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The New 2010 Incoterms® -
What has changed?
© STTAS 2010 2
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Disclaimer
© STTAS 2010
Incoterms® 2010
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© STTAS 2010
Incoterms® 2010
– International Commerce Terminology.
– Effective January 1, 2011!
Developed by the International Chamber of Commerce
(ICC) in 1936. Subsequent additions and revisions in
1953, 1967, 1976, 1980, 1990, and 2000.
Purpose was to provide international “rules” for the
interpretation of commonly used trade terms.
They are limited to matters relating to the rights and
obligations of the parties to a contract of sale with
respect to the delivery of the goods, not to a contract of
carriage.
Incoterms®: What are they?
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© STTAS 2010
The Incoterms® are not law! However, they are recognized by international judicial bodies under
contract law as a “meeting of the minds.”
They do not determine transfer of title (ownership)!! Common misconception! The transfer of title may take place anywhere
along the chain and should be specifically identified in the contract.
They do not determine when revenue may be
recognized! GAAP, SEC, and other regulations determine that.
The Incoterms® do not apply to the contract of carriage,
but to the delivery of goods under a sales contract.
They do not enumerate all of the duties and
responsibilities.
Incoterms®
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© STTAS 2010
Incoterms® 2010
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© STTAS 2010
Structure of an Incoterm®
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The terms alone are insufficient – a location
must always be named and the version of the
Incoterms® should be included.
Examples:
ExW Harrisburg, PA, Incoterms® 2010
FCA Kennedy Intl Airport, Incoterms® 2010
© STTAS 2010
2010 Incoterms®
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11 terms now instead of 13
Terms Eliminated:
DAF - Delivered at Frontier
DES - Delivered Ex-Ship
DEQ - Delivered Ex-Quay
DDU - Delivered Duty Unpaid
© STTAS 2010
2010 Incoterms®
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Addition of two new terms:
DAT - Delivered at Terminal
DAP - Delivered at Place
© STTAS 2010
2010 Incoterms®
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© STTAS 2010
Key point!!
It is important to understand the term "delivery" - this term has
not changed, but was NOT previously defined.
Definition of Delivery
• Delivery – “where the risk of loss or damage to the goods transfers from
Seller to Buyer.”
– Example: “CIF Rotterdam, Incoterms 2010 “– Delivery occurs when the Seller turns the
goods over to the international carrier at the port of export! However the Seller is still
responsible for paying the freight to Rotterdam and obtaining insurance in the name of the
Buyer.
2010 Incoterms®
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So do not confuse " delivery" with
freight destination costs.
2010
© STTAS 2010
2010 Incoterms®
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Now
“On Board”
Seller is
responsible for
goods until they
are on board
vessel.
** Under CFR & CIF, Seller pays for international
transportation, but Seller "delivers" when on board on
vessel. Risk of loss passes to Buyer at that point.
(Same as Incoterms 2000)**
Eliminated
“Ship’s Rail” – FOB,
CFR, and CIF
(Marine only terms).
© STTAS 2010
DAT - Delivered at Terminal
Omnimodal term, for all methods of transport.
Must be “a” terminal on buyer's side – air, truck, rail, etc.
Seller is responsible for export clearance, deliver of the goods
packed to destination terminal, all transport costs to named
terminal and unloading (only term to include unloading).
Buyer is responsible for import clearance and on carriage
(foreign inland freight).
No insurance obligation by either party.
2010 Incoterms®
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© STTAS 2010
DAP – Delivered at Place
(heir to DDU, DAF, DES, DEQ)
Seller is responsible for export clearance, deliver the goods
appropriately packed at named destination and pay all
transport costs to named destination (no unloading).
Buyer is responsible for unloading, import clearance, on
carriage (foreign inland freight).
No insurance obligation by either party.
2010 Incoterms®
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© STTAS 2010
Cargo Security
ICC recognized the need to include cargo security
measures, but there are different obligations in
different countries.
Therefore, it has stated the obligation is on both
parties.
2010 Incoterms®
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© STTAS 2010
• The sale price for the merchandise includes all costs, including transportation and customs duty.
•
• There is no effect on the buyer’s inventory until the goods are received at its Distribution Center
• DDP simplifies supply chain management.
• Buyer/consignee is not directly responsible for customs clearance and import trade compliance.
• Lack of visibility while shipment is in transit.
• Loss of ability to control social corporate responsibility by producer, which could result in negative publicity for the buyer.
• C-TPAT and Importer Security Filing concerns regarding incomplete security in supply chain.
• Possible delays in release of merchandise if IOR is not eligible for expedited release.
• If merchandise bears buyer’s labels, the buyer will still be associated with any negative import issues.
• Buyer has no control over product integrity (i.e., compliance with Lacey Act, CPSIA, etc.).
Pros & Cons of DDP
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Pro’s Pros of DDP Transactions Cons of DDP Transactions
DDP Transactions
© STTAS 2010
UPDATE - 2010 Incoterms®
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© STTAS 2010
Resources
http://www.iccwbo.org/incoterms/id3045/index.html
http://www.strtrade.com
http://www.wtcdw.com
2010 Incoterms®
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© STTAS 2010
Donna L. Bade
SANDLER, TRAVIS & ROSENBERG, P.A.
312.641.0000
Dennis L. Wright
Sandler & Travis Trade Advisory Services, Inc.
248.474.7200
QUESTIONS?
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