by Raffi Varoujian

Created on: July 08, 2011

Incoterms (short for International Commercial Terms) are standard contract terms, first published in 1936 by the International Chamber of Commerce (ICC), to help international business partners regulate the risk, cost and other obligations arising from cross-border trade. Incoterms are not mandatory and are not implied into commercial contracts. They must be agreed by the parties and can be adapted or varied at their discretion.

The recent version of Incoterms – Incoterms 2010 – was published by the ICC in January 2011. As such, a vast majority of commercial organisations who use Incoterms will be operating under Incoterms 2000. Although there is no imperative to switch from the 2000 to 2010 versions, the recent update takes into account changes in international practice over the last ten years, the most obvious being a change from paper-based documentation to electronic communication.

The new Incoterms can generally be split into two types. Those that pertain to all, general, forms of transportation, and those that solely pertain to transportation by sea. The maritime provisions, which were the primary focus of previous Incoterms, now take a more secondary, understated role. The main changes in Incoterms 2010 from the 2000 version are as follows:

1. Changes in terminology

Delivered at Terminal (DAT) and Delivered at Place (DAP) amalgamate and completely replace the following Incoterms 2000: (i) Delivered At Frontier (DAF); (ii) Delivered Ex Ship (DES); (iii) Delivered Ex Quay (DEQ); and (iii) Delivered Duty Unpaid (DDU). These changes were introduced following extensive consultation with the ICC’s business community, with the old terms considered to redundant and archaic. Companies who wish to use them can continue to do so by referring to older versions of Incoterms in their contracts.

2. Encouraging commodity sales

Many standard commodities contracts excluded Incoterms because none of the rules clearly permitted the sale of goods while they were still in transit. Such contracts usually include clauses allowing “string sales” during which cargo may change hands a number of times before it reaches port. The 2010 amendment to Incoterms now makes clear that such transactions are permitted.

3. Housekeeping

The new terms have been streamlined and tidied up, with diagrams and pictures being utilised to illustrate, visually, how the terms work in practice. The introduction to the Incoterms manual has been shortened, and a welcome set

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