International commercial operations have their origin in a purchase and sale contract between the importer and the exporter, which stipulates the clauses by which the respective commercial operation will be regulated. The INCOTERMS (International Commercial Terms) can be considered as a set of international rules of an optional nature that the International Chamber of Commerce has gathered and defined on the basis of practices more or less standardized by traders. The INCOTERMS basically define the place where the seller is responsible for the goods and what are the expenses to be borne by him and which, therefore, will be included in the price.
The role of the INCOTERMS is essentially as follows:
The Incoterms rules began to develop in 1921 with the formation of the idea by the International Chamber of Commerce. In 1936, the first set of Incoterms rules was published and remained in use for almost 20 years before the second publication in 1953. Other changes and expansions were followed in 1967, 1976, 1980, 1990 and 2000. The eighth version of the Incoterms 2010 rules was published on January 1, 2011.
There are basically two main changes in Incoterms® 2020 compared to the 2010 edition:
- DAT (Delivered at Terminal) is renamed DPU (Delivered at Place Unloaded).
- The FCA (Free Carrier) now allows Bills of Lading to be issued after loading.
Other changes include:
- CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid to) establish new standard insurance contracts, but the level of insurance remains negotiable between buyer and seller.
- When mentioned, the cost allocation between the buyer and seller is stated more precisely - an item refers to all costs for which the seller and buyer are responsible.
- FCA (Free Carrier), DAP (Delivered at Place), DPU (Delivered at Place Unloaded) and DDP (Delivered Duty Paid) now take into account that the buyer and seller organize their own transportation instead of using a third party.
- Safety related obligations are now more prominent.
- "User Notes" for each Incoterm® have replaced the 2010 Edition Guidance Notes and are designed to be simpler for users.
- CIP currently requires as standard ICC A or equivalent insurance coverage. At Incoterms® 2010 was ICC C. The insurance coverage required for ICC remains.
Rules for any mode of Transport
The seven rules defined by Incoterms 2010, for any mode(s) of transport are:
Rules for Maritime Transport
The four rules defined by Incoterms 2010 for international trade where transport is carried out entirely by water are: