Guide to the Incoterms 2010

Rules
INCOTERMS 2010 Rules
The Incoterms 2010 rules* (International Commercial Terms) were developed by the International Chamber of
Commerce (ICC) as a uniform set of rules to clarify the costs, risks and obligations of buyers and sellers in
international commercial transactions. Because they address issues relating to import and export, Incoterms
2010 rules are most appropriate for use in international shipping; they are, however, used for U.S. domestic
shipping as well.
Incoterms 2010 rules are periodically revised and multiple versions are available for use by contracting parties.
The Incoterms 2010 rules became effective January 1, 2000, and remain in effect. The Incoterms 2010 rules are
effective as of January 1, 2011.
Refer to the ICC Web site at www.iccwbo.org/Incoterms/id3040/index.html for information about these terms and
their definitions, which are copyrighted by the ICC.
Note: Although the new Incoterms 2010 rules became available for use as of January 1, 2011,
Incoterms 2000 rules continue to be available. It is incumbent upon contracting parties to
determine which term they want to use and to designate the version being applied.
For some time Incoterms rules have consisted of 13 terms. Incoterms 2010 rules eliminate four of the
previously-existing terms (DDU, DES, DEQ and DAF) and add two new terms (DAT and DAP), resulting in a
total of 11 terms. The new version is made available for both domestic and international use; contracting parties
should, however, review the applicability of these terms to the domestic environment prior to applying them.
The terms are structured to increase incrementally the obligations (control, risk and cost) on one party while
decreasing the obligations of the other, depending on the specific term chosen. Each term clarifies which party is
responsible for:
Inland freight (transportation within the origination country)
Forwarder selection
Export clearance
Carrier selection and scheduling
International freight
Import clearance
On-carriage (transportation within the destination country)
Delivery occurs (and risk of loss transfers) at the point designated by the term selected. Transfer of title is NOT
covered by any of the Incoterms 2010 rules and must be separately specified by the parties.
Incoterms 2010 rules can be divided into two groups multi-modal (available for multiple forms of transport,
including land, air and waterway transportation) and single mode (applicable only to waterway transportation).
The terms in each group are listed on page 2 in order of increasing responsibility for the seller (and
correspondingly decreasing responsibility for the buyer). So, for example, using the term EXW makes the seller
responsible only for making the goods available at its own premises; delivery occurs and risk of loss transfers at
that point. When the term DDP is used, the seller becomes responsible for everything except on-carriage where
the location for delivery is not the buyers actual location. DDP is the only Incoterms rule that makes the seller
responsible for import clearance.
Buyers in the United States who are likely to be familiar with delivery terms defined within Articles 2 and 2A of the
Uniform Commercial Code (UCC) should pay particular attention to the overlap in the use of certain
terms/abbreviations between the Incoterms 2010 rules and the UCC. Free on board (F.O.B.), free alongside
(F.A.S.) and C.I.F. are all used in the UCC, but their definitions there are much different from the definition of the
same terms in the Incoterms 2010 rules. Under the Incoterms 2010 rules all three of the overlapping terms
(FOB, FAS and CIF) fall into the single mode group, meaning they can only be used for waterway transportation.
Under the UCC only F.A.S. is limited to use with a vessel.

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Numerous publications and seminars are available through the International Chamber of Commerce
(http://store.iccbooksusa.net/ or http://www.iccbooks.com/Home/Home.aspx) as well as from other organizations
explaining in depth the application of both the Incoterms 2000 rules and Incoterms 2010 rules.
TERM DEFINITION
The multi-modal (available for multiple forms of transport, including land, air and waterway transportation) terms are:
Unchanged
in

Incoterms
2010 rules

Ex works (EXW) named place (sellers location)

An Incoterms rule under which the price that the seller quotes applies only at the point of origin.
The buyer takes possession of the shipment at the point of origin and bears all costs and risks
associated with transporting the goods to the destination. This Incoterms rule is regarded as the
most open-ended. There is generally nothing specific regarding delivery and there is a mutually
convenient pickup time for exporter and importer agreed upon. Used for any mode of transport.
See Also Incoterms rules
Compare: Delivered Duty Paid

Unchanged
in

Incoterms
2010 rules

Free Carrier At (FCA) named place (sellers country)

An Incoterms rule under which seller delivers goods, cleared for export, to the buyer-designated
carrier at a named location. Used for any mode of transport. Seller must load goods onto the buyer's
carrier. The key document signifying transfer of responsibility is receipt by carrier to exporter.
See Also: Incoterms rules

