On 16 September the International Chamber of Commerce (ICC) has launched the revision of the Incoterm® rules. These rules used by companies in international transactions will enter into force on 1 January 2011.Since the launch of the Incoterm® rules by the ICC in 1936, regular updates took place to keep track of the developments in international trade. As it is international practice that determines the content, Incoterms® 2010 take account of electronic communications in business transactions, concern about security in the movement of goods and changes in transport practices.

What are the main features of the Incoterm® 2010 rules?

•  The Incoterm® rules 2000, such as DAF,DES, DEQ and DDU are replaced by Incoterm® 2010 rules DAT and DAP.
• The 11 Incoterm ®2010 rules have been classified according to the mode of transport.EXW, FCA, CPT, CIP, DAT, DAP and DDP belong to the group that can be used irrespective of the mode of transport (even when there is no maritime transport involved). The second group FAS, FOB, CFR and CIF are reserved for ‘sea and inland waterway’ in transactions where both starting and end places are ports.
•  The Incoterm® 2010 rules are available for application to both international and domestic sale contracts. 
• Each Incoterm rule has its own Guidance Note, explaining details, such as when it should be used, when risk passes, and how costs are allocated between Buyer and Seller.  
• The Incoterm® 2010 rules give electronic means of communication the same effect as paper if the parties agree or where customary.
• This revision of the rules is also clarifying the parties’ obligations relating to the insurance of the carriage.
• The new rules also take into account the obligations between Buyer and Seller to obtain or to render assistance in obtaining security-related clearances.
•  Terminal handling charges are clearly allocated in the relevant Incoterm rule, such as CPT, CIP, CFR, CIF, DAT, DAP and DDP.
• For clarification purposes, Incoterm® 2010 rules include the obligations to ‘buy goods shipped’ as an alternative to the obligation to ship goods in the relevant Incoterm rule.    

 What does it mean for your company? It is imperative to know how the Incoterm® 2010 rules have to be properly used as it will affect your duties regarding information obligations and allocation of costs.  Also the assistance to be given for obtaining information is essential.

Take advantage by using the correct Incoterm for a specific situation, minimize risks, obligations, and avoid loss of business and legal actions. For more information, an assessment of the impact of this change or an in – house training, please contact us at: info@customs4trade.com

The draft proposal of Incoterms ® 2010 was unanimously approved at the ICC’s Commercial Law and Practice Commission (CLP) on May 6th. Before launching the new terms, this draft proposal has to be approved by the ICC Executive Board.  This meeting is scheduled for September 16 & 17.  If all goes as planned, Incoterms® 2010 will become a reality upon their approval. The new set of rules are expected to come into force on 1/1/2011.

ICC  foresees the launch of the Incoterms® 2010 rules with a Major Conference in Paris from 27^th till 29^th September 2010. 

For the time being, there is little information to share on the changes, although it is expected that:

• changes will be substantial;
• there will be fewer rules than the 13 Incoterms 2000;
• there are brand new rules;
• the new rules will be much more friendly.
• Incoterms will be calles ‘rules’.

Incoterms or international commercial terms are a series of standard trade definitions, published by International Chamber of Commerce (ICC) and widely used in international commercial transactions. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices.

The International Chamber of Commerce (ICC), introduced the first version of Incoterms in 1936. There are currently 13 Incoterms. Among the best known Incoterms are EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To).

The Incoterms have been revised six times in order to reflect international trade developments. The last update of the Incoterms entered into force on 1 January 2000. As the guardian and originator of Incoterms rules, ICC has a responsibility to consult regularly all parties interested in international trade to keep Incoterms rules relevant, efficient and up-to-date. ICC is currently revising Incoterms 2000. This revision is expected to be major on the seller-buyer cargo security obligations, which are linked to respective Custom-Trade Partnership Against Terrorism (C-TPAT) and Authorized Economic Operator (AEO) cargo security regimes.

After receiving a large number of comments from the ICC National Committees, the Incoterms Drafting Group recently completed a third draft of the revised version of Incoterms. After comments on the third draft are submitted by the ICC National Committees, the Drafting Group will meet in March 2010 to prepare a fourth version of the draft revisions to Incoterms. It appears that the new version of Incoterms will be entitled “Incoterms 2010”. This new edition is expected to enter into force on 1 January 2011.

Incoterms – short for “International Commercial Terms” – are standard trade definitions most commonly used in international sales contracts.  Among the best known Incoterms are EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To). 

The International Chamber of Commerce (ICC), introduced the first version of Incoterms in 1936.  Since then, ICC experts in the Commission on Commercial Law and Practice have updated them six times to keep pace with the development of international trade.  The last update of the Incoterms entered into force on 1 January 2000.  

Recently ICC took the decision to review these “Incoterms 2000″.  A major revision is expected on the seller-buyer cargo security obligations, which are linked to respective Custom-Trade Partnership Against Terrorism (C-TPAT) and Authorized Economic Operator (AEO) cargo security regimes. 

As ICC has the reponsibility to consult regularly all parties interested in international trade,  ICC Belgium is currently undertaking an inquiry to make sure that the Belgian companies interested can give their input for changes.  The results of the inquiry will be available as from 15 June onwards.

Click here if you want to follow this inquiry.