By Think Big Management International
The International Chamber of Commerce (ICC) has recently reviewed the Incoterms. This is the first revision in ten years and in particular, it reflects the many profound changes that have taken place in the world in that time, including the 9/11 attacks, reform of the UCC codes in the United States in 2004, extension of the euro zone, increase in the number of duty-free zones in a number of countries and the 2009 version of the Cargo Clauses Institute (LMA/IUA).
This complete review of the Incoterms by the ICC is also aimed at simplifying transactions and their interpretation, as well as improving the legal safeguards, whilst retaining its basic objectives which include sharing of risk, costs and responsibilities for traders.
Two groups of Incoterms
The number of Incoterms has passed from 13 to 11 organized in two groups. The first group is made up of “multimodal” Incoterms, meaning they apply to all forms of transportation (EXW, FCA, CPT, CIP, DAT, DAP and DDP), while the second group is “monomodal” and only apply to transactions via maritime transportation (FAS, FOB, CFR and CIF). So four Incoterms (DAF, DES, DEQ, DDU) have disappeared and are replaced by two new ones, DAP: Delivered at place (point of destination) and DAT: Delivered at terminal (name of city).
Making the Incoterms 2010® easier to follow
As the business community has been asking for some years now, the Incoterms 2010® also include more information concerning the following points:
- Delivery: In day-to-day business, the term “delivery” represents the final obligation of the seller towards the buyer, or the end of the contract or responsability. Since this a key moment and crucial to both parties, the Incoterms 2010® have defined this aspect more fully.
- Security: The previous edition of the Incoterms dates from before the 9/11 attacks, an event that has since led to greater awareness of the issue of security for all actors in the logistic chain. The Incoterms review contains specific provisions for the sharing of responsibilities and risks with respect to the security of merchandise, which at the same time meets with the obligations of the C-TPAT, PEP and OEA security programs, all derived from SAFE – the Framework of Standards of the World Customs Organization (WCO).
EXW: Produced in 2000, mainly to cover internal sales to foreign entities, this Incoterm, used mainly for domestic commerce, has now been provided with greater versatility.
Domestic transactions: Europe is not the same either, as it was in the year 2000, having abolished various physical borders. Certain international transactions have become domestic transactions and the Incoterms 2010® apply to them.
Paperless commerce: Advances in information technologies combined with the anticipated transmission of shipments to Customs organizations has meant that certain paper documents have disappeared.