Unchanged
in

Incoterms
2010 rules

Carriage Paid To (CPT) named place of destination

An Incoterms rule used for any mode of transportation. Buyer assumes title and risk of loss when
goods are delivered to the carrier. Seller pays shipping to destination. CPT delivery takes place when
the exporter hands over goods to the carrier. The exporter is given bill of lading or equivalent
document (air waybill, sea waybill, multi-modal bill of lading).
See Also: Incoterms rules
Compare: Carriage and Insurance Paid To

Unchanged
in

Incoterms
2010 rules

Carriage Insurance Paid (CIP) named place of destination

An Incoterms rule under which seller delivers goods to seller-designated carrier, pays cost of
carriage to named destination and must obtain insurance to cover buyers risk of loss in transit.
Buyer bears risk of loss and any additional costs after sellers delivery to carrier, protected by sellers
insurance. Used for any mode of transportation; same as CPT, but seller pays for insurance and
names buyer as beneficiary.
See Also: Incoterms rules
Compare: Carriage Paid To

Eliminated
in

Incoterms
2010 rules

Delivered Duty Unpaid (DDU) named place of destination

An Incoterms rule under which seller bears the risk and expense of getting the goods to a named
destination, but excluding duties, taxes and other official charges payable on import. Some
variations on DDU are possible if the seller is to pay some of the import charges. Delivery takes place
when the exporter places goods at the disposal of the importer in city of delivery. There is no
corresponding transportation document, although a bill of lading is usually used. Used for any mode
of transportation. Same as Delivered Ex Quay (DEQ), except that the buyer and seller can specify
delivery of the goods to a warehouse or other destination point. Seller must arrange for ground
transport in the buyer's country. Buyer bears responsibility for import customs duties.
This term is defined in the Incoterms 2000 rules. It has been eliminated in the Incoterms 2010
rules, but the Incoterms 2000 rules can still be used by contracting parties if they so agree.
See Also: Incoterms rules
Compare: Delivered Duty Paid, Delivered Ex Quay, Delivered at Terminal, Delivered at Place

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TERM DEFINITION
New in

Incoterms
2010 rules

Delivered at Terminal (DAT) named place of destination

An Incoterms rule under which seller delivers goods to a named terminal in the destination
country. Buyer is responsible for import clearance and any further in-country carriage. This term is
one of two terms considered to be replacement terms for Delivered Duty Unpaid (DDU), which is
eliminated from Incoterms 2010.
See Also: Incoterms rules
Compare: Delivered at Place, Delivered Duty Unpaid, Delivered Duty Paid

New in

Incoterms
2010 rules

Delivered at Place (DAP) named place of destination

An Incoterms rule under which seller delivers goods to the buyers facility or another named
location (other than a terminal) in the destination country. Buyer is responsible for import clearance
and any further in-country carriage. This term is one of two terms considered to be replacement
terms for Delivered Duty Unpaid (DDU), which is eliminated from Incoterms 2010 rules.
See Also: Incoterms rules
Compare: Delivered at Terminal, Delivered Duty Unpaid, Delivered Duty Paid

Unchanged
in

Incoterms
2010 rules

Delivered Duty Paid (DDP) named place of destination

An Incoterms rule under which seller (exporter) is responsible for all costs involved in delivering
the goods to a named place of destination and for clearing customs in the country of import. Seller
provides literally door-to-door delivery, including customs clearance in the port of export and the
port of destination. Thus, seller bears the entire risk of loss until goods are delivered to the buyer's
premises. Full term is "DDP named place of destination." Delivery takes place when exporter places
goods at disposal of importer in city of delivery. There is no corresponding transportation document,
although bill of lading is usually used. Used for any mode of transportation. Seller bears all risk and
customs responsibilities until the goods are delivered to a specified location and clear import
customs. Buyer assumes risk and title when the goods are delivered to the buyer's specified
location.
See Also: Incoterms rules
Compare: Delivered Duty Unpaid, Ex Works, Free On Board (UCC), Delivered at Terminal, Delivered at
Place

The single mode terms (which can only be used with waterway transportation) are:
Unchanged
in

