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Incoterms 2000 will make international trading easier

The International Chamber of Commerce today published the millennium edition of its standard trade definitions, Incoterms 2000.

Incoterms are a basic reference for sales contracts, in constant daily use throughout the world. The new version will make it easier for traders to do business in the new century, despite the growing volume and complexity of international transactions.
Since Incoterms were first published in 1936, they have been updated six times. They precisely define the responsibilities of buyer and seller and are recognized as the international standard by customs authorities and courts in all the main trading nations.

Among the best known Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To). This trade-marked ICC product has become the cornerstone of international trade. Provided that the Incoterms themselves are correctly used, the risk of costly misunderstandings and legal disputes is greatly reduced.

They should now be incorporated under the reference "Incoterms 2000" into contracts that are effective from January 2000 or any date thereafter. Incoterms 1990 remain valid until the end of 1999.

The latest edition takes account of the increased use of intermodal transport by providing for the delivery of goods from seller to buyer at any point in the transport chain instead of concentrating as in the past on the moment the goods cross the ship's rail. The term FCA (Free Carrier) gives a clear definition of the seller's delivery obligation in the country of export, irrespective of the mode of transport.

Emmanuel Jolivet, ICC's policy manager for international commercial practice, said the terms offer an array of choices for buyers and sellers to express the main provisions of a sales contract. For example EXW covers the seller's minimum obligations -- putting the goods at the buyer's disposal while they are still on the seller's premises. At the other end of the spectrum, Delivered Duty Paid (DDP) expresses the maximum obligations for the seller -- delivery is completed when goods are cleared for import and placed at the buyer's disposal at the named place of destination. Under DDP, the buyer is responsible for unloading the goods from the "arriving means of transport."

A big advantage of the new edition of Incoterms is that they clearly allocate the loading and unloading obligations of both buyer and seller. Mr Jolivet noted: "One of the most frequent queries we received about the old version was on the allocation of terminal handling charges under FCA. Previous ambiguities have now been removed." Mr Jolivet said much anguish and expense can be avoided if specific reference to Incoterms 2000 is made whenever the terms are used.

Another basic requirement is that relevant locations are named whenever an Incoterm is inserted into a contract. For example, the term Delivered at Frontier (DAF) should always be accompanied by a reference to the exact place and on which frontier delivery is to be made. "If the contract neglects this fundamental detail, the buyer could be put to enormous inconvenience because the seller would then be entitled to choose any place of delivery at the frontier," Mr Jolivet said.

Here are some examples of the correct use of Incoterms:

  FOB Liverpool Incoterms 2000
  DDU Frankfurt Schmidt GmbH Warehouse 4 Incoterms 2000 
  CPT Smith Carriers, Inc. Main Warehouse New York Incoterms 2000 

Incoterms 2000 are the culmination of two years of work by ICC's Working Party on Trade Terms, consisting of more than 40 trade experts from companies and business associations around the world. The group carried out extensive consultations among users before agreeing on the final draft.

Incoterms 2000 are available in a bilingual English-French edition from ICC Publishing S.A. in Paris and ICC national committees worldwide. They may also be ordered through the Business Bookstore. To make sure the finer points are well understood, the launch is accompanied by seminars in Austria, Britain, Chile, China, Finland, France, Germany, Mexico, Peru Singapore and Sweden.

The 13 Incoterms

Incoterms 2000 describe the responsibilities of seller and buyer in international trade. The full and authoritative definition of each trade term is published in Incoterms 2000, Publication 560, obtainable from the Business Bookstore and ICC national committees throughout the world.

 
    EXW EX WORKS (... named place) 
    FCA FREE CARRIER (... 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) 
    CPT CARRIAGE PAID TO (... named place of destination) 
    CIP CARRIAGE AND INSURANCE PAID TO (... named place of destination) 
    DAF DELIVERED AT FRONTIER (... named place) 
    DES DELIVERED EX SHIP (... named port of destination) 
    DEQ DELIVERED EX QUAY (... named port of destination) 
    DDU DELIVERED DUTY UNPAID (... named place of destination)
    DDP DELIVERED DUTY PAID (... named place of destination)
(Ãâó: http://www.iccwbo.org/home/news_archives/1999/incoterms_2000_published.asp)