Understand Incoterms® Rules To Avoid Disputes Between Buyers And Sellers

Understand Incoterms® Rules To Avoid Disputes Between Buyers And Sellers

The Incoterms® rules (International Commerce Terms) are internationally recognised and have become an essential part of the daily language of trade since they were first published in 1936. They are maintained and developed by the International Chambers of Commerce (ICC). They provide rules and guidance to importers, exporters, lawyers, transporters, insurers and everyone involved in trade, and as such are regularly used in contracts for the sale of goods all over the world.

The current set of Incoterms® rules, known as Incoterms 2010, came into force on 1st January 2011, and provide precise definitions of terms and responsibilities for the following:

Rules for any mode or modes of transport

  • Ex Works (EXW)
  • Free Carrier (FCA)
  • Carriage Paid To (CPT)
  • Carriage and Insurance Paid To (CIP)
  • Delivered at Place (DAP)
  • Delivered at Terminal (DAT)
  • Delivered Duty Paid (DDP)

Rules for sea and inland waterway transport

  • Free Alongside Ship (FAS)
  • Free On Board (FOB)
  • Cost and Freight (CFR)
  • Cost, Insurance and Freight (CIF)

Because Incoterms® rules clarify the tasks, costs and risks involved in the delivery of goods by sellers to buyers, their use significantly helps to avoid costly misunderstandings. An added advantage is that they are also recognised by UNCITRAL (the United Nations Commission on International Trade Law) as providing the global standard for the interpretation of the most commonly used terms in foreign trade.

For customs clearance, Incoterms® are important as they determine who bears the transport cost. In most countries transport cost must be included in the customs base on which duty and taxes are due. A clear awareness of the Incoterms® principles coupled with their correct use and application can therefore really help you and your customers avoid problems in exporting and importing goods.

Full information on all Incoterms® rules, guidance notes, training resources and packages and other useful background and explanatory details can be found at www.incoterms.com