INCOTERMS 2010

Introduction
On 1 January 2011, the ICC’s Incoterms 2010 come into force. These are the eighth revision of the Incoterm Rules, with the last revision dating back to 2000. The new Rules have been revised to take into account developments in international trade over the past ten years as the volume and complexity of global sales has increased, to address security issues arising in recent times and to provide for the ongoing changes in electronic communication. The new Rules also recognise the growth of customs-free areas.

One of the principal concerns with regard to the Incoterms has been that often the wrong term is selected for use by the parties. The introduction to the new 2010 Rules stresses the need to use the term appropriate to the goods, to the chosen means of transport and to whether or not the parties intend to impose additional obligations on the seller or buyer.

In addition, there are Guidance Notes (and a diagram) at the front of each Incoterms Rule containing information to assist in making a choice on which Rule to use.

Summarised below are the principal changes to the 2000 version.
Reclassification of Rules

The new Rules 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.
FAS, FOB, CFR and CIF belong to the second class of Rules. In respect of FOB, CFR and CIF, reference to the “ship’s rail” has now been deleted and this has been replaced with the goods being delivered when they are “on board” the vessel.

Rules apply to domestic as well as international trade The Incoterms have traditionally been used for international sale contracts even though some trade blocs, such as the European Union, have minimised the signifi cance of border formalities. The new Rules now recognise that they can also be used for domestic sale contracts and reference is made in a number of the Rules that export and import formalities will only need to be complied with where applicable. It is anticipated that this change may encourage greater use of the Rules in the USA in place of the former US Uniform Commercial Code.