International commerce terms are international rules, that are situated in the dictionary. They provide the most widely used trade terms of export trade in the first place about franco – the process of transfer of responsibility from the vender to the customer. International trade terms are standard terms of international sales contracts, which are defined in advance in an internationally recognized document.
The rules were for the first time published in 1936 by the International Chamber of Commerce(MTII), the first edition is known as "Incoterms-1936". Amendments and additions were made later in 1953, 1967, 1976, 1980, 1990, 2000, 2010.
Basic principles and regulation of terms in Incoterms:
- distribution between the seller and the buyer of transportation spendings for the delivery of goods, in other words – determination of which spendings pay the customer and which the buyer.
- the moment of transition from the seller to the buyer of the risks of damage or accidental loss of cargo.
- the date of delivery of the goods, in other words, the determination of the moment of the actual transfer by the seller of goods to the disposal of the buyer or his representative - for example, the transport organization - and, therefore, the fulfillment or non-fulfillment of his obligations by the time of delivery.
Outside of Incoterms there are rules for the transfer of ownership from the seller to the buyer, as well as the consequences of non-fulfillment by the parties of obligations under the contract of sale of goods, including grounds for the release of the parties from liability, which is governed by the applicable law or the Vienna Convention.
Each defined term is a three-letter abbreviation, the first letter indicates the point of transition of obligations from the seller to the buyer:
- E — at the place of departure,
- F — at the departure terminals of the main transport, the main carriage is not paid,
- C — at the terminals of the arrival of the main carriage, the main carriage paid,
- D — the buyer has full arrival.
11 terms are defined in Incoterms-2010, 7 of them are acceptable to any type of transport of the main transportation.
- EXW (ex works): the commodity is received by the buyer from the seller's warehouse indicated in the contract, payment of export duties is charged to the buyer.
- FCA (free carrier): the goods are delivered to the main carrier of the customer to the terminal of departure indicated in the contract, export duties are paid by the seller.
- CPT CPT (carriage paid to ...): the commodity is delivered to the main carrier of the customer, the main transportation is paid by the seller prior to the arrival terminal specified in the contract, the pays the insurance, imported customs clearance and the delivery from the terminal of the arrival of the main carrier is made by the buyer.
- CIP (carriage and insurance paid to ...): the same as CPT, but the main transportation is insured by the seller.
- DAT (delivered at terminal):is delivery to the import customs terminal specified in the contract. Export payments and basic transportation, including insurance is paid by the seller, customs clearance by import is carried out by the buyer.
- DAP (delivered at point): the delivery to the destination specified in the contract, import duties and local taxes are paid by the buyer.
- DDP (delivered duty paid): the goods are delivered to the customer at the destination specified in the contract, cleared of all customs and risks.
Also 4 terms are defined in Incoterms 2010 that apply exclusively to maritime transport and the transport of territorial waters:
- FOB (free on board): the commodity is loaded to the buyer's ship, the seller pays the transfer.
- FAS (free alongside ship): commodity is delivered to the buyer's vessel, the contract specifies the port of loading, transshipment and loading is paid by the buyer.
- CFR (cost and freight): the goods are delivered to the buyer's specified port of destination, the main transportation insurance, unloading and transshipment is paid by the buyer.
- CIF (Cost, Insurance and Freight): the same as CFR, but the main transport is insured by the seller.