Incoterms® and Commercial Contracts

How are the Incoterms® rules properly used?

The Incoterms® rules can be incorporated into contracts by simple reference, e.g. 'FCA 38 cours Albert 1er, Paris, France, Incoterms® 2010'


To be certain to benefit from the Incoterms® rules, traders should link their contracts to the Incoterms® rules by explicitly referring to a particular Incoterms® rule in the quoted price. The common practice of quoting a price as follows, '$100/ton FCA New York' (i.e. without an explicit reference to 'Incoterms® 2010') can be DANGEROUS. In the absence of a specific reference to the Incoterms® rules, the trader may lose the right to apply the Incoterms® rules to the contract. The contract may consequently be subjected to a national legal definition of a particular trade term, with surprising results. A more correct formulation of the above contract would be '$100/ton FCA New York Incoterms® 2010'.

In practice, it would appear that one of the most common ways of incorporating an Incoterms® rule into a contract is to include it in the General Terms and Conditions of the exporter or importer. This allows both the exporter and importer to 'forget' about specifying the application of the Incoterms® rules while they negotiate the other terms of the contract. Although this can be a helpful backstop, one wonders if it does not also lead some exporters and importers to conclude erroneously that the Incoterms® rules are mere 'technicalities' or details for the 'fine print'. Such an attitude might lead traders to downgrade the importance of the choice of a particular Incoterms® rule, which could prove unfortunate, as we will see. Another common tactic is to place a reference to the chosen Incoterms® rule somewhere in the pro forma invoice. Whichever technique is chosen, reference to the Incoterms® rules should be clear and unequivocal and refer to the year of the current valid version of the Incoterms® rules (e.g., 'Incoterms® 2010').