What's New with Incoterms?

Buyers' Training
July 3, 2012 — 1,186 views  
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Purchasing professionals deal with some of the most demanding trading laws in the world, and the contracts they negotiate can contain extraordinarily complex language and regulations. This is especially true during international dealings - as laws vary from country to country, these experts need to be at the top of their game at all times. The demanding environment of international trade is what originally gave rise to incoterms in the early 1900s.

In 1936, the International Chamber of Commerce (ICC) created incoterms to act as a bridge between nations and establish a uniform language that could be used by any purchasing professional in the world. There are currently 11 different incoterms, all dealing with the shipment and movement of purchased goods. For example, according to Foreign-Trade.com, the incoterm FCA is often associated with orders involving roll-off/roll-on or container transport.

These clauses also concern the legal documentation needed for global shipments, and clarify who is responsible for procuring and signing necessary papers. The commercial invoice and packing list are two standard items that must be included in any global shipment of purchased goods.

So what's new with incoterms? In 2010, the ICC revised the current set of incoterms and produced a revised constitution that first took effect on January 1st, 2011. The new rules were called "Incoterms 2010," and included a number of reductions and designations to help update existing incoterms.

The total number of three-letter, standard trade terms was reduced to 11 from the original 13. DAF, DES, DEQ, and DDU designations were phased out, while Delivered at Terminal (DAT) and Delivered at Place (DAP) were added by the ICC. The following is a list of current incoterms as defined by the Incoterm 2010 documentation:

EXW - EX WORKS (named place of delivery)

FCA - FREE CARRIER (named place of delivery)

CPT - CARRIAGE PAID TO (named place of destination)

CIP - CARRIAGE AND INSURANCE PAID TO (named place of destination)

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)

FAS - FREE ALONGSIDE SHIP (named port of shipment)

FOB - FREE ON BOARD (named port of shipment)

CFR - COST AND FREIGHT (named port of destination)

CIF - COST INSURANCE AND FREIGHT (named port of destination)

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