Incoterms are the international commercial terms used in international as well as domestic trade. Incoterms are the set of rules which defines the point where the Cost, Obligations & Risk are transferred from seller to buyer.
Cost: Who among seller and buyer pays for which
activity. For example who will pay for insurance or transportation or custom
clearance etc.
Obligations: Who is responsible to do which
activity. For example who will arrange import custom clearance.
Risk: At which place risk to be transferred from
seller to buyer.
International Chamber of Commerce (ICC) was
established at Atlantic City, United States in 1919.
1920
In 1920 ICC starts collecting details (with the
help of a survey within approx. 13 countries) of the trade terms used by the
exporters/importers at that time and analyse those details.
1928
In 1928 second survey starts, this time the
region of survey was bigger and approx. 30 countries included.
1936
ICC continues the study and interpretation of
the information received from the various sources and published the first
version of Incoterms® in 1936. Total 6 incoterms published in the first
version, they are:
FAS - Free alongside ship
FOB - Free on board
C&F - Cost and Freight
CIF - Cost Insurance and Freight
EXS - Ex Ship
EXQ - Ex Quay
1953
Further revision of Incoterms was delayed
because of World War II and the second version of Incoterms® was published in
1953. Three new trade terms for non maritime transport were introduced in the
first revision, they were:
DCP - Delivered Costs Paid
FOR - Free on Rail
FOT - Free on Truck
1967
The third version of Incoterms® was published in
1967. In this version ICC corrected the misunderstandings or misinterpretations
of the previous version's trade terms. Two new trade terms introduced in this
version, they were:
DAF - Delivery at frontier
DDP- Delivery at destination
1974
The next edition of Incoterms® was published in
1974. The air shipments were increasing by that time and keeping the air
transportation in mind ICC introduced this fourth version of Incoterms®. In
this version, a new trade terms introduced named FOB Airport - Free on Board
Airport. The main aim of this new trade term was to clear the confusion in FOB
term by mentioning exact carrier.
1980
With time demand of containerized cargo was
increasing and documentary requirements were changing. Because of these changes
and new requirements Incoterms® further revised in 1980. In this version, also
a new trade term introduced named FRC - Free carrier, which indicates a point
where seller delivers the goods on shore (may be at a container yard).
1990
Based on further studies and surveys ICC
published next version of Incoterms® in 1990. In this revision individual
transport terms FOR - Free on Rail, FOT - Free on Truck & FOB Airport -
Free on Board Airport removed in order to simplify Free Carrier term and named
it as FCA - Free Carrier at named point which can be used for all modes of
transport (sea, air, rail, truck, multimodal transport).
List of incoterms in this edition:
EXW - Ex Works
FOB - Free on board
CIF - Cost Insurance and Freight
CFR - Cost and Freight
FAS - Free alongside ship
FCA - Free carrier
CPT - Carriage paid to
CIP - Carriage and insurance paid to
DAF - Delivered at frontier
DES - Delivered Ex Ship
DEQ - Delivered Ex Quay
DDU - Delivered duty unpaid
DDP - Delivered duty paid
2000
The responsibility of custom clearance required
more clarity, so next version of Incoterms® published on 2000. In this version
some points of FAS & DEQ were updated such as license, authorizations and
formalities so that it could be defined which party (seller or buyer) will be
responsible for these activities.
2010
Based on the studies and interpretations,
Incoterms® further revised in 2010. In this revision D group of rules were
consolidated.
Few incoterms removed and some were included.
Incoterms which were removed:
DAF - Delivered at frontier
DES - Delivered Ex Ship
DEQ - Delivered Ex Quay
DDU - Delivered duty unpaid
New incoterms introduced:
DAT - Delivered at Terminal
DAP - Delivered at Place
Other modifications were done keeping in mind
the added obligation for seller and buyer to exchange information so that the
trade can be executed smoothly.
Number of incoterms in this version were 11
(reduced from 13 to 11), the list is given below.
Rules for Sea and Inland waterways:
CIF - Cost Insurance and Freight
CFR - Cost and Freight
FAS - Free alongside ship
FOB - Free on board
Rules for any mode of transportation:
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
2020
The latest version of Incoterms® has been
published in the year 2020. Incoterms® 2020 is the current version of
Incoterms®.
Below are the changes made in Incoterms® 2020:
1. DPU
replaced DAP: A new incoterm DPU - Delivered at Place Unloaded introduced,
which replaced the incoterm DAT - Delivered at Terminal replaced. In case of
DAT delivery was restricted to a terminal but in case of DPU delivery can be
done at any place.
2.
Insurance obligations in CIF & CIP: Seller has to arrange insurance in CIF
& CIP incoterms. In CIF insurance of goods must cover from loaded on board
the vessel to arrival at port of destination (POD), In CIP insurance of goods
must cover from the place of delivery at first carrier to final delivery of
goods at destination.
3.
Changes in FCA: In FCA buyer can instruct shipping line to issued bill of
lading with on board notation (issue on board bill of lading) to the seller
once the goods are loaded into vessel.
4.
Security requirements: Transportation security rules changed, where screening
of containers made mandatory. These changes are mentioned in article A4 for
carriage A7 for clearance of export & import.
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