Incoterms
The Incoterms are a set of commercial/trade rules established by the International Chamber of Commerce (“ICC”) that are used in international sale contracts.[1] The Incoterms are not mandatory rules – for them to receive legal effect, they must be explicitly incorporated by the parties into their contract. In the following paragraphs, after outlining the classification of Incoterms, we will describe basic features of Incoterms used for all modes of transport, as well as of those used only for sea and inland waterway transport. We will also describe changes in the Incoterms 2020 rules.
Classification of Incoterms
The Incoterms are divided into four principal categories: E, F, C and D.
Category E (Departure), which contains only one trade term, i.e. EXW (Ex Works).
Category F (Main Carriage Unpaid), which contains three trade terms:
- FCA (Free Carrier)
- FAS (Free Alongside Ship)
- FOB (Free on Board)
Category C (Main Carriage Paid), which contains four trade terms:
- CPT (Carriage paid to)
- CIP (Carriage and Insurance paid to)
- CFR (Cost and Freight)
- CIF (Cost, Insurance and Freight)
Category D (Arrival), which contains three trade terms:
- DAP (Delivered at Place)
- DPU (Delivered at Place Unloaded)
- DDP (Delivered Duty Paid)
The four above-mentioned categories can also be classified as per the means of transportation:
- Incoterms for any mode of transport: EXW, FCA, CPT, CIP, DPU, DAP and DDP;
- Incoterms only for sea and inland waterway transport: FAS, FOB, CFR and CIF.
Each Incoterm contains a set of rules of interpretation for the obligations of both the seller (A1-A10) and the buyer (B1-B10) covering the following issues:
- A1/B1 – General Obligations,
- A2/B2 – Delivery,
- A3/B3 – Transfer of risks,
- A4/B4 – Carriage,
- A5/B5 – Insurance,
- A6/B6 – Delivery/transport document,
- A7/B7 – Export/import clearance,
- A8/B8 – Checking/packaging/marking,
- A9/B9 – Allocation of costs, and
- A10/B10 – Notices.