Frequently asked questions

If you have any questions about Incoterms not addressed on this website, please get in touch.

Q:Can we still use Incoterms 2000 in our agreements?

Yes.

Many companies have complex agreements with their counterparties and service providers, which will be time-consuming to redraft.

Therefore parties are free to continue to refer to Incoterms 2000 (or any other revision!) – provided that this is specified unambiguously in their agreements.

Q:What Incoterms rules work best with letters of credit?

Where possible use CIF, CIP, CFR or CPT.

For all these rules, delivery takes place before the main carriage. The carrier gives the seller a transport document which (usually) serves as a mechanism for control of the goods – it will be presented to a bank under the letter of credit, and then passed on to the buyer so that the goods can be claimed.

All the other rules are potentially problematical in one way or another.

For example with FCA, the buyer is in control of the main transport, and there are circumstances in which the buyer may be able to frustrate the transaction.

Conversely with DAT, the buyer can be at risk, because seller may be able to get paid under the letter of credit before fulfilling the delivery obligation.

More on letters of credit and the Incoterms rules

 

Q:What is Incoterms 2010’s relevance to domestic transactions?

Use of the rules is not limited to cross-border trading.

The Incoterms rules are also applicable to transactions where the buyer and seller are in the same country, or both within a customs union such as the European Union.

All the provisions of the rules are written with this in mind, e.g. if there are issues with import duty or taxes, they need only be considered where appropriate.

Q:What is Incoterms 2010′s connection with transfer of title to the goods?

The Incoterms rules are silent on the issue of when title in the goods passes from seller to buyer. This should be dealt with elsewhere in the commercial agreement.

The issue of title to the goods is related to that of revenue recognition, which matters to those organisations who want the best figures in their financial reports.

Revenue recognition is defined by accounting standards such as GAAP, and the point of delivery (as defined by the Incoterms rule) is one factor in the decision on this matter.

Hence rules such as DAP and DAT would tend to be disadvantageous in this respect.

Q:What are Incoterms 2011?

There is no Incoterms 2011 revision, this is a mistake.

Revisions of the rules take place around every ten years or so.

The most recent revision is called Incoterms 2010, and it came into force on 1st January 2011.

Q:Can we add qualifications or variations to a rule?

Yes

It is possible to add extra words to an Incoterms rule, so as to cater for special situations and/or to achieve more precise definition of obligations

Example 1:
For some types of cargo, costs arise from stowing the cargo on the vessel. So the Incoterms rule “FOB stowed” will make it clear that the seller is responsible not only for loading the cargo on board, but also for stowing it.

Example 2:
The rule “DDP, VAT unpaid” – seller is responsible for paying import duty, but not for paying VAT

Example 3:
The rule “EXW, loaded” – seller is responsible for loading goods onto vehicle

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