Overview of New ICC Guide to Incoterms 2010
The International Chamber of Commerce has published its Guide to Incoterms® 2010 to serve as a practical resource for users of the new Incoterms® that took effect in January 2011, which are used by companies for business transactions worldwide1, including the buying and selling of goods.
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(Incoterms® 2010 rules are internationally accepted standard definitions of trade terms (INternational COmmercial TERMS). The Incoterms® were published in 1936 to help traders avoid misunderstandings by defining the cost, risks, and responsibilities of both buyers and sellers in contracts1 for the sale of goods. The Incoterms® 2010 rules take into account developments in global trade since they were last revised in 2000. The U.S. Council for International Business (USCIB) has organized a series of training seminars throughout the U.S. to explain the changes in the Incoterms® 2010 rules.)
Rules Are Updated to Cover Cargo Security, Electronic Communications, Etc.
The Incoterms® 2010 rules have been updated to expand their coverage of cargo security, which has been at the forefront of the transportation agenda for many countries since the September 11, 2001 terrorist attacks2, as well as the increased use of electronic communications in business transactions. The ICC states that the new version of Incoterms® has been modified to ensure that the rules clearly and accurately reflect present-day trade practices.
2 New Incoterms® 2010 Rules Replaces 4 Incoterms® 2000 Rules
The ICC states that the number of rules has been reduced from 13 to 11 by substituting two new rules that may be used irrespective of the agreed mode of transport, Delivered at Terminal (DAT) and Delivered at Place (DAP), for four Incoterms® 2000 rules: Delivered At Frontier (DAF), Delivered Duty Unpaid (DDU), Delivered Ex Quay (DEQ), and Delivered Ex Ship (DES).
The ICC states that under both new rules, delivery occurs at a named destination and at the buyer's disposal, but that in DAT, delivery is unloaded from the arriving vehicle (as under the former DEQ rule) and in DAP, delivery is ready for unloading (as under the former DAF, DES and DDU rules).
Rules Are Classified According to Mode of Transport
The 11 Incoterms® 2010 rules are classified into two distinct classes. The first class includes seven Incoterms® 2010 rules that can be used irrespective of the mode of transport selected and irrespective of whether one or more than one mode of transport is employed. They can be used even when there is no maritime transport at all and can be used in cases where a ship is used for part of the carriage. These rules include:
| EXW | EX Worx |
|---|---|
| FCA | Free Carrier |
| CPT | Carriage Paid To |
| CIP | Carriage and Insurance Paid to |
| DAT | Delivered At Terminal |
| DAP | Delivered At Place |
| DDP | Delivered Duty Paid |
Rules for Sea and Inland Waterway Modes of Transport
In the second class of Incoterms® 2010 rules, the point of delivery and the place to which the goods are carried to the buyer are both ports, hence the label “sea and inland waterway” rules. The rules for sea and inland waterway transport are:
| FAS | Free Alongside Ship |
|---|---|
| FOB | Free On Board |
| CFR | Cost and Freight |
| CIF | Cost Insurance and Freight |
Incoterms® 2010 Rules Can be Used in Both International & Domestic Contracts
The ICC states that although Incoterms® rules have traditionally been used in international sale contracts, Incoterms® 2010 rules are available for application to both international and domestic sale contracts. The ICC notes that in various areas of the world trade blocs, like the European Union, have made border formalities between different countries less significant. Additionally, traders commonly use Incoterms® rules for purely domestic sale contracts, especially in the U.S., where traders increasingly use Incoterms® rules in domestic trade rather than the former Uniform Commercial Code shipment and delivery terms.
1While contracts for the sale of goods incorporating earlier versions of the Incoterms® rules are still viable, ICC suggests that users refer to Incoterms® 2010 for new transactions.
2Due to heightened concern about security in the movement of goods, verification that the goods do not pose a threat to life or property for reasons other than their inherent nature is required. Therefore, the Incoterms® 2010 rules have allocated obligations between the buyer and seller to obtain or to render assistance in obtaining security-related clearances, such as chain-of-custody information, in articles A2/B2 and A10/B10 of various Incoterms® rules.
(See ITT's Online Archives or 03/31/11 news, 11033172, for BP summary announcing the availability of the guide.
See ITT's Online Archives or 09/16/10 news, 10091633, for BP summary announcing the release of the Incoterms® 2010 rules.
See ITT's Online Archives or 04/01/11 news, 11040161, for BP summary of USCIB's seminars on the Incoterms® 2010 rules.)
Information on the main features of the Incoterms® 2010 rules is available here.