UNDERSTANDING INCOTERMS 2010-Introduction

What are Incoterms®?

The term, Incoterms®, is an abbreviation for International Commercial Terms. They are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts for domestic and international trade. They are published by the International Chamber of Commerce (ICC) and are widely used in international commercial transactions. The first Incoterms® were issued in 1936. The most recent version of Incoterms®, Incoterms® 2010, were launched in September 2010 and became effective January 1, 2011.

What are Incoterms® used for?

Incoterms® provide a common set of rules to clarify responsibilities of sellers and buyers for the delivery of goods under sales contracts. They apportion transportation costs and responsibilities associated with the delivery of goods between buyers (importers) and sellers (exporters) and reflect modern-day transportation practices. Incoterms® significantly reduce misunderstandings among traders and thereby minimize trade disputes and litigation.

Why were the Incoterms® 2000 revised?

Incoterms® 2010 are the updated version of Incoterms®. Incoterms® 2010 have been developed as a result of an extensive review of current shipping practices and trends in an effort to keep up with the rapid expansion of world trade. The key drivers for this update include: a need for improved cargo security, changes to the Uniform Commercial Code in 2004 that resulted in a deletion of U.S. shipment and delivery terms, and new trends in global transportation.

What are the Incoterms® 2010?

The two main categories of Incoterms® 2010 are now organized by modes of transport. Used in international as well as in domestic contracts for the first time, the new groups aim to simplify the drafting of contracts and help avoid misunderstandings by clearly stipulating the obligations of buyers and sellers.

Group 1. Incoterms® that apply to any mode of transport are:

• ·         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

Group 2. Incoterms® that apply to sea and inland waterway transport only:

• ·         FAS Free Alongside Ship
• ·         FOB Free on Board
• ·         CFR Cost and Freight
• ·         CIF Cost, Insurance, and Freight