INCOTERMS 2000

2.Purpose Of Incoterms 2000, What They Do For You And What They Are Not

2.1 The word Incoterm is an abbreviation of "International Commercial Terms" and the chosen term is the CONTRACT OF SALE (NOT A CONTRACT OF CARRIAGE). As trade terms, they are key elements of international contracts of sale, they tell both the seller and buyer what to do in regard to the following:

· Carriage of the goods from seller to buyer
· Export and import customs clearance
· How the costs are to be divided
· At which point risk transfers to the buyer from the seller

Incoterms do not deal with:

· Transfer of property rights in the goods
· Relief from obligations and exemptions from liability in unexpected or unforeseeable events
· Consequences of various breaches of contract except those relating to the passing of risks and costs when the buyer is in breach of his obligation to accept goods or to nominate the carrier under an F-term.

2.2 The purpose of INCOTERMS 2000 is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade, to avoid the uncertainties of different interpretation of different countries of such terms.

2.3 Parties involved in international trade are not usually aware of the trading practices of each other's country. This can give rise to misunderstanding, dispute and litigation, which can become extremely costly. In order to overcome these problems the International Chamber of Commerce first published a set of rules in 1936, known as INCOTERMS 1936. As trade practices changed over the years amendments were published in 1953, 1967, 1976, 1980, 1990 and now 2000. Incoterms 2000 replaces all previous versions.

2.4 The 1990 amendments were essentially to adapt for the increasing use of EDI (electronic data interchange) in international trade. Secondly, the changes in transportation techniques rendered certain terms inappropriate, particularly the use containerisation, multimodal transport and roll on roll off traffic. INCOTERMS 1990 included the term FCA- Free carrier at named place, to suit all types of transport irrespective of mode and combination of different modes. Hence some particular terms relating specifically to modes of transport have been removed. (FOR/FOT and FOB Airport), whereas, Incoterms 2000 changes terminology for sake of consistency and ease of understanding plus the following main points:

· Under the FAS-term the obligation of export clearance is now on the seller (previously the buyer)
· Under the FCA-term there are now specifications of the seller's obligation to load the goods on the buyers collecting vehicle and the buyer's obligation to receive the seller's arriving vehicle unloaded
· Under the DEQ-term the obligation of import clearance is now on the buyer (previously the seller)

Incoterms 2000 also improves the understanding of the FOB, CFR and CIF terms (which all transfer the risk at "crossing of ships rail"), so that these terms can be avoided when they are no longer appropriate. Parties are invited to choose terms such as FCA, CPT and CIP where delivery of the goods is connected to handing over of the goods to the carrier (or agent) with risk passing at the FCA named point as opposed to "crossing the ships rail"