Introduction

This half-day ICC event included a presentation from David Lowe, a member of the Incoterms 2010 drafting group,
so in addition to learning about the changes, we gained some insight into the revision process and the thinking
of the drafting group.

Layout and format

It was clear from the outset that the new rules have a clear educational mission. It is well known that "traditional" Incoterms
such as CIF continue to be used inappropriately in a world where containerised and multimodal movements of goods
are the norm. So the rules are now separated into two sections, clearly labelled "Rules for any mode or mode of transport"
and "Rules for sea and inland waterway transport"

Furthermore there is now a "guidance" section heading up each section, which advises, for example, that CIF "may
not be appropriate" where the goods are handed over to the carrier before they are loaded on the vessel - the usual
container scenario.

The changes to the "D" terms

These are of course the most substantive changes in this revision - the abolition of four "D" terms - DEQ, DES, DAF and DDU - and the introduction of two new "D" terms, DAT (Delivered at Terminal) and (DAP) Delivered at Place.

The observation from the presenter was that they had expected considerable opposition when the idea of removing these
was first proposed; however the reaction from the trading community was very muted!

As with the old "D" terms, risk passes at the point of delivery, which for DAT is unloaded from the conveyance, and for
DAP is on the conveyance ready for unloading.

It is anticipated that DAT will replace DEQ, and will be the Incoterm of choice for container operations where the seller retains responsibility for the main carriage. It is expected that DAP will replace DES, DAF and DDU.

The new "D" rules seem straightforward and consistent with the logic of the Incoterms structure.

Clarifications and "tidying up"

There is welcome clarification on terminal handling charges - a bugbear of importers, because carriers' practice on the inclusion of THCs varies, and situations can arise where the importer is in effect double charged for them. The new Incoterms makes it clear that this should not happen - e.g. CIP B6 buyer bears "unloading costs, unless such costs were for the seller's account under the contract of carriage"

"String" trades. In the commodities business it is commonplace for the goods to be bought once in transit, in which case the new buyer does not contract with the carrier, they merely acquire a carriage contract already made. The new Incoterms recognise this

"Exit the ship's rail." The time-honoured formula for FOB, CFR and CIF has been that risk transfers when the goods cross the ship's rail during loading. This has been replaced with "placing goods on board" the vessel.

Security issues

Throughout the revision process, there was much talk of the impact of anti-terrorism programmes such as C-TPAT, and
the need for the Incoterms revision to provide guidance for traders.

In the event, Incoterms 2010 has relatively little to say about this. For each Incoterm, there is a heading A10: "Assistance
with information and related costs" for the seller, and a parallel B10 heading for the buyer. But the obligations of each party
are stated in the most general terms, along the lines of providing "requested information in a timely manner."

Parties are obliged to make reimbursement of costs associated with the provision of such information; but these
reimbursements appear to operate in both directions, and there is no detail as what this might mean in practice.

Conclusion

This not a radical revision, but welcome improvements have been made in many areas. As ever, the success of these
new rules will depend on the care that traders apply to the detailed work of aligning their use of Incoterms with their
commercial agreements and their carriage contracts. However the new format should focus the readers' minds on anomalies
in their current practice, and motivate them to start this process!

Roger Kreitman
Principal Consultant

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