Learning more about Incoterms®2010

Incoterms is the abbreviation for International Commercial Terms, generally known or referred to as trade terms, which are used by contracting parties in international contracts of sale but not in contracts of carriage. Their application and use in an international contract of sale is to define: • The roles of the contracting parties in respect of the carriage of the goods; • The responsibility for the export and import clearance; and • The explanation of the division of costs and risks between the contracting parties. The International Chamber of Commerce (ICC) first created and coined the word “Incoterms” in 1936, although its development started in 1919. “This undisputed worldwide contractual standard” has been subject to regular reviews and updates over the years in order to take account of developments in international trade. The last update was introduced on 01 January 2000, resulting in the creation of what is known as “Incoterms 2000”. (Please consult the ICC publication. Earlier versions of Incolearn can also be requested in hardcopy or accessed on www.ftwonline.co.za.) The lastest version of Incoterms, which will be known as “Incoterms®2010” (it is now trademarked) will enter into force on 01 January 2011. The two obvious questions are no doubt what the changes are, and if these are significant. The answer to the first question is evident in the subtitle of Incoterms®2010 which reads “ICC Rules for the use of Domestic and International Trade Terms”. Secondly, there are no longer four categories or groups i.e. E-terms, F-terms, C-terms, and D-terms are now replaced with two distinct classes – “Rules for any Mode or Modes of Transport” and “Rules for Sea and Inland Waterway Transport”. The Incoterms have been reduced to 11 from 13, with four Incoterms having been deleted and two new Incoterms added. The 3-letter Incoterms are Ex Works (EXW), Free Carrier (FCA), Carriage Paid to (CPT), Carriage and Insurance Paid to (CIP), Delivered at Terminal (DAT), Delivered at Place (DAP), Delivered Duty Paid (DDP), Free Alongside Ship (FAS), Free on Board (FOB), Cost and Freight (CFR), and Cost Insurance and Freight (CIF). The first seven Incoterms are “Rules for any Mode or Modes of Transport” while the last four Incoterms are “Rules for Sea and Inland Waterway Transport”. As to how to use the Incoterms®2010 rules, the ICC suggests that you: • Incorporate the Incoterms®2010 rules into contracts of sale; • Choose the appropriate Incoterms®2010 rules; • Specify the place or port as precisely as possible; and • Remember that Incoterms®2010 do not give a complete contract of sale.