Incoterms
2010 rules

Unchanged
in

Incoterms
2010 rules

Unchanged
in

Incoterms
2010 rules

Free Alongside Ship (FAS) named vessel at loading port

An Incoterms rule used only for maritime trade (transport by vessel) Under this arrangement, the
supplier agrees to deliver the goods in proper condition alongside the vessel. The buyer assumes all
subsequent risks and expenses after delivery to the pier. This term can only be used for waterway
transportation.
See also: Incoterms rules
Compare: F.A.S UCC
Free On Board (FOB) named vessel at loading port
An Incoterms rule used only for maritime trade (transport by vessel) under which responsibility for
the shipment transfers from exporter to importer when shipment is loaded aboard the vessel. Seller
must load the goods onto the ship. Centuries of maritime tradition says that the FOB point is the
Ship's Rail, also referred to as "Freight on Board." This is the older maritime term of trade. If the
freight falls while loading, however, it is the exporter's responsibility if it lands on quay, but it is the
importer's responsibility if it lands on ship. The documentation of delivery is the ocean bill of lading
or sea waybill. This term can only be used for waterway transportation.
See Also: Freight Collect, Incoterms rules
Compare: Free On Board UCC
Cost & Freight (CFR) named port of destination
An Incoterms rule under which goods are considered to be "delivered" (and buyer assumes risk of
loss) when they pass the ship's rail in the port of shipment. The seller is responsible for clearing the
goods for export and for costs and freight to bring the goods to the destination port. This term can
only be used for waterway transportation.
See Also: Incoterms rules
Compare: C.&F. UCC, C.I.F UCC, CIF Incoterm, Carriage Paid To

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TERM DEFINITION
Unchanged
in

Incoterms
2010 rules

Cost, Insurance & Freight (CIF) named port of destination

This Incoterms rule is similar to Cost & Freight (CFR) where goods are considered to be "delivered"
(and buyer assumes risk of loss) when they pass the ship's rail in the port of shipment. The seller is
responsible for clearing the goods for export and for costs and freight to bring the goods to the
destination port. Under CIF the seller must also obtain marine insurance against buyer's risk of loss
or damage in transit. This term can only be used for waterway transportation.
See Also: Incoterms rules
Compare: C.&F. UCC, C.I.F UCC, Cost and Freight, Carriage Insurance Paid

Eliminated
in

Incoterms
2010 rules

Delivered Ex Ship (DES) named port

An Incoterms rule under which sellers delivery obligation is satisfied when goods are placed at
buyers disposition on board a vessel at a designated destination port, not cleared for import.
This term is defined in the Incoterms 2000 rules. It has been eliminated in Incoterms 2010 rules,
but Incoterms 2000 rules can still be used by contracting parties if they so agree.
See Also: Incoterms rules
Compare: Delivered Ex Quay

Eliminated
in

Incoterms
2010 rules

Delivered Ex Quay (DEQ) named port

An Incoterms rule used for ship transport. Signifies that the seller is responsible for all risks and
costs incurred to have the goods delivered and unloaded at a named port of destination. This
includes the obligation to contract and pay for freight and transportation costs by sea or inland
waterway, unloading fees, export and import licensing fees, and other taxes (unless specifically
excluded in the contract). The buyer is obligated only to assist in obtaining any import license or
other official authorization necessary to import the goods.
This term is defined in the Incoterms 2000 rules. It has been eliminated in the Incoterms 2010
rules, but Incoterms 2000 rules can still be used by contracting parties if they so agree.
See Also: Incoterms rules
Compare: Delivered Ex Ship

Eliminated
in

Incoterms
2010 rules

Delivered at Frontier (DAF)

An Incoterms rule under which seller's delivery obligation is satisfied when goods are placed at
buyer's disposition on arriving means of transportation, cleared for export but not import, and not
unloaded. Delivery takes place when the vehicle is placed at disposal of importer at designated
border city. There is no specific documentation for transfer, although some carriers provide some.
Used for any mode of transportation. Buyer acquires title, risk and responsibility for import customs
clearance.
This term is defined in the Incoterms 2000 rules. It has been eliminated in the Incoterms 2010
rules, but the Incoterms 2000 rules can still be used by contracting parties if they so agree.
See Also: Incoterms rules

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INCOTERMS 2010 VS INCOTERMS 2000

