The International Chamber of Commerce (ICC)’s Incoterms 2010 will come into effect on 1 January 2011. The Incoterms rules are a series of internationally recognised standardised terms governing the costs, risks and practical arrangements for the sale of goods, so the new rules are relevant for anyone involved in the buying and selling of goods and services relating to the movement of goods, especially international traders.
The new rules reflect the changes which have taken place in international trade since the last version of the rules was published in 2000 and include significant changes such as the introduction of two new Incoterms rules (Delivered at Terminal (DAT) and Delivered at Place (DAP)) and the abolition of four old ones (Delivered at Frontier (DAF), Delivered Ex Ship (DES), Delivered Ex Quay (DEQ) and Delivered Duty Unpaid (DDU)). There are also changes to deal with cargo security and insurance, and the rules have been generally updated to make them more user friendly and to mirror the modern language of international trade.
In the past, the key issue with the Incoterms rules has not been their content but their incorrect application. All too often, buyers and sellers do not use the correct rule or do not fully understand the effect of the rule they are using. Therefore, attempts have been made by the ICC to make the new rules more accessible. The key changes include:
- Providing more detailed guidance notes for each rule explaining when the rule should and should not be used;
- Splitting the rules into two classes: one class which can be used for any form of transport and the other which can only be used for maritime transport; and
- Adding a picture at the beginning of each rule to summarise it at a glance.
To use the new Incoterms 2010 rules it is important to choose the correct rule for your circumstances and incorporate the chosen rule into the relevant contract as it will not apply otherwise. However, it is also important to remember that whilst the new rules are useful for shortening a contract, they are not complete and other provisions (such as details of the goods, price and payment, intellectual property, law and jurisdiction) will need to be included in the contract.
Reviewed in 2015