The INCOTERMS (International Commercial Terms) is a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. International trade terms are the standard terms of an international sale and purchase agreement. These terms determine obligations of the parties engaged in foreign trade, and regulate the time of transfer of ownership of the goods, responsibility for the goods spoiled in transit, improper execution of shipping documents etc. The INCOTERMS Rules regulate the essential terms and conditions of delivery of goods but not all the obligations of the parties in full, under international sale and purchase agreement.

One of the main reasons for development of the INCOTERMS Rules is in the fact that the parties of an agreement often do not know the nuances of trade practice existing in different countries, and that leads to misunderstanding, disputes, and trials, and loss of time and money. So, use of INCOTERMS Rules is an advantage in case of reference to the court, because courts interpret their meaning unambiguously in all countries in practice.

A new version of the INCOTERMS 2010 Rules came into effect on January 1, 2011. The new version of the Rules contained the two scales of international trade terms (one scale was intended for foreign trade, the other one was intended for domestic trade). Quantity of the terms of the INCOTERMS 2010 was reduced from 13 to 11. That occurred by inclusion of the two new terms that can be used regardless of the agreed method of transportation, namely: DAT (Delivered at Terminal) and DAP (Delivered at Point) instead of the terms of the INCOTERMS 2000 DAF (Delivered at frontier), DES (Delivered ex Ship), DEQ (Delivered ex Quay) and DDU (Delivered, Duty Unpaid).

The two categories of rules were created within the INCOTERMS 2010: the rules for any mode of transport, and the rules for sea and island waterway transportation, instead of the four categories that were available in the INCOTERMS 2000.

The insurance coverage was revised considering the adjustments made by Institute Cargo Clauses (Institute of London Underwriters).

The responsibility for payment of the cargo storage at the Terminal is determined clearly.

According to their legal position, the INCOTERMS belong to customs of international trade and are used if they mentioned in a foreign trade contract. The INCOTERMS are of advisory nature, and their use in a contract in full or in part depends on the contracting parties’ will. If there is any discrepancy in the basic terms interpretation between a contract and INCOTERMS, the terms of the contract shall prevail. If you decided to use INCOTERMS when executing a contract, you should provide for the relevant reference in you contract.