A Brief History Of Incoterms

Incoterms history

1923: first interest of the ICC for commercial terms

After the creation of the ICC in 1919, one of his first initiatives was to facilitate international trade operations. At the beginning of the 1920s, the global organization of companies began to understand the commercial terms used by operators. This was accomplished through a study limited to six terms commonly used in just 13 countries. The results were published in 1923, highlighting disparities in interpretation.

1928: clarity improved

To examine the differences in interpretation identified in the initial survey, a second study was conducted. This time, the scope was extended to the interpretation of commercial terms used in over 30 countries.

1936: global guidelines for international trade operators

Based on the results of the studies, the first version of the Incoterms rules was published. The terms included FAS, FOB, C&F, CIF, Ex Ship and Ex Quay.

1953: increase in rail transport

Due to the Second World War, further revisions to the Incoterms standards were suspended and never resumed until the 1950s. The first revision of the Incoterms standards was therefore published in 1953. Three new terms for non-maritime transport were introduced. The new rules included DCP (Delivered Costs Paid), FOR (Free on Rail) and FOT (Free on Truck).

1967: correction of interpretation errors

ICC launched the third revision of Incoterms, to eliminate the misinterpretations of the previous version. Two new terms DAF (Delivered at Frontier) and DDP (Delivery Duties Paid) were added.

1974: growth of air transport

The growing use of air transport required a new revision of the terms. The new edition reported the new term FOB Airport (Free On board Airport). The purpose of this term was to eliminate confusion with respect to the maritime term FOB (Free on Board).

1980: development of container traffic

With the expansion of freight transport in containers, the need for another overhaul was felt. With this edition the term FRC (Free Carrier … Named at Point) was introduced, which indicated goods not received “alongside ship”, but in an internal point, as in a container-yard.

1990: a complete overhaul

The fifth revision has simplified and optimized the so-called Free-Carrier terms by eliminating the terms for each type of transport (FOR-Free on Rail, FOT-Free on Truck and FOB Airport-Free on board Airport), considering it sufficient to use the generic term FCA (Free Carrier … at Named Point).

2000: modification of customs clearance obligations

Optimization of customs aspects in terms of FAS and DEQ.

2010: reflections on the contemporary commercial landscape

The 2010 revision allowed the optimization of the so-called “D-rules“, with the elimination of the terms DAF (Delivered at Frontier), DES (Delivered Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivered Duty Unpaid) and with the addition of the terms DAT (Delivered at Terminal) and DAP (Delivered at Place). There were also changes in the so-called “String-sales”.

2020: further simplification and more freedom to the parties

The newly-published 2020 revision substituted the term DAT (Delivered at Terminal) with DPU (Delivered at Place Unloaded), essentially leaving the parties with more room to negotiate the point of delivery under Incoterms rules. Additionally, CIP (Carriage and Insurance Paid To) has been modified, so that the minimum insurance coverage is set according to Clause (A) Institute Cargo Clauses instead of (C), which remains for CIF (Cost, Insurance and Freight).

For a full explanation of the new Incoterms 2020 you can refer to our article The Little Guide On The Main Changes Brought By Incoterms 2020.

Globartis Research

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