Iranian lawyer association

5-International Commercial Terms (INCOTERMS)

The global economy has given businesses broader access than ever before to markets all over the world. Goods are sold in more countries in larger quantities, and in greater variety. But as the volume and complexity of international sales increase, so do possibilities for misunderstandings and costly disputes when sales contracts are not adequately drafted.

Incoterms, the official ICC rules for the interpretation of trade terms, facilitate the conduct of international trade.

5-1-Purpose and Scope of Incoterms

The purpose of incoterms is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree.

Frequently, parties to a contract are unaware of the different trading parties in their respective countries. This can give rise to misunderstandings, disputes and litigation, with all the waste of time and money that this entails. In order to remedy these problems, the international chamber of commerce first published in 1936 a set of international rules for the interpretation of trade terms. These rules were known as “incoterms 1936”. Amendments and additions were later made in 1953, 1976, 1980, 1990, 2000 and 2010 in order to bring the rules in line with current international trade parties.

Incoterms have always been primarily intended for use where goods are sold for delivery across national boundaries hence, international commercial terms. However, incoterms are in practice at times also incorporated into contracts for the sale of goods within purely domestic markets.

5-2-Incoterms 2010

In incoterms 2010, all rules are divided into 2 groups. Group 1 include rules used for all modes of transport. Group 2 include rules used solely for sea transport.

5-2-1-Group 1

5-2-1-1-EXW (EX  WORKS)

This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed. It is suitable for domestic trade.

“EX WORKS” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place(i.e. works, factory, warehouse, etc.)

The seller doesn’t need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.

5-2-1-2-FCA (FREE CARRIER)

This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed.

“FREE CARRIER” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

5-2-1-3-CPT (CARRIAGE PAID TO)

This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed.

“CARRIAGE PAID TO” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

5-2-1-4-CIP (CARRIAGE AND INSURANCE PAID TO)

This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed.

“CARRIAGE AND INSURANCE PAID TO” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place(if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

5-2-1-5-DAT (DELIVERED AT TERMINAL)

This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed.

“DELIVERED AT TERMINAL” means that the seller delivers when the goods,once unloaded from the arriving means of transport ,are placed at the disposal of the buyer at a named terminal at the named port or place of destination. Terminal includes any place, whether covered or not, such as a quay , warehouse, container yard or road, rail or air cargo terminal .The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.