Incoterms 2010

Incoterms® 2010 were launched in September 2010 and came into effect on 1 January 2011. These new Incoterms take into account the developments in trade over the past ten years, such as inter alia electronic communication
and developments in cargo security.

The Incoterms® rules are an internationally recognized standard who are used worldwide in international and domestic contracts regarding the sale of goods. They are developed by the International Chamber of Commerce (ICC) and provide internationally accepted definitions and rules of interpretation for most common commercial terms.
They help traders to avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers.

The said incoterms relate to the following:

The moment in which the risk in relation to the goods passes from the seller to the buyer;

The moment in which the costs pass from the seller to the buyer, i.e. the costs of transportation, insurance and customs (if applicable);

The documents (or equivalent electronic information) the seller must provide to the buyer.

Depending on which “Incoterm” is applicable to a particular commercial transaction, both seller as buyer will know the costs and risks to be borne and the implications thereof with regard to the accounting, logistics, contractual obligations, liability and profit.

Hereinafter we will provide a short outline with regard to the main changes established by the “Incoterms 2010”:

1. There will now be a total of 11 terms instead of 13;

Until 1 January 2011, there were 13 Incoterms or delivery conditions, of which six were directed at marine transport, while the other seven were applicable to all modes of transport (multimodal).

Four terms are deleted and there are 2 new additions. DAF (Delivered At Frontier), DES (Delivered Ex Ship) and DDU (Delivered Duty Unpaid) are replaced by DAP (Delivered At Place), and DEQ (Delivered Ex Quay) is replaced by DAT (Delivered At Terminal).

2. Incoterms will now be subdivided into 2 groups, instead of the previous four classes, E,F,C and D :

a.    Seven Incoterms are applicable to any mode of transport:

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

b.    Four incoterms are only applicable to sea and inland waterway transport :

FAS : free alongside ship
FOB : free on board
CFR : cost and freight
CIF : cost insurance and freight

3. Some terms now have a different content, such as for example FOB.

The ship’s railing as symbolic border has been abolished for the FOB incoterm, which becomes a real “Free-on-board” from now on whereby the risk and costs will continue to be borne by the seller until the goods are on board the ship, and have touched the deck of the ship.

4. The new Incoterms refer also to the use of electronic communication. Now parties can use equivalent electronic records if agreed between parties and in case the equivalent electronic records have the same value as communication on paper.

5. Finally, the Incoterms 2010 allocate to the parties obligations to obtain or to provide information in order to obtain security-related clearances. In this order the seller will be able to prove with an export document and the buyer with an import document that the goods quitted the country of export and entered into the country of import.

25 January 2011

Leo Peeters