The development or introduction of term incoterm introduced by ICC in early 1920’s. Group of industrialists, financiers and traders developed the trade standards to do business globally that would become knowns as the incoterm.
The ICC (International Chamber of commerce) was created in 1919. The ICC saw the opportunity/need to create global system of rules for trading. In 1920, ICC conducted study for understanding of trade terms to help buyers and sellers in international trade. This study introduce 6 common trade terms in only 13 countries and then published the study results in 1923.
After first publish, in 1928, as second initial survey and improvement was done, more than 30 countries were expanded in the clarification of trade rules. After examine the finding and tested in 30 countries, finally the first version of the incoterms was published in 1936. The six trade terms that were tested and examine in 1920 and 1928 includes FAS (Free alongside Ship), FOB (Free on Board), C;F (Carriage and Freight), Ex Ship and Ex Quay. The first version of incoterms was issued in 1953. After trade increased in rail mode, the three new incoterm of non-marine transport were examined and created. DCP (Delivered Costs Paid), FOR (Free on Rail) and FOT (Free on Truck) were added. As trade increased, two more trade rules were introduced DAF (Delivery at Frontier) and DDP (Delivery at destination) to overcomes delivery issues in international trade.
In 1974, due to raising trade in air transportation there was need to introduce incoterms in air mode to solve trading issues. Thus 1974 ICC introduced new term of trade “FOB Airport” was introduced especially for air transport. In 1980, ICC introduced FRC (Free Carrier) for rise of container traffic. In late 1980’s ICC decided to completely revised all incoterm that have been introduced in order to take on them to modern-day commercial practice. In 1990 new version were published in which transportation modes like FOR, FOT and FOB Airport were eliminated and introduce FCA (Free Carrier). In 1990 version, there 13 individual incoterms. In 2000, ICC did modification in incoterms and amended some customs clearance obligations in order to resolve issues in import and export during international trade.
2010 Incoterm edition is the current and final version of trade terms that companies are using now and it address almost all the issues of international trade. 2010 incoterm edition merged D-family of rules by removing DAF, DES (Delivered Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivered Duty Paid) and added two new incoterms: DAT (Delivered at Terminal) and DAP (Delivered at Place), reflections on the modern trade landscape. Incoterm 2010 came into effect in 2011.
Currently companies using 11 incoterms for trade internationally and also domestics. – EXW, FCA, CPT, CIP, DAT, DAP and DDP, FAS, FOB, CFR and CIF. CITATION IncotermRulesHistory l 1033 (Incoterm Rules History, 2018)
Role and Purpose of Incoterms
When we talking about International Trade, we are importing and exporting goods from different countries. We need to fulfill different countries requirements in order to trade in other countries. Incoterm plays an important role to make simple and effective for trader to do business internationally. Incoterms are important part of international trade but many business concern groups misunderstood it. Some people think incoterms only related to freight charges like used for clarification of who will be responsible for various charges of international transportation from point of origin to point of destination. Incoterm are more than just deciding defining freight charges. Incoterms reduce the risks during shipments of goods/services. Its provide secure payment of goods, timely delivery schedules, reduced the cost and time by adopting standard rules of international trade all over the countries. It enables the protect the buyers and sellers from constant changes in shipping practices and countries terms and conditions. Incoterms rules are applied by governments, the legal authorities and the freight forwarders and are acceptable in all the countries of the world. CITATION flashglobal p /flashglobal l 1033 (2017, p. /flashglobal)In business especially global, people facing different language barriers and different implications and types of fees in different countries, sometime federal government. For example in some countries tariffs, fees, any other surcharges enforced by federal body and in some countries it imposed by local governments. By using incoterms, companies eliminate all these limitations because incoterm provide all parties same classifications of specific terms and conditions in trade agreement. Companies can reduce level of risk during freight of any mode transportation. The main purpose of developing incoterm is trade will continuous without any t. CITATION freightindustrytimes l 1033 (Mike Josypenko,Director of Special Projects | The Institute of Export, 2015)http://www.worldwidecargo.com/general/the-importance-of-incoterms/ in international trade buyers and sellers choose incoterm in order to clarify who will pay the cost of transportation, who part is loading or unloading of goods, who will bears the risk of loss/damage at any given point during international trading and which terms performed by particular parties.
http://www.bflcanada.ca/en/blog/0-94-why-incoterms-are-so-important-.htmlThese incoterms are pre-defined by international chamber of commerce (ICC).