INCOTERMS are a set of uniform rules codifying the interpretation of trade terms defining the rights and obligations of both buyer and seller in an international transactions, thereby enabling an otherwise complex basis for a sale contract to be accomplished in three letters.
INCOTERMS are designed to arrange for the transfer of responsibility from seller to buyer at a convenient place where goods can be inspected. Hence FOB, CFR (C&F) and CIF arrange for this to occur upon loading on board the vessel. With containers, inspection at shipside is not possible, so that FOB, CFR etc. are inappropriate. The International Chamber of Commerce (ICC) have, accordingly drafted three Combined Transport equivalents, which they advise to use when availing of Combined Transport services in order to avoid disputes. They are FCA, CPT and CIP which transfer responsibility from seller to buyer at the inland point at which the carrier takes charge of the goods.
INCOTERMS can be divided into recommended usages by mode of carriage. The division recommended by the ICC is: – All modes (i.e.combined transport)-EXM, FCA, CPT, CIP, DAF, DDU, DDP. Conventional port-to-port/sea carriage only – FAS, FOB, CFR, CIF, DES, DEQ.
The terms set out hereunder are the INCOTERMS 1990: -