Stay Up-to-Date with the Most Recent International Commerce Terms
If you have ever engaged in any sort of international commerce dealings, you are likely familiar with the International Chamber of Commerce (ICC). The aptly named Incoterms are a regularly updated guide to the International Commerce terms that are used all over the world. The goal of the Incoterms is to avoid communication issues due to language barriers.
Instead, everyone who is involved in some aspects of the transportation or shipping of goods internationally can follow the same guide to understand the general rules. Originally published in 1936, they have been periodically revised to essentially make understanding important terms a little easier for everyone. The most recent edition was published on Jan. 1, 2011, and is dubbed the Incoterms 2010.
In the Incoterms 2010, the guide was updated to reflect a few changes. To read the text in its entirety, a complete copy can be obtained from the ICC Store.
Most Recent Changes to the Incoterms
The goal of the Incoterms is to help reduce confusion and miscommunications between importers and exporters from different countries. As such, the ICC is always looking for better ways to improve it and minimize confusion between parties. In the eighth and most recent guide, significant changes were made in two areas:
- How many categories the Incoterms are divided into. In the previous version, they were subdivided into four categories, but in the 2010 version, there are only two categories, separated only by the method of delivery.
- The number of rules. In the 2000 version, there were 13, which have been cut down to 11 in the Incoterms 2010.
Brief Review of Incoterms 2010
Rules for Any Mode or Modes of Transport
- EXW: Ex Works. This term refers to goods that are at the disposal of the buyer at a location determined or owned by the seller. The seller is not responsible for loading the goods or clearing them for export.
- FCA: Free Carrier. This means that the seller is responsible for delivering the merchandise to the buyer (or an approved proxy for the buyer). The guide urges both parties to clearly specify the place of delivery, as the risk will be solely on the buyer.
- CPT: Carriage Paid To. This term means that the seller is in charge of delivering the merchandise to a place agreed. The seller will be responsible for paying the costs of carriage and any relative fees.
- CIP. Carriage and Insurance Paid To. Similar to the above term, this means that the seller is responsible for ensuring delivery and paying the costs of carriage to the carrier. In addition, the seller will pay for and contract insurance to cover damage or loss of the goods during delivery.
- DAT. Delivered At Terminal. This term means that the goods are to be delivered, unloaded, and placed at the buyer’s disposal at the seller’s risk. A ‘terminal’ can be a place such as a warehouse, container yard, or cargo terminal.
- DAP. Delivered at Place. Like the term above, this means that the seller is responsible for placing the goods at the buyer’s disposal upon import. The seller assumes responsibility for all risks involved.
- DDP. Delivered Duty Paid. This term means that the seller is in charge of delivering the goods to the buyer after clearing them for import upon arrival and unloading at the agreed destination. The seller will be responsible for the costs and risks associated with delivering the goods and will be required to pay any import and export duty on all merchandise.
Rules for Sea and Inland Waterway Transport
- FAS. Free Alongside Ship. This term means that the goods are considered delivered by the seller upon placement alongside the shipping vessel decided by the buyer at the determined port of shipment. Once the goods are in the buyer’s possession, they assume all risks and costs associated with the goods.
- FOB. Free On Board. This means that the seller must deliver the merchandise onto the vessel decided by the buyer at the predetermined port. Once the goods have been delivered on board the vessel, all responsibility shifts to the buyer.
- CFR. Cost and Freight. This term means the seller must deliver the goods to the vessel determined by the buyer at the designated port. The seller is responsible for paying the costs and freight that may have been incurred to transport the goods to the port of destination.
- CIF. Cost, Insurance, and Freight. Similar to the term above, this means that the seller is responsible for ensuring the goods are delivered on board the vessel at the port determined by the buyer. The seller will be responsible for contracting the transportation of the merchandise to the port and is in charge of paying any costs that may have been incurred. The seller will also be responsible for contracting and paying out an insurance policy in the event that the goods are lost or damaged. Once the merchandise has been delivered on board the vessel, the responsibility of any risk transfers to the buyer.
Need Help? Consider a Customs Broker
While the goals of the Incoterms are to help reduce any uncertainty and clarify any misunderstandings within the international shipping industry, we understand that it can sometimes be difficult to grasp their understanding. Promptus LLC is here to help!
We have a team of highly-trained and knowledgeable Customs Brokers available to help decipher any and all things related to the import and export field. While the Incoterms 2010 is not the law, they are internationally recognized and are widely used by importers and exporters all over the world. We are conveniently located just north of the bustling Miami Pier and have access to an array of dedicated global logistics options. Contact us today to learn more about our ocean shipping and freight forwarding services!