According to (Wikipedia.org),The Incoterms rules or International Commercial terms are a series of predefined commercial terms published by the International Chamber of Commerce (ICC) widely used in
international commercial transactions.
A series of three-letter trade terms related to common sales practices, the Incoterms rules are intended
primarily to clearly communicate the tasks, costs and risks associated with the transportation and delivery
of goods.
The Incoterms rules are accepted by governments, legal authorities and practitioners worldwide for the
interpretation of most commonly used terms in international trade.
They are intended to reduce or remove altogether uncertainties arising from different interpretation of the
rules in different countries
The Incoterms, which were first published in 1936, attempt to provide an internationally agreed upon set of
definitions for certain aspects of contracts of sale in international trade.
The scope of the Incoterms does not extend to all subjects covered in a contract of sale and do not apply to
contracts of carriage. Their specific purpose is to set forth the rights and obligations of the seller and buyer
with respect to the delivery of the goods sold. Thus, the Incoterms set forth a discrete set of responsibilities
allocated between the seller and buyer which are outlined in a set
of commonly designated paragraphs describing, in parallel fashion, the respective obligations of the parties
in each separate Incoterm.
WHAT INCOTERMS DO
INCOTERMS inform the sales contract by defining the respective obligations, costs and risks involved in the
delivery of goods from the Seller to the Buyer.
WHAT INCOTERMS DO NOT DO
INCOTERMS by themselves DO NOT:
Constitute a contract;
Supersede the law governing the contract;
Define where title transfers; nor,
Address the price payable, currency or credit terms.
These items are defined by the express terms in the sales contract and by the governing law.
The International Chamber of Commerce (ICC) has now published their Publication No. 715E on Incoterms
2010. These rules can be used from 1st January 2011, although there is nothing to stop organizations from
using previous Incoterms as long as this is stated in the contracts in the correct manner and all parties in
the contract agree to their use.
There have been a number of changes between Incoterms 2000 and Incoterms 2010 although not as
dramatic as the changes between Incoterms 1990 and Incoterms 2000 when, amongst other changes, the
phrase C & F was supposedly abolished. This is because even today C & F is often used in contracts
worldwide.
Interestingly enough, the ICC have stated on the front of their publication that these are the ICC rules for the
use of domestic and international trade terms. For some time there has been a movement towards
Incoterms being used with domestic contracts involving the shipment of goods, as well as international
ones, and in fact there is nothing to stop a company using these terms in a domestic context. The provison
being, as usual, that everyone in the contract chain is aware of the meaning of the Incoterm, if used.
Although Incoterms are extremely important for the implementation of a contract of sale, a great number of
problems which may occur in such a contract are not dealt with at all, like transfer of ownership and other
property rights, breaches of contract and the consequences following from such breaches as well as
exemptions from liability and certain situations. It should be stressed that Incoterms are not intended to
replace such contract terms that are needed for a complete contract of sale either by the incorporation of

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standard terms or by individually negotiated terms.

