2 Significant Changes To Incoterms 2010

On January 1, 2011, the eighth revision of Incoterms came into effect. The last revision was in 2000. The new Rules have been revised to take into account the changes and developments in international trade in the last 10 years. International shipping volumes have increased while at the same time becoming more complex. The new Rules are also designed to take into account continuing security issues that are now part of daily life in international trade, as well as provide for on-going changes in electronic communication.

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Two Classes For New Incoterms Rules

1. Rules for use in relation to any mode or modes of transport which can be used when there is no maritime transport at all or where maritime transport is used for only part of the carriage. These Rules are:

EXW — Ex Works

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

2. Rules for sea and inland waterway transport, where the point of delivery and the place to which the goods are carried are both ports. These Rules are:

FAS — Free Alongside Ship

FOB — Free On-Board Vessel

CFR — Cost and Freight

CIF — Cost, Insurance and Freight

Incoterms Terms Replaced

For those of you that are experienced with Incoterms, you will notice that some terms have been replaced:DAT replaces DEQ (Delivered ex Quay)

• DAT may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed. DAT means that the seller delivers when the goods, having been unloaded from the arriving means of transport, are placed at the buyer”s disposal at a named terminal at the named port or place of destination.

• DAT requires the seller to clear the goods for export where applicable but the seller has no obligation to clear the goods for import, pay any import duty, or carry out any import customs formalities. It was considered that DAT would prove to be more useful than DEQ in the case of containers that might be unloaded and then loaded into a container stack at the terminal, awaiting shipment. There was previously no term clearly dealing with containers that were not at the buyer”s premise.

DAP replaces DAF (Delivered at Frontier), DES (Delivered Ex Ship), DDU (Delivered Duty Unpaid)

• The reason for the change was to make Rules that could be considered more user friendly by eliminating terms that were essentially the same. Under DAP, a ship can be considered the arriving vehicle and a port can be the named place of destination.

• Under DAP, the seller bears all the costs (other than any import clearance costs) and risks involved in bringing the goods to the named destination.

Incoterms have traditionally been used for international sales contracts. A principal concern has been that often the wrong term is used by the parties. The new 2010 Rules stress the need to use the term appropriate to the goods, the chosen method of transport, and to whether or not the parties intend to impose additional obligations on the buyer or seller. The new Rules recognize that they can be used for domestic sales contracts, and reference is made in a number of Rules that export and import formalities will only need to be complied with where applicable. It is anticipated that this change may encourage greater use of the Rules in the United States in place of the former U.S. Uniform Commercial Code.