Purpose of Incoterms Trading with other countries, as discussed earlier, cuts across political and national

boundaries. Inevitably, as an exporter, you need to deal with people of different cultures, customs, and
traditions. What may be true to Filipinos and the Philippines may not be applicable at all to the citizens
of other countries. Various trading practices also exist among countries. In the Philippines, a delay in
delivery is somehow reflective of its culture. In other countries, however, such practice is a sure sign of
unprofessionalism. To facilitate better understanding among countries, the International Chamber of
Commerce (ICC) provided a set of international rules for the interpretation of the most commonly used
terms of delivery in foreign trade. Thus, the uncertainties and arbitrariness of interpretations of such
terms in different countries are avoided or, at least, minimized to a considerable degree The
International Rules for the Interpretation of Trade Terms (Incoterms or International Commercial Terms)
came into being in 1936. To avoid misunderstandings, disputes, and litigations among nations, the
international trade body decided to come up with a set of trade terms which will serve as reference for
both the seller and the buyer. In other words, the Incoterms delineate the responsibilities of the seller
(or exporter) to the buyer (or importer). They also become a component or part of a price quotation for
the foreign buyer. The terms cannot stand alone as they are; there has to be a delivery point, either the
port of shipment or the destination together with the price quoted in foreign denomination. According
to the International Chamber of Commerce, the number of Incoterms has been reduced from 13 to 11.
This has been achieved by substituting two new rules that may be used irrespective of the agreed mode
of transport—DAT (Delivered at Terminal) and DAP (Delivered at Place) —for the Incoterms 2000 rules
OAF, SES, DEQ, and DDU. Additionally. the 11 Incoterms 2010 rules are presented in two distinct classes:
(a) rules for any mode or modes of transport, and (b) rules for sea and inland waterway transport. The
rules for any mode or modes of transportation can be used irrespective of the mode of transport
selected and the number of mode of transport employed. EXW, FCA, CPT, CIP, DAT, DAP, and DDP
belong to this class 1. Ex-works (EXW) Factory. The seller is responsible for the goods only inside/within
the factory premises. The responsibility for the goods is transferred to the buyer once he/she picks it up
from the seller's Ex-works (EXW) Factory. The seller is responsible for the goods only inside/within the
factory premises. The responsibility for the goods is transferred to the buyer once he/she picks it up
from the seller's 2. Free Carrier (FCA). The arrangement between the seller and the buyer is just like Free
on Board Port of Shipment. However, this term can be used for any mode of transport. 3. Carriage Paid
To (CPT), named place or port of destination. This term used for air or ocean containerized and
roll-on/roll-off shipments. 4. Carriage and Insurance Paid to (CIP), named place or port of destination.
This term is used for air or ocean containerized and roll-on/roll-off shipments. 5. Delivered at Terminal
(DAT). This term means that the seller has already delivered, when the goods— once unloaded from the
arriving means of transport—are placed at the disposal of the buyer at the named terminal at the
named port or place of destination. *Terminal" includes a place. whether covered or not, such as a quay,
warehouse. container yard road, rail, or air cargo terminal. The seller bears all risks involved in bringing
the goods to and unloading them at the named port or place of destination. 6. Delivered at Place (DAP).
This term means that the seller has already delivered. when the goods are placed at the disposal of the
buyer on the arriving means of transport ready for unloading at the named place of destination. The
seller bears all risks involved in bringing the goods to the named place. 7. Delivered Duty Paid (DDP),
named place of destination. This term is used for any mode of transportation. In the second class of
Incoterms 2010 rules, the point of delivery and the lace to which the goods are carried to the buyer are
both ports, hence the label "sea and inland waterway" rules. FAS, FOB, CFR, and CIF belong to this lass.
8. Free Alongside Ship (FAS), named ocean port of shipment. This can only be used for LCL (less than
container load) shipments. It cannot be used for containerized shipments. 9. Free on Board vessel (FOB),
named ocean port of shipment. This term is used for ocean shipments only where it is important that
the goods pass the ship's rail. 10. Cost and Freight (CFR), named ocean port of destination. This term is
used for ocean shipments that are not containerized. 11. Cost, Insurance, and Freight (CIF), named
ocean port of destination. This term is used for ocean shipments that are not containerized. The
different responsibilities and risks involved in the four most commonly used Incoterms in the
Philippines, which include EXW Factory, FOB Port of Shipment. CFR Port of Destination, and CIF Port of
Destination, are detailed in the next sub sections. The differences among them are the costs, risks,
insurance, and documents to be handled by either or the importer.