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Incoterms 2010
I
nternational Commerce Terms, Incoterms 2010
known as ‘Incoterms’, are the most Incoterms are basically divided into
commonly accepted terms of sale four categories:
in international business. It defines • ‘E’ term – Exporter makes the
the responsibilities of the exporter and goods available to the buyer at
buyer in the arrangement of shipments the exporter’s premises or other
and transfer of liability involved in place named by the exporter
their international sales. It is crucial • ‘F’ terms – Exporter is responsible
to know which Incoterm is being used to deliver the goods to the export
at the start of a negotiation/quotation shipment point and carrier
of a sale, as it will affect the costs/ designated by the buyer
responsibility involved in shipping, • ‘C’ terms – Exporter is responsible
insurance and tariffs. for contracting carriage of goods
In a series of two articles, Apparel
discusses the International International Chamber of to the place of destination, but
Commercial Terms or Incoterms, Commerce (ICC) introduced the first does not assume risk of loss or
which are the prevalent terms in version of Incoterms in 1936. ICC damage to goods, or additional
international business. updated Incoterms several times to costs due to events occurring after
TEXT BY keep pace with the development of shipment
Vasant Kothari international trade. Since then they • ‘D’ terms – Exporter is
have been updated in the years 1953, responsible for all costs and risks
1967, 1976, 1980, 1990, 2000 associated with delivering goods
and the latest in 2010, which will be to the named place in the country
implemented from 01 January, 2011. of destination.
On-carriage:
• Transportation from arrival point
in the destination country to
buyer, which can be by any mode
Carrier:
• Any party who arranges for the
primary transportation by truck,
plane, ship, rail, etc.
Delivery:
• The term delivery is used in two
contexts in Incoterms:
ã The exporter bringing the
goods to the named point
ã Traditional sense of the buyer
receiving the goods
Customs clearance:
• Clearing the goods for export or
import means paying the duties,
taxes and administrative costs
• Performing administrative matters
related to:
ã Clearance and customs
formalities
ã Import and/or export
regulations
ã Typically, the shipper (exporter)
clears the goods for export the
buyer (buyer) clears the goods
for import
Responsibilities Affected by
Incoterms
The terms allocate responsibilities and
• Limited to matters relating to the ã Obligations to clear the goods costs between the parties for:
obligations of the parties with for export and import • Licenses and government
respect to the delivery of the ã Packing of the goods imposed formalities for import
goods sold ã Buyer’s obligation to take delivery and export
• Incoterms deal only with the • Packing and marking for
relation between the exporters Main Functions of Incoterms international transport
and buyers under the contract • Eliminate barriers caused by • Documentation required for the
of sale distance, language, and local transport, transfer and Customs
• Incoterms deal with a number of business practices clearance of goods
identified obligations imposed on • Eliminate uncertainties and • Proof of delivery
the parties such as: different interpretations of trade • Taxes, duties, consular fees,
ã Exporter’s obligation to place terms on a world-wide scale terminal charges, arrival and
the goods at the disposal of • Provide universally accepted destination charges
the buyer, or vocabulary • Insurance, when elected
ã Hand them over for carriage, or • Reduce risk of misunderstanding, • Loading and unloading
ã Deliver them at a destination, and disputes and litigation • International and inland
ã The distribution of risk between • Facilitate international commercial transport
the parties exchanges • Risk of loss or damage n