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ThisarticlediscussesInternationalCommercialTermsorIncotermswhichareoftenfound
ininternationaltradecontracts
IncotermsisanabbreviationofInternationalCommercialTerms.Thesetermshavebeenpublishedby
theInternationalChamberofCommerce(ICC)since1936andhavebeensubjecttoreviewandupdating
sincethatdate.ThemostrecentupdateswereannouncedinParisbytheICCon16September2010.
AlthoughearlierversionsofIncotermsmaystillbeincorporatedintofuturecontractsifthepartiesagree,it
islikelythatmostcontractsmadenowwillrefertothislatesteditionofIncoterms.Inordertoavoidthe
possibilityofconfusion,contractsshouldreferspecificallytotheIncoterms2010ratherthanjust
Incoterms,ifthepartieswishthenewtermstoapply.Thiswillavoidanysubsequentdisputeastowhich
setofrulesapply.TheassumptionisthatthenewversionoftheICCtermswillapplytoF4(GLO).
TheIncotermsareoftentobefoundininternationalcontracts,andtheyseektoprovideacommonsetof
rulesforthemostfrequentlyusedinternationaltermsoftradewiththeaimofremovingconfusionover
theirinterpretation.Forexample,thetermssetoutexactlywhoisundertheobligationtotakecontrolof
and/orinsuregoodsataparticularpointintheshippingprocess.Thetermsalsodealwiththeobligation
fortheclearanceofthegoodsforexportorimport,andrequirementsonthepackingofitems.
CLASSESOFTERMS
Amongthechangesmadeinthe2010rulesisthereductionintheoverallnumberfrom13to11.Thisis
theresultoftheremovaloffourprevioustermsandtheinclusionoftwonewones.Ineffect,thisisa
replacementoffourpreviousrules,DAF,DES,DEQandDDU,bytwonewrulesthatmaybeused
irrespectiveoftheagreedmodeoftransport.ThesenewrulesareDAT(DeliveredatTerminal),andDAP
(DeliveredatPlace)(seebelowformoredetails).
Changeshavealsobeenmadetobetterdealwithcargosecurityandinsurance,andthelanguagehas
beenchangedtoreflectthemodernusageininternationaltrade.
Thenewruleshavebeenseparatedintotwoclassesratherthanthepreviousfourcategories.Thecurrent
twoclassesoftermsare:
(i)rulesforuseinrelationtoanymodeormodesoftransport
Thesecanbeusedincaseswhereeithermaritimetransportisnotinvolvedinthecarriageofthegoods,
orwheremaritimetransportisusedforonlypartofthecarriage.Thisfirstclassincludesthefollowing
sevenIncotermsthatcanbeusedirrespectiveofthemodeoftransportselectedandirrespectiveof
whetheroneormorethanonemodeoftransportisemployed:
EXWExWords
http://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f4/technicalarticles/iccintroducesnewinternational 1/3
4/19/2017 ICCintroducesnewInternationalCommercialTerms|F4CorporateandBusinessLaw|ACCAQualification|Students|ACCAGlobal
FCAFreeCarrier
CPTCarriagePaidTo
CIPCarriageandInsurancePaidTo
DATDeliveredatTerminal
DAPDeliveredatPlace
DDPDeliveredDutyPaid
Mostofthetermsretaintheirformermeanings,sonofurtherexplanationwillbeprovided.However,as
DATandDAParenewandreplacepreviousdeliveryterms,theyneedsome,ifbrief,explanation.
DATreplacesthemorespecificDEQ(DeliveredexQuay).Itrequiresthesellertopayforcarriagetothe
terminal,exceptforcostsrelatedtoimportclearance,andtoassumeallrisksuptothepointthatthe
goodsareunloadedattheterminal.Thesellerdeliverswhenthegoods,havingbeenunloadedfromthe
arrivingmeansoftransport,areplacedatthebuyer'sdisposalatanamedterminalatthenamedportor
placeofdestination.Asindicated,DATrequiresthesellertoclearthegoodsforexportwhereapplicable
butthesellerhasnoobligationtoclearthegoodsforimport,payanyimportdutyorcarryoutanyimport
customsformalities.
DAP(DeliveredatPlace)replacesDAF(DeliveredatFrontier),DES(DeliveredexShip)andDDU
(DeliveredDutyUnpaid).UnderDAP,asellerbearsallthecosts,otherthanimportclearancecostsand
risksinvolvedinbringingthegoodstothenameddestination.Consequently,thesellerassumesallrisks
andcostspriortothepointthatthegoodsarereadyforunloadingbythebuyerattheagreeddestination.
