Apparel Exports
Incoterms 2010
In a series of two articles, Apparel
discusses the International
Commercial Terms or Incoterms,
which are the prevalent terms in
international business.
TEXT BY
Vasant Kothari
62 APPAREL DECEMBER 2010
I
nternational Commerce Terms,
known as ‘Incoterms’, are the most
commonly accepted terms of sale
in international business. It defines
the responsibilities of the exporter and
buyer in the arrangement of shipments
and transfer of liability involved in
their international sales. It is crucial
to know which Incoterm is being used
at the start of a negotiation/quotation
of a sale, as it will affect the costs/
responsibility involved in shipping,
insurance and tariffs.
International Chamber of
Commerce (ICC) introduced the first
version of Incoterms in 1936. ICC
updated Incoterms several times to
keep pace with the development of
international trade. Since then they
have been updated in the years 1953,
1967, 1976, 1980, 1990, 2000
and the latest in 2010, which will be
implemented from 01 January, 2011.
Incoterms 2010
Incoterms are basically divided into
four categories:
• ‘E’ term – Exporter makes the
goods available to the buyer at
the exporter’s premises or other
place named by the exporter
• ‘F’ terms – Exporter is responsible
to deliver the goods to the export
shipment point and carrier
designated by the buyer
• ‘C’ terms – Exporter is responsible
for contracting carriage of goods
to the place of destination, but
does not assume risk of loss or
damage to goods, or additional
costs due to events occurring after
shipment
• ‘D’ terms – Exporter is
responsible for all costs and risks
associated with delivering goods
to the named place in the country
of destination.
international
Commerce
Terms, known
as ‘Incoterms’,
are the most
commonly
accepted terms
of sale in
international
business.

APPAREL DECEMBER 2010 63

 Common Terminology of
Incoterms
Pre-carriage:
• Initial transport of goods from
the exporter to the main carrier,
usually by truck, rail or
inland waterway
Main carriage:
• Primary transport of goods
• Longest part of the journey &
from one country to another
• Usually by sea or air, but may be
by truck or rail

On-carriage:
• Transportation from arrival point
in the destination country to
buyer, which can be by any mode

Carrier:
• Any party who arranges for the
primary transportation by truck,
plane, ship, rail, etc.

Delivery:
• The term delivery is used in two
contexts in Incoterms:
ã The exporter bringing the
goods to the named point
ã Traditional sense of the buyer
receiving the goods

Customs clearance:
• Clearing the goods for export or
import means paying the duties,
taxes and administrative costs
• Performing administrative matters
related to:
ã Clearance and customs
formalities
ã Import and/or export
regulations
ã Typically, the shipper (exporter)
clears the goods for export the
buyer (buyer) clears the goods
for import

Scope and Purpose of

Incoterms
• Commercial terms defining the
roles of the buyer and exporter in
the arrangement of international
transportation and other
responsibilities related to
the international shipment of
tangible goods.
• Provides a set of international
rules for the interpretation of the
most commonly used trade terms
in foreign trade

64 APPAREL DECEMBER 2010


• Limited to matters relating to the
obligations of the parties with
respect to the delivery of the
goods sold
• Incoterms deal only with the
relation between the exporters
and buyers under the contract
of sale
• Incoterms deal with a number of
identified obligations imposed on
the parties such as:
ã Exporter’s obligation to place
the goods at the disposal of
the buyer, or
ã Hand them over for carriage, or
ã Deliver them at a destination, and
ã The distribution of risk between
the parties
ã Obligations to clear the goods
for export and import
ã Packing of the goods
ã Buyer’s obligation to take delivery
Main Functions of Incoterms
• Eliminate barriers caused by
distance, language, and local
business practices
• Eliminate uncertainties and
different interpretations of trade
terms on a world-wide scale
• Provide universally accepted
vocabulary
• Reduce risk of misunderstanding,
disputes and litigation
• Facilitate international commercial
exchanges
It is crucial to
know which
Incoterm is being
used at the start
of a negotiation/
quotation of a sale,
as it will affect the
costs/responsibility
involved in shipping,
insurance and tariffs.
• Define the buyer’s and exporter’s
costs, risk and obligations
regarding delivery of the goods
What Incoterms Does Not
Cover
• How or when the title of the
goods is transferred
• Protect a party from his/her own
risk of loss for all segments of
the shipment
• Cover the goods before or after
delivery
• Define the remedies for breach
of contract
• Terms of payment that dictate
when you get paid
• Specify details of the transfer,
transport, and delivery of goods
• Intangible goods like computer
software
• Incoterms applies to the contract
of sale and not the contract of
carriage (transportation)
Responsibilities Affected by
Incoterms
The terms allocate responsibilities and
costs between the parties for:
• Licenses and government
imposed formalities for import
and export
• Packing and marking for
international transport
• Documentation required for the
transport, transfer and Customs
clearance of goods
• Proof of delivery
• Taxes, duties, consular fees,
terminal charges, arrival and
destination charges
• Insurance, when elected
• Loading and unloading
• International and inland
transport
• Risk of loss or damage n
APPAREL DECEMBER 2010 65