Incoterms® 2010

Incoterms® (International Commercial Terms) are a set of international rules for the uniform interpretation of common contract clauses in export/import transactions. They were first published in 1936 by the International Chamber of Commerce (ICC) in Paris, and are updated periodically. The latest version, Incoterms® 2010, was launched in September 2010 and became effective January 1, 2011.

Incoterms® are key elements of international contracts of sale intended to guide parties with respect to carriage of goods from seller to buyer along with export and import clearance. Incoterms® also explain the division of costs and risks between the two parties and at what point the responsibility shifts from seller to buyer.

Incoterms® allow electronic communication, such as EDI and electronic documents as long as both parties agree. They are not laws enacted by governments, but rather, rules agreed to by parties to a contract.

Incoterms® have two components – the terms name and a name place. It is incomplete if one is missing.

Example:      FCA, XYZ Cargo Terminal, Chicago O’Hare International Airport (ORD), USA

Incoterm Groups

The existing 11 Incoterms® are broken down into four color-coded categories for easy navigation, reading and understanding.

E terms - Departure

  • EXW - Ex Works (named place of delivery)

F terms - Main Carriage Unpaid

  • FCA - Free Carrier (named place of delivery)
  • FAS - Free Alongside Ship (named port of shipment)
  • FOB - Free On Board (named port of shipment)

C terms - Main Carriage Paid

  • CFR - Cost and Freight (named port of destination)
  • CIF - Cost, Insurance and Freight (named port of destination)
  • CPT - Carriage Paid To (named place of destination)
  • CIP - Carriage and Insurance Paid To (named place of destination)

D terms - Arrival

  • DAT - Delivered At Terminal (named terminal at port or place of destination)
  • DAP - Delivered At Place (named place of destination)
  • DDP - Delivered Duty Paid (named place of destination)

Caution must be exercised when using Incoterms® because they relate to particular modes of transportation. The terms FAS, FOB, CFR and CIF are applicable to only sea or inland waterway transport. All other Incoterms® can be used for all modes of transportation - air, ground, rail and ocean.

A short glossary related to Incoterms® can be found here.

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