Brief History and Developments Of The Trade Terms

One of the most important things when talking about an international sales contract is the trade term.[1] In such a contract, it is exceptional that it does not include a trade term. Each sale contract might have one of these terms to better understanding the extent of parties’ liability. It will be for their benefit in case there is a need for clarifying the responsibility of the parties because of the contradiction in the contract.[2] Relations between the buyer and the seller have changed in many ways in the process. The biggest proofs of this are the legal systems,rights and obligations that changes from country to country. This instability and variability of the conditions in each contract; created the need for a standardized and generally accepted set of terms for merchants.

Incoterms is a program implemented by the International Chamber of Commerce (ICC) in order to provide a standard for the terms used in international trade. These terms regulate the liability and responsibility issues between the buyer and the seller in international trade. The purpose of this regulation is to make the process easier and more understandable for two parties by putting the tasks and responsibilities into a certain pattern.[3]Incoterms, first published in 1936, was revised in 1963, 1967, 1976, 1980, 1990 and 2000 due to changes in international trade over time.[4] The current version is INCOTERMS 2010, which was introduced on January 1, 2011.[5]Incoterms 2010 consists of 11 terms under 4 main headings. In the 2010 version, the terms DAF, DES, DEQ, DDU have been removed and DAT (Delivered At Terminal) and DAP (Delivered At Place) are added. The ICC has also started writing new rules under the name of Incoterms 2020.

Incoterms should not be confused with a sales contract (including transfer of ownership, price, breach of contract, possible remedies, contractual obligations not related to delivery) or a contract of carriage (including packing and stacking) or a law governing these two contracts. The purpose of Incoterms is to define the responsibility arising from import and export, the obligations related to the regulation of crowning, the issues related to the insurance coverage during the transportation and the risk and transfer related to the delivery of the goods. In practice, Incoterms rules are usually supplemented by additional terms. Simultaneously, traders often choose the wrong terms in legal documents with other linked contracts.[6]

[1]Jan Ramberg, International Commercial Transactions, (ICC Publication no 588 – Kluwer Law International

Norstedts Juridik, Paris, 1997) p. 93

[2]G. Jiménez, Guide to Export-Import Basics – Vital Knowledge for Trading Internationally, (ICC Publication no 685)

[3]Thomas Cook, Mastering the Bussines of Global Trade, (CRC Press, 2014) p. 26

[4]Ibid p. 36

[5] Jan Ramberg, ICC Guide to Incoterms 2010, (ICC Services Publications, Paris, 2011) p.8

[6]J. Malfliet, Incoterms 2010 and the mode of transport: how to choose the right term, Management Challenges in the 21st Century: Transport and Logistics – Opportunity for Slovakia in the Era of Knowledge Economy (Bratislava, 2011), p.164