 and Incoterms 2010.
Incoterms 2010

Incoterms 2010, which is the latest version of rules that regulates international commercial terms, came into effect on 1 January 2011. 

There are 11 rules defined in Incoterms 2010 and they are all trademarked of ICC. It is possible to purchase both hard copy and online version of Incoterms 2010 rules from ICC's website.

What are the differences between Incoterms 2000 and Incoterms 2010

There are 4 main amendments exist in Incoterms 2010 comparing to Incoterms 2000. These amendments are:
  • Addition of New Incoterms Rules:Two new incoterms rules have been put into use with the Incoterms 2010 rules. These new rules are DAT and DAP. (You can find detailed information regarding these new incoterms below on this page.)
  • Deleted Incoterms Rules:Four incoterms rules have been removed from the usage with the publication of Incoterms 2010. These no longer valid incoterms are DAF, DES, DEQ and DDU.
  • Changing the Classification of Rules:Incoterms 2010 divides incoterms into two main categories: Rules for any mode or modes of transport (ex works, free carrier, carriage paid to, carriage and insurance paid to, delivered at terminal, delivered at place, delivered duty paid) and rules for sea and inland waterway transport (free alongside ship, free on board, cost and freight, cost insurance and freight)
  • Definition of New Delivery Place for Incoterms FOB, CFR and CIFAccording to Incoterms 2010, the goods will be delivered by exporter to importer only when they will be shipped on board a named vessel at the port of loading. In the previous version of the rules, Incoterms 2000, the goods have been considered as deliveried once they have passed the ship's rail.

Explanation of Trade Terms Defined in Incoterms 2010

On this section I will be explaining the trade terms, which have been defined in Incoterms 2010 rules.
RULES FOR ANY MODE OR MODES OF TRANSPORT

EXW - Ex Works: “Ex Works” means that the exporter delivers the goods to the importer when exporter places the goods at the disposal of the importer at the exporter’s premises or at another named place such as exporter's warehouse etc.
FCA - Free Carrier:  “Free Carrier” means that the exporter delivers the goods to the carrier or another person nominated by the importer at the exporter’s premises or another named place.
CPT - Carriage Paid to:  “Carriage Paid To” means that the exporter delivers the goods to the carrier or another person nominated by the exporter at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
  • When CPT is used, the exporter fulfils its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination. 
  • CPT requires the seller to clear the goods for export, where applicable.
CIP - Carriage and Insurance Paid to:  “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
  • When CIP is used, the seller fulfils its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination. 
  • CIP requires the seller to clear the goods for export, where applicable. 
  • What are the differences between CIF and CIP Incoterms?
DAT - Delivered at Terminal: “Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination.
  • “Terminal” includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal.
  • DAT requires the seller to clear the goods for export, where applicable. 
  • Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities. 
  • What are the differences between DAT and DAP Incoterms?
DAP - Delivered at Place: “Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.
DDP - Delivered Duty Paid: “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.
RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS - Free Alongside Ship:  “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.
FOB - Free on Board: “Free on Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.
CFR - Cost and Freight: “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel.
  • CFR requires the seller to clear the goods for export, where applicable. 
  • Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities. 
  • What are the differences between FOB and CFR?
CIF - Cost, Insurance and Freight: “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered.


How to buy Incoterms 2010? Which websites or online stores are selling original Incoterms 2010 rules? 
Original Incoterms rules can be bought from ICC'S website. Both hard copy and online form of Incoterms 2010 publications are available on ICC's official website.
Incoterms® 2010 English Edition By the International Chamber of Commerce (ICC) ICC Publication No. 715E, 2010 Edition.


Supplementary Incoterms Books Published by ICC 

INCOTERMS® 2010 Q&A Questions and expert ICC guidance on the Incoterms® 2010 rules ICC Publication No. 744E, 2013 Edition

This practical one-stop shop for traders and those that advise them, features a host of practical tools to help readers choose the correct Incoterms® 2010 rule for their deal and avoid costly mistakes arising from dangerous mismatches between the contract of sale and related documents such as ‘Letters of credit’ and ‘Contracts of carriage’.

website: http://store.iccwbo.org/incoterms-2010-qa
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