International Chamber of Commerce Announces Changes for Incoterms 2010
The International Chamber of Commerce (ICC) will soon issue the 2010 version of the Incoterms. The ICC is an international non-governmental organization that promotes and facilitates international trade. The Incoterms (an acronym of International Commercial Terms) are an established set of sales terms that parties can incorporate into international sales contracts to define certain rights, risks and responsibilities for cross-border trade. The terms define which party is responsible for import, export, customs clearance, transportation, risk of loss and in some cases, obligations to insure the goods. The Incoterms substantially simplify the allocation of responsibilities by providing a pre-defined set of terms that parties can easily incorporate into their contracts through a useful and consistent short-hand.
While the terms themselves have not yet been issued, the ICC has announced certain basic changes in the number and categories of terms. The terms are expected to be issued in September and would take effect January 1, 2011. Despite the 2011 effective date, the terms will still be referred to as “Incoterms 2010.” The timing for the change is consistent with the established ten year cycle for updating the terms to conform to current trade practices and trends.
Unlike prior versions of the Incoterms, the 2010 Incoterms indicate that they are for both international and domestic trade. The applicability to domestic trade is intended to recognize the existence of certain trade blocks and free trade zones such as the European Union (EU). The rules of the EU virtually eliminate borders for purposes of customs and import/export.
The 2010 Incoterms are divided into two categories: (1) Rules for Any Mode of Transport and (2) Rules for Sea and Inland Waterway Transport. This modification should help reduce the use of incorrect terms, such as using terms intended for maritime transport for shipment by air.
The 2010 Incoterms also reduce the total number of terms from 13 to 11. This was accomplished by eliminating four terms, and adding two new terms from the 2000 version. The eliminated terms are:
- DAF – Delivered at Frontier
- DES – Delivered Ex Ship
- DEQ – Delivered Ex Quay
- DDU – Delivered Duty Unpaid
The new terms are:
- DAP – Delivered at Place
- DAT – Delivered at Terminal
As a result of these changes, Incoterms 2010 will be comprised of the following:
Rules for Any Mode of Transport
- CIP – Carriage and Insurance Paid
- CPT – Carriage Paid To
- DAP – Delivered At Place
- DAT – Delivered At Terminal
- DDP – Delivered Duty Paid
- EXW – Ex Work
- FCA – Free Carrier
Rules for Sea and Inland Waterway Transport
- CFR – Cost and Freight
- CIF – Cost, Insurance and Freight
- FAS – Free Alongside Ship
- FOB – Free On Board
The ICC protects the terms by Copyright and republication of the actual terms are therefore restricted. However, both the terms themselves and aids that help explain and interpret the terms are available from the ICC. The ICC is currently taking pre-orders for the 2010 Incoterms at its website: http://iccwbo.org/incoterms.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Practice Area.