The encyclopedia · Legal & Compliance · Legal decision · 1936–2020
ICC's Incoterms gave trade shorthand the same meaning in every port
FOB and CIF meant different things in different countries, so ICC surveyed courts and published one definition in 1936; Incoterms are still used worldwide.
International Chamber of Commerce (ICC)
the move
Trade terms like 'free on board' were used for centuries, but their meaning differed from country to country — and courts interpreted the same abbreviation differently, creating disputes over who paid for freight, insurance and risk.
In the post-war period the ICC, founded in 1919, surveyed the commercial trade terms merchants used: a 1923 study of six terms in 13 countries highlighted the disparities, and a wider study followed. In 1936 ICC published the first Incoterms rules, defining FAS, FOB, C&F, CIF, Ex Ship and Ex Quay.
Incoterms are not law — parties choose them by contract — but that is their strength: a seller and buyer anywhere can agree 'FOB Incoterms 2020' and share one precise schedule of costs, risks and delivery duties. The rules are revised as transport changes, from containers to electronic documents.
why it works
- One definition replaced a dozen national readings of the same three letters.
- Parties could pick terms knowing exactly who bears each cost and risk.
- The ICC's survey method made the standard reflect real merchant practice.
- Revisions kept it relevant as rail, air and container shipping arrived.
what transfers
When a word is worth money, ambiguity is a cost: an industry body that publishes one authoritative definition can make a whole market cheaper to transact in.
what came after
Incoterms became the global standard for interpreting trade terms, recognised by UNCITRAL, and are updated roughly every decade — the current version is Incoterms 2020. They are used in sales contracts worldwide, from EXW to DDP.
references
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