.

.

Incoterms are officially known as the "International Rules for the Interpretation of Trade Terms"  They were first drafted by the International Chamber of Commerce. They have been updated every ten years or so, resting with the most recent edition which is referred to as "INCOTERMS 2000"

There are 13 different Incoterms. Some of these terms, such as FOB and CIF, are well entrenched by custom and usage in international contracts of sale. Others are not as popular, but are increasingly being used, such as what will be referred to as the "D Terms".

The Incoterms confirm as between a seller and buyer who must arrange for the carriage of goods from the seller to the buyer, who must attend to export and import clearance, as well as the division of certain cost and the issue of who bears the "risk" over a shipment at any particular time. Perhaps most importantly, they define the seller's "delivery" obligation which is directly tied into the issue of "risk".

The Incoterms however do have limitations. As will be seen below, they do not govern all of the aspects of  a sale relationship.

Sometimes, the parties use a variation of an Incoterm which simply creates confusion as to respective obligations rather than resolving same. Inconsistent use of Incoterms, or the use of a term not suitable to the particular circumstances, can defeat the initial purpose for which the Incoterm is referenced in the contract of sale. Incoterms are not "required". They are not mandated by law. They can be modified, of left out, as the parties choose.

Incoterms can also be sub-classified in a different manner:
.
- Departure Contracts "E-Terms
- Shipment Contracts "F-Terms" + "C-Terms"
- Arrival Contracts "D-Terms"

.
The "E-Terms" (ex works) can be referred to as a "departure" contract. The seller's obligations terminate on the departure of the goods from the seller's premises.

The "F-Terms" of Incoterms are identified as being "main carriage not paid by seller". Under the "F-Terms", the seller must hand over to the buyer's nominated carrier the goods, with risk and expense then passing to the buyer.

The "C-Terms" of Incoterms can be referred to as "main carriage paid by seller"
Under the "C-Terms", the seller bears the costs of carriage even after the goods have been "delivered".

"D-Terms" are referred to as "arrival contracts". The seller undertakes the obligation to ensure that the goods arrive at a stated destination, with the goods remaining at the sellers risk until that point.

.

.[ Home ] [ Interpretations ]

.