The Revised Incoterms
Marine Newsletter 1/2011. The Incoterms are used daily by many different operators – salespeople, purchasers, forwarders, agents, bankers, insurers, lawyers, and so on. The individual clauses are used to define the parties in a transaction who take on the costs, risks, and responsibilities involved.
The International Chamber of Commerce (ICC) has been responsible for maintaining the clauses since they were drawn up back in 1936. The 8th Edition has been given the title ‘Incoterms 2010’ and thus supersedes Incoterms 2000.
What has changed?
Since 2000, the number of clauses has been reduced from 13 to 11. This has been made possible by the introduction of new clauses, which can apply to all forms of transport and are therefore not restricted to e.g. shipping, which is evident from clauses such as FOB, CFR and CIF.
The clauses no longer included in Incoterms 2010:
- DAF (Delivered at frontier)
- DES (Delivered ex ship)
- DEX (Delivered ex quay)
- DDU (Delivered duty unpaid)
The clauses added to Incoterms 2010:
- DAT (Delivered at terminal)
- DAP (Delivered at place)
Delivered at terminal
As stated above, there is a new clause that can be used for all forms of transport, which is particularly appropriate in connection with multimodal transports. ‘Delivered at terminal’ means that availability of insurance and transfer of risk between seller and buyer takes place when the goods are unloaded from the incoming transport vehicle and are available to the purchaser at a specified terminal or named port or destination. The word ‘Terminal’ covers any place including an open space, such as a quay, store, container terminal, and railway or airfreight terminal.
It is recommended that the parties to the agreement ensure that the expression ‘Terminal’ is defined as precisely as possible. In other words, the location in the terminal where the goods should be delivered should also be defined. In the event that it is agreed that the seller will bear the risk and costs of transporting the goods onward from the specified terminal, it is recommended that DAP or DDP is used.
Delivered at place
This term is also a clause that can be used in multimodal transport. ‘Delivered at place’ means that the seller has delivered the goods to a point where they are available to the purchaser on the incoming transport vehicle and are ready for unloading at the specified destination. In insurance terms, this means that the availability of insurance and transfer of risk becomes the responsibility of the purchaser from the moment that the goods are delivered and are available to the purchaser at the agreed location (‘place’).
The seller bears all risks involved in bringing the goods to the specified place. As with DAT, it is recommended that the place of delivery should be specified in the agreement, because it is the seller who bears all risks and costs up the point of delivery at the destination.
The difference between DAT and DAP
The most important difference is that the shipments are sold IHT. DAT delivers the goods unloaded from the transport medium, but if they are sold DAP the goods are delivered but not unloaded from the transport medium.
The former headings by clauses (E, F, C and D) that we know from Incoterms 2010 are no longer used. Headings now cover only the following two categories:
Regulations for any mode(s) 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
Regulations for transport by sea and inland waterways:
- FAS – Free alongside ship
- FOB – Free on board
- CFR – Cost and Freight
- CIF – Costs Insurance and Freight
With no doubt the implemented changes to the clauses have been much needed. Hopefully the changes will make an end of the misuse of clauses attended for transport by sea only and not by truck, airfreight and any other mean of transportation.
In addition, the implementation of the DAT and DAP to Incoterms 2010 is future proof when it concerns multimodal transport. Yet there still exists a possibility for changes in future revisions of the clauses. For example, it was strongly considered to remove the Ex Works (EXW) clause because it is legally better suited for national- rather than international transport.
Another problem with EXW is that in several cases we have seen that the seller assumes duties and responsibilities, which are to be arranged by the buyer of the goods, e.g. loading the cargo on-board the transport vehicle and establish export documentation for customs or even pay for the freight.
These issues can easily raise legal disputes between buyer and seller, whether it concerns insurance, transportation or other tasks under the trade cycle. To avoid any doubt about the use of Incoterms, we recommend the official Incoterms 2010 handbook, which is available in English and many local languages (more information at iccwbo.org).
Peter Bredal Mikkelsen