International Trade Terms Are Renewed: Incoterms ® 2010

International Trade Terms are Renewed: Incoterms ® 2010

1. Purpose and Scope of Incoterms


a) Purpose


The purpose of Incoterms is, as stated by ICC “to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or atleast reduced to a considerable degree”.

Since international sales contracts are generally realized between the non-present parties from different nationalities, it is very important how the parties interpret the terms and the abbreviations commonly used in foreign trade. By this regulation of Incoterms, at least the confusions and the differences of interpretation will be overcome and theconflicts arising out of international trade will be reduced.

b) Scope


The scope of the Incoterms is limited to the rights and obligations of the parties’ arising from the delivery of the sale of goods. Incoterms do not define the goods, but the goods should be understood as commodities.

Incoterms do not regulate any contract other than sale contract. However, even in a salecontract, Incoterms do not cover all the contractual aspects. The topics that Incoterms govern can be gathered under four groups: (i) the delivery of goods, (ii) transfer of risks, (iii) division of costs, and (iv) obligations concerning the documents. Incoterms do not provide rules for the (i) payment and payment methods, (ii) transfer of ownership, (iii) variants, (iv) dispute resolution and (v) otherissues relating to fulfilment of the contract.

2. Incoterms® 2010


a) Need for Changes


It is stated under the Foreword of Incoterms® 2010, since the creation of the Incoterms® rules by ICC in 1936, this globally accepted contractual standard has been regularly updated to keep pace with the development of international trade.

It is also stated that the continued spread ofcustoms-free zones, the increased use of electronic communications in business transactions, the heightened concern about security in the movement of goods and changes in transport practices required the ICC to revise the Incoterms® 2000.

Moreover, the urge of the traders to commonly use Incoterms rules for purely domestic sale contracts within the boundaries of countries or trade blocks like EUand the greater willingness in the United States to use Incoterms rules in domestic trade rather than the former Uniform Commercial Code shipment and delivery terms also motivated ICC to revise Incoterms in a way that would enable the trade terms to be used also on domestic basis in addition to its previous use on international basis.

b) Main Novelties


i) New Incoterms RulesFirst of all, the number of Incoterm rules has been reduced to 11 from 13.

Two new rules that may be used irrespective of the agreed mode of transport being namely (1) DAT (Delivered at Terminal) and (2) DAP (Delivered at Place) replace the Incoterms 2000 rules DAF, DES, DEQ and DDU. Both of the new rules provide for delivery to occur at a named destination. In DAT, the delivery occurs atthe buyer’s disposal unloaded from the arriving vehicle. In DAP, it occurs at the buyer’s disposal, ready for unloading. These new rules, like their predecessors, are “delivered”, with the seller bearing all the costs, other than those related to import clearance, where applicable, and risks involved in bringing the goods to the named place of destination.

ii) Classification ofIncoterms


Under the previous version of 1990 and 2000 of Incoterms, the rules were classified under four groups as;

• “E” Group consisting of “Ex Works: EXW”,

• “F” Group consisting of “FCA, FAS and FOB”,

• “C” Group consisting of “CFR, CIF, CPT and CIP”, and

• “D” Group consisting of “DAF, DES, DEQ, DDU and DDP”.

Incoterms® 2010 prefers a completely different distinction and a...