In particular, it should be remembered that the Incoterms do not deal with passage of title. Just because a
seller, for example, has an obligation to deliver goods at a certain port or place does not necessarily mean
that title to those goods transfers at that place. Passage of title is an issue that is dealt with elsewhere in
contracts of sale. This is one of the most common misconceptions about the Incoterms.
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.
Below are the principal differences of Incoterms 2010 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.
Terms for any transport mode
EXW - EX WORKS (... named place of delivery)
The Seller's only responsibility is to make the goods available at the Seller's
premises. The Buyer bears full costs and risks of moving the goods from there to
destination.
FCA - FREE CARRIER (... named place of delivery)
The Seller delivers the goods, cleared for export, to the carrier selected by the
Buyer. The Seller loads the goods if the carrier pickup is at the Seller's premises.
From that point, the Buyer bears the costs and risks of moving the goods to
destination.
CPT - CARRIAGE PAID TO (... named place of destination)
The Seller pays for moving the goods to destination. From the time the goods are
transferred to the first carrier, the Buyer bears the risks of loss or damage.
CIP - CARRIAGE AND INSURANCE PAID TO (... named place of destination)
The Seller pays for moving the goods to destination. From the time the goods are
transferred to the first carrier, the Buyer bears the risks of loss or damage.
The Seller, however, purchases the cargo insurance.
DAT - DELIVERED AT TERMINAL (... named terminal at port or place of Destination)
The Seller delivers when the goods, once unloaded from the arriving means of
transport, are placed at the Buyer's disposal at a named terminal at the named port
or place of destination. "Terminal" includes any place, whether covered or not,
such as a quay, warehouse, container yard or road, rail or air cargo terminal.
The Seller bears all risks involved in bringing the goods to and unloading them at
the terminal at the named port or place of destination.
DAP - DELIVERED AT PLACE (... named place of destination)
The Seller delivers when the goods are placed at the Buyer's disposal on the
arriving means of transport ready for unloading at the names place of destination.
The Seller bears all risks involved in bringing the goods to the named place.
DDP - DELIVERED DUTY PAID (... named place)
The Seller delivers the goods -cleared for import - to the Buyer at destination.
The Seller bears all costs and risks of moving the goods to destination, including
the payment of Customs duties and taxes.
Maritime only terms
FAS - FREE ALONGSIDE SHIP (... named port of shipment)
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The Seller delivers the goods to the origin port. From that point, the Buyer bears
all costs and risks of loss or damage.
FOB - FREE ON BOARD (... named port of shipment)
The Seller delivers the goods on board the ship and clears the goods for export.
From that point, the Buyer bears all costs and risks of loss or damage.
CFR - COST AND FREIGHT (... named port of destination)
The Seller clears the goods for export and pays the costs of moving the goods to
destination. The Buyer bears all risks of loss or damage.
CIF - COST INSURANCE AND FREIGHT (... named port of destination)
The Seller clears the goods for export and pays the costs of moving the goods to
the port of destination. The Buyer bears all risks of loss or damage. The Seller,
however, purchases the cargo insurance.
Two new terms replace four current terms
DAT and DAP - that have replaced four of the Incoterms 2000 rules: DAF (Delivered at
Frontier), DES (Delivered Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivered Duty
Unpaid). This has reduced the total number of Incoterms rules from 13 to 11.
The new Incoterms 2010 rule DAT means Delivered At Terminal. This rule applies for any mode of transport
and specifies that the goods are placed at the buyers disposal unloaded from the arriving vehicle. Under
this rule a terminal is any place where the goods may be deposited; for example, a wharf, a container
yard, or an air cargo terminal. The parties to the contract of sale should be careful to specify as clearly as
possible the specific terminal and point within the terminal where the goods are to be unloaded. This is
because the risk of loss will stay with the seller until such delivery and it is important there will be no
confusion about the point at which the risk of loss passes to the buyer.
The other new Incoterm, DAP, means Delivered At Place. The DAP term differs from the DAT term in that,
when the goods are delivered to the place specified, the sellers obligation is to place them at the disposal
of the buyer on the arriving means of transport ready for unloading.
Whereas in the DAT term, the seller is responsible for unloading the goods, under the DAP term,it is the
buyers responsibility to unload the goods. If the seller wishes to use the DAP term, it should make sure that
its transportation contract matches its obligations. Otherwise, the seller could be charged for unloading
costs by the carrier and not be able to recover them from the buyer. Also under the DAP term, the seller is
responsible for clearing goods for export but the buyer is responsible for clearing goods for import. If the
buyer wishes to have the seller take responsibility for import clearance as well, it should use the DDP
(Delivered Duty Paid) term.
The Incoterms 2010 also eliminates the concept of delivery over the ships rail or past the
ships rail for the FOB, CFR and CIF terms. The concept of goods being loaded over the ships rail dates
back to a time when most cargoes were loaded in break bulk fashion and actually hoisted by cranes over the
ships rail. Previous versions of the Incoterms have specified that the sellers risk of loss, for example,
passed to the buyer at the specific point when the goods passed
over the ships rail on their way to being loaded. Today, most cargo is loaded in containersand, although
those containers are also loaded over the ships rail, the International Chamber of Commerce has decided to
employ the term On Board for the 2010 Incoterms, and presumably into the future, because this is a
concept that is more familiar to parties dealing with modern transportation and bill of lading terminology.
Risk (A5/B5)
The transfer of risk provision remains the same, aside from the clarification that risk
passes when the goods are on board the vessel, not when they pass over the ship's rail.
Electronic communication
Another change in the Incoterms 2010 is that they freely recognize electronic means of communication as
being equivalent to paper communication when the parties agree. Therefore, most of the Incoterms 2010
terms contain a specification that any document . . . may be an equivalent electronic record or procedure if
agreed between the parties or customary. Generally therefore, if the parties to a contract of sale wish to
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specify that electronic communications are the equivalent of paper communications, they should insert a
term dealing with this in the contract.
Insurance cover and security related clearances
The Incoterms 2010 also more prominently feature insurance and security-related obligations of the seller
