To establish this division, the point at which goods are considered delivered from seller to buyer under the respective terms must be indicated. Normally, at this point (the "critical point"), the obligation to arrange for further transport of goods and to assume further costs and risks is transferred from seller to buyer. Under some trade terms, the "critical points" for the transfer of costs and risks do not coincide.

There are two particular misconceptions about Incoterms:

they are frequently misunderstood as applying to a contract of carriage rather than to a contract of salethey are sometimes wrongly assumed to provide for all the obligations which parties may wish to include in a contract of sale.

These misconceptions are very common although the ICC has always stressed that Incoterms deal only with the relation between sellers and buyers under a contract of sale, and, moreover, only do so in some particular and very distinct respects.

Incoterms 2000

Incoterms 2000 bring the official ICC rules for the interpretation of the most commonly used trade terms in line with the current international trade practices:

recent spread of customs-free zonesincreased use of electronic communications in business transactionschanges in transport techniques.

In their 2000 revised version, Incoterms concentrate on the thirteen most important trade terms and offer a simpler and clearer presentation of them. The use of different expressions to convey the same meaning has been avoided. Moreover, whenever possible, the same expressions as appear in the 1980 Vienna Convention on Contracts for the International Sale of Goods have been used.

The following is the complete list of Incoterms 2000 in their abbreviated form, full form and in a Russian translation.

As is clearly seen from the list, the terms are grouped in four basically different categories:

• the «E» term whereby the seller simply makes the goods available to the buyer at the seller’s own premises. This term represents the minimum obligation for the seller (and the maximum obligation for the buyer).

• the «F» terms FCA, FAS, FOB whereby the seller is asked to deliver the goods to a carrier appointed by the buyer.

• the «C» terms CFR, CIF, CPT, CIP whereby the seller contracts for carriage without taking the risk of loss or damage to goods or additional costs due to events occurring after shipment and dispatch.

• the «D» terms DAF, DES, DEQ, DDU, DDP whereby the seller bears all costs and risks needed to bring goods to place of destination.

The respective obligations of parties under each term are grouped under ten headings. Each heading on the seller’s side has its equivalent on the buyer’s side.

At first glance, it would seem best that each of the contracting parties limit its obligation as much as possible. The seller would then try to negotiate an Ex Works contract while the buyer would try to persuade the seller to deliver goods duty paid to the buyer’s premises. In practice, however, the situation is not that simple. A seller or a buyer cannot easily make a better contract merely by shifting functions, costs and risks to a contracting party. The parties involved will probably be guided by the following criteria:

Market situation

In a highly competitive market, the seller may wish to offer prices to the buyer that are comparable to prices offered in the buyer’s domestic market. The seller would then undertake to deliver the goods using the DDP term. As a minimum the seller would be obliged to arrange and pay for transportation by using the CIF term. One should remember that additional costs and risks accepted by the seller are always reflected in the price.