INCOTERMS 2010

EXW | FCA | CPT | CIP | DAT | DDP | FAS | FOB| CRF | CIF

1. Background

In global trade problems of interpretation can quickly escalate to disputes between counterparties. The international commerce terms (INCOTERMS) published by the International Chamber of Commerce (ICC) are widely used in global trade and international commercial transactions. Their value is in ensuring a consistent interpretation of the most commonly used terms for the allocation of transaction costs and responsibilities between buyers and sellers in international trade. They are broadly accepted worldwide as the leading global standard for the effective documentation of these key contractual terms. This in part is owed to the fact that the ICC has ruled on the interpretation of many of the terms in its case law, giving added confidence to the global trade community.

2. Key changes

The INCOTERMS are periodically revised by the ICC to reflect developments in international trade. Below is a list of the key changes introduced by INCOTERMS 2010.

(a) Several terms included in previous editions of INCOTERMS (principally DAF, DES, DEQ, and DDU) have been eliminated, while two new terms, Delivered at Terminal (DAT) and Delivered at Place (DAP), have been added. These new terms attempt to better reflect the role cargo security and electronic data interchange now play in international trade.

• DAT means that the seller delivers when the goods, having been unloaded from the arriving means of transport, are placed at the buyer’s disposal at a named terminal at the named port or place of destination. DAT requires the seller to clear the goods for export but the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

• DAP replaces DAF, DES, DEQ and DDU. The arriving “vehicle” under DAP could be a ship and the named place of destination could be a port. Consequently, the ICC considered that DAP could safely be used instead of DES and that it would make INCOTERMS 2010 more “user-friendly” if they abolished terms that were substantially the same. A seller under DAP bears all the costs (other than import clearance costs) and risks involved in bringing the goods to the named destination.

(b) INCOTERMS 2010 recognise that the terms can be used for domestic sale contracts and reference is made in a number of the rules to the effect that export and import formalities will only need to be complied with where applicable.

(c) In respect of FOB, CFR and CIF, reference to the “ship’s rail” has now been deleted and replaced with the goods being delivered when they are “on board” the vessel.

(d) INCOTERMS 2010 have been separated into two classes: (i) Rules for use in relation to any mode or modes of transport, which can be used where there is no maritime transport at all or where maritime transport is used for only part of the carriage and (ii) Rules for sea and inland waterway transport, where the point of delivery and the place to which the goods are carried to the buyer are both ports.

All Modes of Transport	Sea & Inland Waterway Transportation
EXW - Ex Works	FAS - Free Alongside Ship
FCA - Free Carrier	FOB - Free On Board
CPT - Carriage Paid To	CFR - Cost and Freight
CIP - Carriage and Insurance Paid	CIF - Cost, Insurance and Freight
DAT - Delivered At Place
DDP - Delivered Duty Paid

(e) Given the continual evolution of new electronic procedures, INCOTERMS 2010 provide for the use of paper communications or “equivalent electronic record or procedure” where agreed or customary.

(f) The new rules more clearly allocate obligations between the buyer and the seller in respect of obtaining security-related clearances for the goods in question. They also take into account the 2009 revision of the Institute Cargo Clauses and expressly provide information duties relating to insurance.

3. Conclusion

Where properly negotiated, agreed and operated, INCOTERMS continue to be of value to international commerce. As always, the key will lie in selecting and incorporating into contracts those INCOTERMS which best reflect the common intentions of the parties.

Where disputes arise, the correct application of INCOTERMS will often facilitate speedy and efficient resolution of disputes, particularly using alternative dispute resolution (ADR) mechanisms.
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For further information, please contact your usual Irish Exporters Association contact or:

Peppe Santoro
Partner, Corporate
Telephone: +353 1 6644 217
Email: psantoro@eversheds.ie