Itshouldbeemphasisedthatalthoughallthetermslistedapplywhenthereisnomaritimetransport,they
canbeusedincaseswhereashipisusedforpartonlyofthecarriage.
(ii)rulesforseaandinlandwaterwaytransport
Theserulesapplywherethepointofdeliveryandtheplacetowhichthegoodsarecarriedtothebuyer
arebothports.Therearefoursubstantivesrules:
FASFreeAlongsideShip
FOBFreeonBoard
CFRCostandFreight
CIFCostInsuranceandFreight
Noneoftheseruleshasbeenchangedinpractice,althoughinrelationtothelastthreeFOB,CFRand
CIFreferencetotheship'srailasthepointofdeliveryhasnowbeendeletedandthishasbeen
replacedwiththegoodsbeingdeliveredwhentheyareonboardthevessel.Thisisclearlydoneinthe
pursuitofupdatinglanguageandastheICCsownintroductiontothenewrulesstates:Thismoreclosely
reflectsmoderncommercialrealityandavoidstheratherdatedimageoftheriskswingingtoandfro
acrossanimaginaryperpendicularline.
SPHEREOFAPPLICATION
Afurtherchangeandrecognitionofexistingpracticeisthatthenewrulesapplytodomesticaswellas
internationaltrade,whereaspreviousIncotermsappliedtointernationalsalecontracts.Asaresult,the
newrulesstatethattheobligationtocomplywithexport/importformalitiesexistsonlywhereapplicable.
Thisalterationisinrecognitionofthefactthatsometradeblocs,suchastheEuropeanUnion,have
minimisedifnotremovedthesignificanceofborderformalities.Itisalsoexpectedthatthisparticular
alterationshouldleadtogreateruseoftheIncotermruleswithintheUS.
SALEOFGOODSINTRANSIT
Reflectingthefactthatcommoditiesmaybesoldseveraltimesoverduringtransit,throughastringofsale
contracts,thenewruleshavebeenamendedtoindicatethatinrealityapurchaser/sellerinthemiddleof
thestringofcontractsdoesnotactuallyshipthecommodities,astheyarealreadyonboardwhenthey
acquiretitleoverthem.Consequently,underthenewtherules,onlythefirstsellerwillberesponsiblefor
shippingthegoodsandsubsequentsellerswillbeundertheobligationtoprocuregoodsshipped.Thisis
notamajorchangebutitdoestidyuptherules.
SECURITY
Giventhecontextofuncertaintyregardingpotentialterrorismandtheneedforheightenedsecurity,many
countrieshaveintroducedsecuritychecksinrelationtogoodscrossingtheirboundaries.Thenew
Incotermrulesnowrequirebothsellersandbuyerstoprovidesufficientinformationtooneanothersothat
export/importclearancecanbeobtained.
TERMINALHANDLINGCHARGES
http://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f4/technicalarticles/iccintroducesnewinternational 2/3
4/19/2017 ICCintroducesnewInternationalCommercialTerms|F4CorporateandBusinessLaw|ACCAQualification|Students|ACCAGlobal
Thenewruleslooktoclarifyresponsibilityforcostsarisingattheendofthejourney.Undertheold
IncotermsrulesCPT,CIP,CFR,CIF,DAT,DAP,andDDP,thesellerwasrequiredtomake
arrangementsforthecarriageofthegoodstotheagreeddestinationbutitwasactuallythebuyerwho
actuallypaidthecosts,asthesewereincludedinthetotalsellingprice.Thisgaverisetoproblemswhere
thecarrierorterminaloperatorchargedfurtherhandlingcoststothebuyer/receiverofthegoods.The
newIncotermsrulesseektoavoidthiseventualitybyclearlyallocatingsuchcostsbetweentheparties.
ELECTRONICDOCUMENTATION
Thepreviousrulesprovidedfortheuseofelectronicdatainterchange,wherethepartieshadagreedits
use.Thenewrulesprovidefortheuseofpapercommunicationsorequivalentelectronicrecordor
procedurewhereagreedorcustomary,withcustomaryindicatingrecognitionofcurrentpracticeinthis
regard.
CONCLUSION
Incotermsareacoreconstituentofinternationalcontractsandhavefrequentlyformedthebasisfor
questionsintheF4Globalexam.Althoughinthemannerofanupdatingexercise,thenewIncoterms
2010dointroducesignificantnewrulesforstudentsoftheF4Globalsyllabustotakeintoconsiderationin
theirpreparationforfutureexams.
WrittenbyamemberoftheF4examiningteam
Lastupdated:17Feb2016
http://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f4/technicalarticles/iccintroducesnewinternational 3/3