Trade has always been played a key role in development of the civilizations. Traders follow the practices, which have been created through hundreds of years, are well known for their areas. But these practices have limited sphere of influence so vital trade customs vary from one place to another. As international trade emerged it was observed that different practices have been creating ambiguity for the traders. Frequently, parties to a trade transaction are unaware of the different trading practices in their respective countries. This can give rise to misunderstandings, disputes and litigation, with all the waste of time and money that this entails.
Buyers and sellers should know exactly what their obligations and rights are in a foreign trade transaction without leaving a possible source of uncertainty. For example, they should know the place of the delivery, the party who is responsible for making the contract of carriage and insurance, arranging the export and import procedures and paying the loading and unloading costs etc...
The points indicated above are the core elements of a sales contract as a result they had to be re-written for every foreign trade transaction. In order to prevent unnecessary repetitions, trade terms, which contain almost all of the vital parts regarding the obligations of the parties on a sales contract, have been created by various organizations. But these initial trade terms had different interpretations in different countries so they could not create an uniformity in practice.
INCOTERMS (International Commercial Terms) have been created by the International Chamber of Commerce in order to reach an uniform set of international rules for the interpretation of trade terms in a global scale. First version of INCOTERMS published in 1936. These first rules were known as “Incoterms 1936”. In 1953, 1967, 1976, 1980, 1990 and finally in 2000 rules have been amended in order to bring the them in line with current international trade practices.
INCOTERMS can only be applied to the sales contracts which are related to the trade of tangible goods. Incoterms should not be used in other contracts, such as contract of carriage, insurance etc... Reference to Incoterms 2000 in a sales contract defines clearly the parties’ respective obligations and reduces the risk of legal complications.
There are 13 Incoterms defined in INCOTERMS 2000. Some of them can be used irrespective of the mode of transportation whereas others can only be used in maritime and inland waterway transport.