and buyer in the various terms. The insurance obligations are now found in Paragraphs A-3 / B-3 under each
Incoterm. Security obligations; for example, the obligation to obtain security related clearances or chain-ofcustody information, are set forth in Paragraphs A-2 / B-2
of each Incoterm.
Contracts of Carriage/Insurance (A3/B3)
The seller is required to obtain cargo insurance complying at least with the minimum cover provided by
Clauses (C) of the Institute Cargo Clauses. Note, however, that this is the minimum level of insurance and
covers only major casualties, such as total loss of cargo. The buyer also has the option of requiring
that the seller provides, at the buyer's expense and where procurable, any
additional cover, for example, cover provided by Clauses (A) or (B) of the
Institute Cargo Clauses or any similar clauses and/or cover complying with the
Institute War Clauses and/or Institute Strikes Clauses or any similar set of clauses.
This acts as a sort insurance "bolt-on", but the buyer will be required to pay more
for this. If the buyer wishes for the seller to arrange for this "bolt-on" insurance, it is recommended that this
is included in the sale contract.
Terminal handling charges
The Incoterms 2010 also changed the way in which the obligation to pay terminal handling charges are
allocated. There are a number of the Incoterms rules that require the seller to make arrangements for the
carriage of goods to the agreed destination, which means the seller is
responsible for paying the freight charges to that destination. Sometimes these freight charges include the
terminal handling charges at destination and sometimes they dont. Since, as a practical matter, the buyer
will almost always be paying for the freight charges in the price of the goods, it is important to the buyer
that it not have to pay separately for terminal handling charges that are already included in the freight
charges and, therefore, in the cost of the goods. The
relevant Incoterms (CPT, CIP, CFR, CIF, DAT, DAP, and DDT) now include a clear allocation of terminal
handling costs in Paragraphs A-6 / B-6 of each such Incoterm.
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 significance 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.
Delivery (A4)/Taking Delivery (B4)
The delivery provisions are similar to INCOTERMS 2000, however, the seller's obligation is now to place the
goods "on board the vessel," rather than over the ship's rail at the loading port indicated by the buyer. The
"ship's rail" as the point of delivery has been omitted in preference for the goods being delivered on board
the vessel in order to more closely reflect modern commercial reality and to avoid costly disputes over when
exactly the goods pass the "ship's rail".
If no specific loading point has been indicated by the buyer, the new Terms make it clear that the seller may
select the point that best suits the seller's purpose. In practice, it would be sensible to include an express
provision enabling the seller to chose the loading point if that is what is agreed.
Finally the new Terms clarify that the seller may now perform its delivery obligation by procuring delivered
goods as opposed to deliver goods itself. This simply reflects the current accepted practice in string sales.
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Checking/Packaging/Marking (A9)
INCOTERMS 2010 provide that the seller must actually pack the goods; under the previous Terms the
obligation was only to provide packaging. In relation to the costs of "checking operations", the new Terms
now provide that the cost of any pre-shipment inspection required by the authority of the export country is
part of the costs that the seller must bear. Express terms should be used if the parties wish to allocate costs
differently. The corollary of this in B9 is that the buyer is to bear the costs of any other mandatory preshipment inspection. Again additional terms would still be useful to avoid arguments as to the nature of any
pre-shipment inspection.
In INCOTERMS 2000, there were no specific references to Institute Cargo Clauses (A), (B) and (C), as well as
the references to the Institute War Clauses and Institute Strikes Clauses.
Inspection (B9)
The buyer is to bear the costs of any mandatory pre-shipment inspection, except when such inspection is
mandated by the country of export.
Requirements and obligations associated with string sales recognised.
Incoterms 2010 recognises and clarifies the practice of string sales (ie, multiple sales of goods during
transit).
Specifically, FCA, CPT, CIP, FAS, FOB, CFR and CIF Incoterms have been amended to
provide that the seller in the middle of a string sale has an obligation to procure goods shipped and not to
ship the goods.
The sellers obligation to contract for the carriage of goods has been amended to allow the seller to procure
a contract of carriage.
Similarities of incoterms 2010 and those of incoterms 2000 include the following;
Application of Incoterms
As with the previous versions of Incoterms, if parties wish the Incoterms 2010 to apply to their sale contract,
they should expressly provide for this in the contract. Incoterms 2010 rather than just Incoterms should
be referred to in the sale contract if it is the intention to incorporate the latest version, so as to avoid any
subsequent dispute as to which set of Rules applies. If the
parties wish to incorporate a specific Rule from Incoterms 2000, or all of Incoterms 2000, again they should
make specific reference to this in the contractual document.
FAS
The provisions of FAS are largely identical to FOB, with the exception that goods are delivered, and risk
passes, once the goods are placed alongside the vessel, as opposed to when they are placed on-board the
vessel. You may wish to expressly provide for what exactly constitutes the goods being "alongside" the
vessel.
CFR
Similarly, the provisions of CFR are largely identical to CIF, with the exception that the seller is not obliged to
procure insurance.
In sum, for the most part, the Incoterms have not changed significantly from 2000 to 2010. As always,
however, care should be taken by sellers and buyers to understand the Incoterms with some specificity. The
purpose of Incoterms, after all, is to establish a common basis of understanding of the rights and obligations
between sellers and buyers throughout the world.
To the extent confusion arises in practice, the usefulness of the Incoterms is eroded. A prime example of this
arises in the common use of the term FOB. Literally, the term means free
on board a carrier. This means that the goods are actually loaded on board a vessel, usually by the seller. In
the case of containerized cargo, however, sellers frequently give the goods to the carrier before the
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container is loaded on board the vessel. In such cases, FOB is not the correct term to use. The FCA (Free
Carrier) Incoterm should be used in its place. The distinction can be very important in cases where the
goods are damaged because the sellers risk of loss passes at different points depending upon which term is
used. For similar reasons, parties to a contract of sale should be careful in their use of additional phrases
attached to the Incoterms. When such additional phrases are used, they should be carefully defined.

