Incoterms Essay

Citi's Online Academy for Corporates: Essentials to Incoterms 2010 and ICC Opinions Updates 28 June 2011

Pamela Woon
Senior Trade Advisor

Prabhu Karunakaran
Trade Advisor

Introduction to Incoterms 2010

Incoterms What are they? Why do they exist? What do they mean? Main changes of Incoterms 2000 to 2010 Who uses them? Incoterms 2010 – Format and Usage
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What Are They? • “Incoterms”: is an abbreviation of “International Commercial Terms” • Published by the International Chamber of Commerce, Paris • Latest version (effective Jan 01, 2011): “Incoterms 2010”

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Why Do They Exist?
• Incoterms have been around since the first version in 1936 and has been revised last in 2000. This is now being replaced with the 2010 version • Shorthand form used in Sales Contracts to define the division between buyers and sellers of certain minimum obligations, risks and costs involved in transportation of goods • Incoterms are only applicable when there is a physical movement of goods • Whilst they are mostly used in International Trade, they can be appropriately used for domestic trade as well

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What Do They Mean?
Incoterms define at the minimum level • The division of costs between buyers and sellers • The point at which delivery occurs, i.e., the point at which the risk of loss or damage transfers from the seller to the buyer • Which party is responsible for export and import clearance Incoterms also give some information regarding documentation, but it is not their primary function
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Incoterms specify: ‐ point in the journey at which responsibility passes from the seller to the buyer ‐ the various costs that are associated with every import‐ export transaction

Incoterm Rules
Components of Cost Cost of Goods Pre-Carriage Export Duty Loading Main carriage Insurance Unloading Import Duty On-carriage Who will bear what cost