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The 11 Incoterms® 2010 rules - FAQs about the basics
What are Incoterms® rules?
What do they cover?
Why Incoterms® rules? Why are Incoterms® rules successful worldwide?
Do Incoterms® rules apply to international or domestic contracts of sale?
What are the 11 Incoterms® rules?
How are Incoterms® rules correctly used?
Why do Incoterms® rules need revising periodically?
Are Incoterms 2010 compulsory after Jan 1st 2011?
Can you name some of the main innovations in Incoterms® 2010?
How can I find out which Incoterms® rule is the right one for my contract of sale?
I keep reading about "E"-terms and "C"-terms. What does that mean?
Where can I get detailed information on the Incoterms® 2010 rules?
When is the risk of loss or damage to the goods transferred from the seller to the buyer?
COMMON MISPERCEPTIONS
What are Incoterms® rules?
The Incoterms® rules are the International Chamber of Commerce (ICC) rules for the use of domestic and international trade terms.
Incoterms® rules are key commercial tools developed and maintained by ICC and used in certain contracts for the sale of goods all over the world. They define the responsibilities of buyers and sellers for the delivery of goods under sales contracts and determine how costs and risks are allocated.
Click here to learn more about the 11 Incoterms® 2010 rules.
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What do they cover?
Incoterms® rules describe mainly the tasks, costs and risks involved in the delivery of goods – excluding intangibles -- from sellers to buyers.
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Why Incoterms® rules? Why are Incoterms® rules successful worldwide?
Incoterms® rules are international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in domestic and international trade. They facilitate business transactions globally by helping traders avoid uncertainties arising from differing interpretations of such terms in different countries.
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Do Incoterms® rules apply to international or domestic contracts of sales?
Incoterms® rules apply to both domestic and international sale contracts.
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What are the Incoterms® rules?
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
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How are Incoterms® rules correctly used?
ICC recommends that Incoterms® 2010 be referred to specifically whenever the terms are used, together with a location. For example, the term "Free Carrier (FCA)" should always be accompanied by a reference to an exact place to which delivery is to be made. To prevent misunderstandings, parties need to make the intended effect of any variants of the three-letter Incoterms® rules extremely clear in their contract. Incorrect use of Incoterms® 2010 rules has the potential to lead to legal consequences.
Below is an example of the correct use of Incoterms® rules:
“FCA 123 Example Street, Paris, France Incoterms® 2010”
Only the version of Incoterms® rules published by ICC is official. Misuses can lead to expensive court cases.
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Why do Incoterms® rules need revising periodically?
Incoterms® rules are revised periodically to adapt them to contemporary commercial practice. For instance in the 2000 version, increased use of FCA (Free Carrier) prompted ICC to simplify delivery obligations under this rule. Technological changes and developments in electronic communication have influenced contemporary trade and shaped the revision of Incoterms® rules.
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Are Incoterms 2010 compulsory after Jan 1st 2011?
It is to be noted that all contracts made under INCOTERMS® 2000 remain valid even after 2011. Moreover, although we recommend using Incoterms® 2010 after 2011, parties to a contract for the sale of goods can agree to choose any version of the Incoterms rules after 2011. It is important however to clearly specify the chosen version INCOTERMS® 2010, INCOTERMS® 2000 or any earlier version.
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Can you name some of the main innovations in Incoterms® 2010?
Two major innovations are the number of rules and their classification . There are 11 rules instead of 13. In addition, the new rules are classified according to the mode of transport (maritime vs. any other mode[s]), reflecting a consolidation and updating of the delivered rules, replacing the precedent categorization into families of rules. In addition it includes the importance of cargo security andthe 2004 revision of the United States’ Uniform Commercial Code, which resulted in a deletion ofthe former US shipment and delivery terms. The revised Incoterms® rules also reflect the adoption in2009 by insurance markets of the revised Institute Cargo Clauses (LMA/IUA) (2009). The most recent revision presents practitioners with comprehensible and useful Guidance Notes to facilitate their correct choice of Incoterms® rules.
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How can I find out which Incoterms® rule is the right one for my contract of sale?
When agreeing on a contract of sale, the parties should choose an Incoterms® rule that is appropriate to the goods and means of transport. Detailed Guidance Notes in each of the Incoterms® 2010 rules help buyers and sellers decide which rule is appropriate for their contract of sale.
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I keep reading about "E" -terms and "C" - terms. What does that mean?
The 2000 version grouped Incoterms® rules into four term categories. Please note that Incoterms® 2010 rules are not divided this way anymore. The current version is classified in two categories according to the mode of transport (maritime vs. any other mode[s]).
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Where can I get detailed information on Incoterms® 2010 rules?
Refer to Publication N° 715E Incoterms® 2010 or N° 720E Guide to Incoterms® 2010 for a thorough explanation on the scope and the use of Incoterms® rules. These are the only recognized publications on the Incoterms® 2010 rules.
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When is the risk of loss or damage to the goods transferred from the seller to the buyer?
The risk of loss or damage of the goods is generally transferred when the seller has fulfilled its delivery obligation in accordance with A4 (Delivery) of the particular Incoterms® rule. Refer to the publication N° 720E Guide to Incoterms® 2010 for a detailed explanation of A4.
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COMMON MISPERCEPTIONS in relation to the use and scope of Incoterms® rules:
Incoterms® rules and transfer of title and/or ownership Incoterms® rules do not deal with the transfer of title to ownership of the goods.
EXW benefits for the seller
In comparison with other Incoterms® rules EXW represents the minimum obligation for the seller. However, when opting for this rule the seller has to take into consideration that under EXW the buyer is not obliged to provide any information regarding the export of the goods (if applicable) to the seller. The seller might require such information for tax or other purposes for instance thus consideration of this fact is crucial. In many cases, the parties are well advised to choose FCA instead.
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