Saturday, October 23, 2010

Incoterms 2010 (NEW RULES)

A part of procurement knowledges applied in my routine job. Just to share with you all.

The global economy has given business broader access than ever before to markets all over the world. Goods are sold in more countries, in larger quantities, and in greater variety. But as the volume and complexity of global sales increase, so do possibilities for misunderstandings and costly disputes when sale contracts are not adequately drafted.

The INCOTERMS rules, the ICC rules on the use of domestic and international trade terms, facilitate the conduct of global trade. Reference to an Incoterms 2010 rule in sale contract clearly defines the parties’ respective obligations and reduces the risk of legal complications.

Since the creations of the Incoterms rules by ICC in 1936, this globally accepted contractual standard has been regularly updated to keep pace with the development of international trade. The Incoterms 2010 rules take account of the continued spread of customs-free zones, the increased use of electronic communications in business transactions, heightened concern about security in the movement of goods and changes in transport practices. Incoterms 2010 updates and consolidates the ‘delivered’ rules, reducing the total number of rules from 13 to 11, and offers a simpler and clearer presentation of all the rules. Incoterms 2010 is also the first version of the Incoterms rules to make all references to buyers and sellers gender-neutral (adapted from Rajat Gupta, ICC Chairman).

The broad expertise of ICC’s Commission on Commercial Law and Practise, whose membership is drawn from all parts of the world and all trade sectors, ensures that the Incoterms 2010 rules respond to business needs everywhere (adapted from Rajat Gupta, ICC Chairman).

Incoterms rules define the responsibilities of buyers and sellers for the delivery of goods under sale contracts. They are the authoritative rules for determining how costs and risks are allocated to the parties. Incoterms rules are regularly incorporated into sale contracts worldwide and have become part of the daily language of trade.

Incoterms 2010 CONTAINS THE ICC rules for use of the 11 Incoterms trading terms. It takes into account the latest developments in commercial practice and updates and consolidates some of the former rules. All sales contracts should make reference to the Incoterms 2010 rules as the latest version of the Incoterms rules.

The International Chamber of Commerce (ICC) had recently revised the Incoterms rules. The new Incoterms 2010 launced on 27th September is effective worldwide as of 1st January 2011.

Incoterms are interntional rules published by the ICC for the interpretation of trade terms eg EXW, FCA, FAS, FOB, CFR, CIF etc. Importers, Exporters, Bankers, Insurers, Freight Forwarders, Customs Brokers and carries need to be aware of the new changes in Incoterms 2010 which have critical implications to their business especially on the following:
  • Carriage of goods between seller and buyer
  • Export and Import clearance requirements
  • Allocation of costs between seller and buyer
  • Acquisition of transit/cargo insurance
  • Assumption of risks for loss and damages

The changes in the new Incoterms rules are massive, sweeping as well as practical. Four terms under the current Incoterms 2000 were taken out. Two new terms DAT (Delivered At Terminal) and DAP (Delivered At Place) have been added.

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