According to the International Chamber of Commerce (ICC), “Incoterms® is the world’s essential terms of trade for the sale of goods”. Incoterms®, a registered trademark, is the abbreviation for International Commercial terms. Consequently, ‘Incoterms’ cannot legally be used by another entity.
The challenge with ‘Incoterms’ is that it’s now a generic term. Thus, unless it’s specifically referenced as Incoterms®, it could refer to any self-devised trade term.
This leads us to the Incoterms® centenary, whose celebration depends on your date of reference. In 1923, the ICC published its trade terms’ findings, highlighting disparities in interpretation. This study was initiated in the early 1920s, shortly after the creation of the ICC in 1919. In 1928, the results of a second ICC study were released, followed by the first iteration of Incoterms® – International Rules for the Interpretation of Incoterms® – published in 1936; it consisted of only six Incoterms®: Free Alongside Ship (FAS), Free on Board (FOB), Cost and Freight (C&F), Cost, Insurance and Freight (CIF), Ex Ship (later Delivered Ex Ship or DES), and Ex Quay (later delivered Ex Quay or DEQ).
The first modern-day Incoterms dates back to 1812 with the creation of FOB, followed in 1895 by CIF. Interestingly, the ICC was not the first organisation to create its own Incoterms, as the European Union Emissions Trading Scheme had done so in 1919.
The second iteration of Incoterms® followed only in 1953, owing to a World War II-induced suspension of the supplementary revision. This iteration debuted three nonmaritime transport Incoterms®: Delivered Costs Paid (DCP), Free on Rail (FOR), and Free on Truck (FOT).
The third iteration, which primarily focused on correcting the misinterpretations of the previous iterations, saw the introduction of two Incoterms®: Delivery at Frontier (DAF), and Delivery at Destination (DDP).
The fourth iteration – Free on Airport (FOA), also called FOB Airport – followed in 1976 with the advent of air transport. It was introduced to allay confusion around the term FOB by signifying the ‘vessel’ used. FOA later became Free Carrier (FCA) – first in the 1980 iteration and then in the 1990 iteration. To avoid creating additional Incoterms® to address air transport, the ICC adopted three new Incoterms® applicable to all modes of transport. At the time, the emergence and subsequent proliferation of containerisation and new documentation processes necessitated the modification of the Incoterms®.
The fifth iteration saw the introduction of Free Carrier (FRC). In 1990, the sixth iteration followed, heralding the beginning of the Incoterms decade reviews. This iteration focused on Incoterms® created to suit intermodal transport. Thirteen Incoterms® remained after the deletion of Free on Rail (FOR), Free on Truck (FOT) and Free On Airport (FOA), leaving Ex Works (EXW), FCA, Free Alongside Ship (FAS), FOB, Cost and Freight (CFR), CIF, CPT, CIP, Delivered at Frontier (DAF), DES, DEQ, Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP). At the time, it was considered sufficient to use the general term FCA (Free Carrier . . . at Named Point), while amendments to the Incoterms® were necessitated by the increased use of electronic messages.
The seventh iteration followed in 2000, with the ‘Licence, Authorisations and Formalities’ in the FAS and DEQ Incoterms® being modified to comply with how most customs authorities address issues of exporter of record and importer of record.
The eighth iteration was published in 2010, consolidating the D-family by removing DAF, DES, DEQ and DDU and adding Delivered at Terminal (DAT) and Delivered at Place (DAP). Other modifications included an increased obligation for buyer and seller to cooperate on information sharing and changes to accommodate “string sales”.
Incoterms® 2020, the ninth and current iteration, saw Delivered at Place Unloaded (DPU) replacing DAT, leaving 11 Incoterms: EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAP, DPU, and DDP. The tenth iteration is expected to be applicable from January 1, 2030.