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Incoterms

Incoterms® 2010

Incoterms® are internationally recognised, standardised rules dictating the distribution of obligations, costs, and risk in the international exchange of goods. They define which party in the transaction is responsible for the organisation and execution of transportation, loading, unloading, insurance, and custom dues, alongside miscellaneous costs. More importantly, they determine precisely the points where risk is transferred from buyer to seller, relevant where accidental loss or damage to and of the product occurs.

The drafting of international contracts is a perpetual challenge. A host of obstacles stand in the way, such as language, local customs, etiquette, and legal hurdles. Incoterms® can facilitate this process, as an instrument created by the economy itself towards harmonising law in commerce. However, Incoterms can be used in national transactions as well. In that case, of course, customs duties, import levies, transit licenses, and the like need not be considered.

The 2010 Edition was released in late 2010, and came to effect on the 1.1.2011. This followed an intense two-year exchange and collaboration by international specialists. Its terms become binding when referenced to in the sales contract. The ICC recommends always referencing to the most recent Incoterms® edition, and to negotiate as precisely a contract as may be possible, for instance:

CPT (O’Hare International Airport, Air Carrier Cargo Center) Incoterms 2010.

Incoterms® form an important part of your sales contract, and so must harmonise with the remaining components, as well as with insurance, financing, and logistics contracts which accompany this. For instance, an EXW seller is not entitled to a transport document or proof of export. In practice, this can lead to considerable problems and to subsequent claims, be it that the letter of credit securing the transaction requires a B/L or an auditor demands to see a customs confirmation of exit.


Incoterms® 2010 includes numerous improvements allowing for greater ease of use, and making the text more accessible. Arguably, the most significant change is the reduction from 13 rules to 11, despite having added two new terms, namely DAP and DAT. Delivery At Place and Delivery At Terminal are highly flexible in use, and meet the challenges of modern container transport by sea, as well as logistics by air and land.

The second fundamental change is a revision to the transfer of risk in maritime transportation, having been updated to suit modern handling methods and technology at ports.

However, also significant are the useful Guidance Notes, providing valuable pointers about each particular Incoterms® rule. The streamlined structure also provides greater clarity for choosing the most appropriate rule. The Incoterms® Rules can be divided into two groups:

The first group refers to those rules usable with any form or combination of transportation:

  • EXW - Ex Works (named place of delivery)
  • FCA - Free Carrier (named place of delivery)
  • CPT - Carriage Paid To (named place of destination)
  • CIP - Carriage and Insurance Paid To (named place of destination)
  • DAT - Delivered at Terminal (named place of destination)
  • DAP - Delivered at Place (named place of destination)
  • DDP - Delivered Duty Paid (named place of destination)

The second group refers exclusively to maritime shipping:

  • 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, Freight (named port of destination)

One of the secrets to the success of Incoterms® is its independence from particular jurisdictions, while still being applicable universally. Its use in Austria will likely give rise to specific questions, and for this the ICC-Austria team is of service in answering these queries. We receive questions concerning foreign trade and law daily, and would be pleased to use our extensive experience to help you in constructing contracts, advising you on the formulation of clauses and the like, tailor-made to suit your necessities and situation.

Please address any questions regarding Incoterms® to:

ICC Austria - International Chamber of Commerce

Wiedner Hauptstrasse 57, 1040 Wien
Tel: +43-1-504 83 00
E-Mail: icc(at)icc-austria.org


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