Introduction
The eighth edition of Incoterms was published on 27th September 2010 and came into force on 1st January
2011. The International Chamber of Commerce (ICC) reviews and amends these terms roughly once a
decade to ensure that they are kept up to date with changes in international trade developments. Although
there has been no radical departure from the previous edition, Incoterms 2000, the changes seek to
accommodate the growing complexities of changes in trade practice over the last decade. It is evident that
the main objective in developing Incoterms 2010 was to make the terms easier for all to understand and to
promote their applicability globally. Incoterms operate as voluntary internationally recognised standard rules
and definitions which allow traders to speak the same language. The suitable term chosen reflects the
agreed contractual obligations relating to the delivery of the goods which is already contained in the
international contract of sale. The delivery term abbreviation inserted into the contract of sale assists
parties in easily understanding what their responsibilities and risks are at different points during transit of
the goods. Incoterms also elucidate who should be responsible for arranging the various required tasks, such
as insurance, costs and import/export clearance.

Incoterms 2010 has now introduced detailed guidance notes for each rule which provide useful background for
explaining which rule is most suitable for particular goods and means of transport. For example, the 2010 edition
now advises that container shipments use the sale terms FCA where FOB was previously used and CPT or CIP
for CIF, CFR. This is because FOB, CIF, CFR and FAS are not suitable for container shipments due to the
practicalities and complexities of container handling (see definitions below).
The most important changes to be aware of are listed below;

Incoterms 2010 may encourage greater use in the USA and EU

An objective of the ICC for Incoterms 2010 was to encourage and create uniformity and certainty in business
transactions globally, thus seeking to reduce the potential for costly disputes. As the name suggests (an
abbreviation of international commercial terms), Incoterms were primarily developed for use in
international cross-border trade. Incoterms 2010 now manifestly accommodates domestic sale contracts
where it states that the obligation to comply with import/export formalities only exists where they are
applicable. Due to the deletion of the former US shipment and delivery terms in the 2004 revision of the
United States Uniform Commercial Code (UCC), Incoterms 2010 would make a logical replacement because
the terms are now also applicable to purely domestic trade thus leading to a likely increase of their use in
the U.S.. The creation of Incoterms 2010 may be an opportunity for traders to move towards the use of
Incoterms, which are more applicable to international business than the generally domestic focus of the
UCC.

The expansion of the European Union in Europe and trade blocs has meant that the EU has virtually eliminated
borders for the purpose of customs and import/export. This change means that the use of Incoterms 2000 has
become less suitable for trade within the EU. Incoterms 2010 now recognises these changes by stating in a
number of rules that export and import formalities will only have to be complied with where necessary.

Changes to the existing terms

The most apparent change is that Incoterms 2010 adopts a more simplified format taking into consideration
containerisation and point-to-point deliveries, as the four terms (DAF, DES, DEQ and DDU) have been

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abolished and replaced with the introduction of just two new terms DAP (Delivered at Place) which replaces
all four terms, and DAT (Delivered at Terminal) which replaces DEQ (Delivered Ex Quay).

The ICC created the new term DAT as it is more applicable for use in the multi-modal trades. DAT means that the
seller has effectively delivered the goods once they have been unloaded from the arriving mode of transport and
placed at the buyers disposal at the named terminal at the named port or place of destination. Therefore the
sellers obligation is solely to clear the goods for export where applicable, not import. The seller still retains all
elements of risk in the movement of goods until they are delivered and therefore must enter into a contract of
carriage. This clarifies the issue of risk when the container has been loaded into a container stack awaiting
shipment at the named terminal but not at the quayside, which was not previously clearly covered by any term.
DAF, DES and DDU were all similar in scope, which often created confusion about the appropriate D term to
use. Therefore, the ICC considered that the one term DAP would be sufficient and refers to any mode of transport
as well as allowing the delivery place in which the seller would be exposed to any risk to also be a named port.
The sellers liability is the same as in DAT except that the buyer is responsible for the unloading of the goods
from the arriving vehicle, whatever that may be.
Also, in contrast to the previous four classes: E = Departure; F = Main Carriage Unpaid; C = Main Carriage
Paid, and D = Arrival, Incoterms 2010 will now be separated into two groups categorised as either suitable
for sea and inland waterway transport, or suitable for any mode of transport. Therefore there are now
eleven, not thirteen, terms to choose from. The definitions below illustrate the structure of the new
Incoterms;

