INCOTERMS 2010

Incoterms are:
1. INternational COmmercial TERMS
2. 11 terms of shipment and delivery created by the International Chamber of Commerce (ICC), for use in sales contracts
3. Provide an Internationally accepted definition of :
   - The responsibilities of Buyer and Seller
   - The allocation of delivery costs
   - The assumption of delivery risks
4. Periodically updated to reflect trade practice
5. Should be referred to as ‘Rules’
6. Translated into different languages

Incoterms aren’t:
1. Law, Incoterms need to be specified in sales contracts in order to apply.
   - This is normally done by citing the current Incoterms version in sales quotations and purchase orders.
2. All-Inclusive, Detailed situations beyond the scope of Incoterms must be covered elsewhere in sales contracts

Incoterms ‘do’:
1. Divide costs, risks and responsibilities between seller and buyer
2. Guide one or the other contracting party into subsidiary contracts necessary to fulfill designated Incoterm tasks, such as contracts of carriage and insurance
3. Provide useful shorthand
4. Reduce potential misunderstandings between buyer and seller
5. “Reflect” rather than dictate trade practice

Incoterms do not:
1. Convey title
2. Address revenue recognition
3. Include all of the duties of the Buyer/Seller in a transaction
4. Automatically apply (you must specify)
5. Speak about payment disputes between buyer and seller
6. Deal with a breach in contracts

Important changes for 2010:
- 11 terms of delivery instead of 13
  1. DAF, DES, DDU and DEQ have been removed
  2. DAP and DAT are new and have been added
- Container arrival costs are not expressed (ex: THC and other destination charges)
- Exact cost transfer points need to be addressed elsewhere in the contract
- DAT is the only term that specifically tasks the seller with unloading
- FOB changed to on board vessel (‘ship’s rail’ reference removed)

Recommended Usage:
Any Mode :
EXW
FCA
CPT
CIP
DAP
DAT
DDP
Maritime Only :
FAS
FOB
CFR
CIF

Categories: trade finance