The International Chamber of Commerce (ICC) has announced the new Incoterms® 2010 rules, set to come into effect on January 1, 2011, replacing the current Incoterms 2000. Short for „international commercial terms,‟ these internationally recognized rules are used in international and domestic contracts as a way to bring legal certainty to business transactions and avoid miscommunication by clearly identifying the responsibilities of the buyer and seller and ensuring traders in different countries are using a standard language.
The new Incoterm rules have been updated in order to address the recent trends in global trade and current practices, such as the increased use of electronic documents, developments in security and more. Transplace International understands importance of the Incoterm rules and the impact these changes will have on shippers doing business internationally and have outlined the new Incoterm rules and how companies can prepare for these changes.
Changes to the current Incoterms
The Incoterms 2010 rules take into account the latest developments in commercial practice as well as updates, and it also consolidates some of the previous rules. These rules are split into two classes to help international traders select the most suitable rule in relation to the mode of transport – one class is used for any mode of transport and the other is solely for maritime transport.
Additionally, the current 13 Incoterms will be reduced to 11 including:
• Rule for any mode of transport: Carriage and Insurance Paid To (CIP); Carriage Paid To (CPT); Delivery At Place (DAP); Delivery Duty Paid (DDP); Delivery At Terminal (DAT); Ex Works (EXW) and Free Carrier (FCA)
• Rules for maritime transport: Free Alongside Ship (FAS); Free On Board (FOB); Cost and Freight (CFR) and Cost, Insurance, Freight (CIF)
Significant changes have been made to the „D‟ Group of terms, which are used when the goods are to be delivered to the buyer at the specified point in the buyer‟s country, where then the risk is then passed to another party. Within this group, there are two new terms added – DAT and DAP – and four have been deleted – DAF, DES, DEQ and DDU. DAP should now be used wherever DAF, DES and DDU were previously used, indicating that delivery takes place once the seller has left the good unloaded for the buyer at the named location. DAT should now be used wherever DEQ was previously used, indicating that delivery takes place once the goods have been unloaded at the specified terminal.
In contrast to the previous „D‟ Group rules, both DAP and DAT can now be used for any mode of transport, not just for maritime transport. Attempts have also been made to make the rules more accessible for domestic users and applicable for the present day processes by advising on the use of the rules in the domestic trade and removing the term „across the ships rail‟ from Incoterms CFR, CIF and FOB and replacing it with the term “on board”.
In addition to the 11 rules, Incoterms 2010 includes:
• Guidance notes and illustrative graphics to help users efficiently choose the right rule for each transaction
• New classification to help choosing the most suitable rule in relation to the mode of transport
• Advice for the use of electronic procedures
• Information on security-related clearances for shipments
• Advice for the use of Incoterms® 2010 in domestic trade.
How to prepare for the changes
There are steps shippers can take to better understand the changes to the Incoterms.
• Work with a third party logistics (3PL) provider that understands the new Incoterms and can help ensure that your international transactions are labeled appropriately.
• Attend one of the U.S. Council for International Business‟s one-day seminars to become familiar with the new Incoterms and prepare for the changes. Information on these seminars can be found at http://www.iccincoterms2010.org/.
To learn more about how Transplace can help improve international shipping and prepare for the changes to the Incoterm rules, please visit: http://www.transplace.com/intl_logistics_services.htm.
For more information on the Incoterms® rules, please visit the official Incoterms website at: http://www.iccwbo.org/incoterms.
Transplace is a non-asset based third party logistics (3PL) provider offering manufacturers and retailers the optimal blend of logistics technology and transportation management services. From complete logistics management outsourcing to intelligent transportation management systems (TMS) and supply chain network planning and design to high-quality brokerage services, Transplace has proven the ability to deliver both rapid return on investment and consistent value to customers. The company is recognized among the elite 3PLs in North America by a customer base that includes many of the largest shippers in the world.
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Steve Dye Kecia Gray