Rules for any mode or modes of transport

EXW - Ex Works
FCA - Free Carrier

CPT - Carriage Paid To

CIP - Carriage and Insurance Paid To

DAT - Delivered At Terminal

DAP - Delivered At Place

DDP - Delivered Duty Paid

Rules for sea and inland waterway transport

FAS - Free Alongside Ship

FOB - Free On Board

CFR - Cost and Freight

CIF - Cost, Insurance and Freight

Changes made to the maritime terms FOB, CIF, CFR and FAS
Incoterms 2010 now allows for the seller to arrange for the contract of carriage under an FOB contract in
trades where it may be commercial practice for the seller to arrange carriage, something which was not
previously provided for.As already previously mentioned Incoterms 2010 provides clarity to the important
definition of the critical point of delivery when transfer of risk from the seller to the buyer takes place. The
accepted understanding that risk passes once goods have passed the imaginary line of the ships rail in
FOB, CFR and CIF has now been replaced with the simple rule that risk passes when the goods are on board
the vessel. This occurs when the whole consignment has been loaded on board the vessel. This is to be

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welcomed as it will avoid any potential costly disputes regarding the exact point in which the goods pass the
ship's rail, rendering the concept of goods hanging on a ships hook crossing the ships rails out-dated.

Insurance requirements
Where an Incoterm rule requires a party to obtain insurance, as in CIP and CIF, Incoterms 2010 requires that
the cargo insurance obtained must comply at least with the minimum cover provided by Clauses (C) of the
Institute Cargo Clauses to reflect the recent 2009 updates.Heightened security requirements cross-borders

Incoterms 2010 now provide specific obligations for the parties to either supply each other with information or to
provide assistance in obtaining necessary security related import/export and transport documentation, such as
chain of custody information, for approvals and clearance. This is because many countries now require
heightened security checks for the transportation of cargo whereas this level of co-operation was not previously
required.

Terminal handling charges

Incoterms have been amended so that the possibility of a buyer being charged twice for terminal handling
costs is minimised. Where the Incoterms rules required the seller to arrange for the contract of carriage to
the agreed destination, the costs of unloading and handling at the import port/terminal may have been
passed on to the buyer by the seller as part of the cost of the goods. However, sometimes buyers are
charged again for this service by the port or terminal. Incoterms 2010 now states more clearly who is
responsible for terminal costs. Also the new Incoterms encourage the parties to make this clear in the
contract of sale.

The increase of the use of E-Communications

Incoterms 2010 now allows for paper communication or an equivalent electronic record or procedure
where this is agreed or customary. Customary means when parties are unable to refuse the use of electronic
communications where for example email is customarily used. This is a progression from Incoterms 2000
which only allowed for the use of Electronic Data Information. This change is evident because all forms of ECommunication are now easily affordable and common place even in small companies and the ICC
recognises that change in trade practices.

Sellers are now able to procure the goods under the new Incoterms
Incoterms 2010 now allows for a seller to have the obligation to procure goods shipped which is in line with
existing commercial practice. Previously Incoterms 2000 meant that the seller had, theoretically, to ship the
goods even though the sellers in the middle of the chain do not ship the goods as they are already in transit. This
recognises that in some instances goods are on-sold several times, but it may be the initial seller who contracted
for the carriage of the goods to the buyer at the end of the chain. This should allow for the Incoterms rules to be
more attractive to commodity traders.

General comments
Although the changes in the usual maritime transport terms of FOB, CIF, FAS and CFR in Incoterms 2010 are
subtle, it is important for ship owners and charterers alike to understand all of the above-mentioned changes due
to the global growth of parties entering into multi-modal transport contracts of sale. Incoterms 2010 is a positive
move forward which provides clarity in the operation of containerisation, both domestically and cross-borders.
Changes in phraseology now applied in Incoterms 2010 accommodate for recent and potential future
developments in trade, individual agreements reached between parties, customary practices used and the growing
use of e-communication.

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It must be remembered that for Incoterms 2010 to apply they have to be included into sale contracts expressly.
Standardised sale contracts need to be amended. In addition, contracts made under Incoterms 2000 remain valid
even after 2011 and, therefore, will need to be amended if parties intend the 2010 Incoterms to apply. It is also
important to remember that parties must state in their contract of sale not just the Incoterms which they wish to
apply to their specific contract, but which relevant version.

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