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The New 2010 Incoterms® - What has changed? www.strtrade.com

The New 2010 Incoterms® - What has changed?

The New 2010 Incoterms® - What has changed? www.strtrade.com

www.strtrade.com

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Incoterms® 2010

Incoterms® 2010 © STTAS 2010 3

Incoterms®: What are they?

Incoterms® 2010

International Commerce Terminology.

Effective January 1, 2011!

Co mmerce Term inology. – Effective January 1, 2011!  Developed by the International Chamber of

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.

to a contract of sale with respect to the delivery of the goods, not to a

Incoterms®

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

of goods under a sales contract .  They do not enumerate all of the duties

responsibilities.

Incoterms® 2010

Incoterms® 2010 © STTAS 2010 6

Structure of an Incoterm®

The terms alone are insufficient a location must always be named and the version of the Incoterms® should be included.

Examples:

of the Incoterms® should be included.  Examples:  ExW Harrisburg, PA, Incoterms® 2010  FCA

ExW Harrisburg, PA, Incoterms® 2010

FCA Kennedy Intl Airport, Incoterms® 2010

2010 Incoterms®

11 terms now instead of 13

Terms Eliminated:

DAF - Delivered at Frontier DES - Delivered Ex-Ship DEQ - Delivered Ex-Quay DDU - Delivered Duty Unpaid

2010 Incoterms®

Addition of two new terms:

DAT - Delivered at Terminal

DAP - Delivered at Place

2010 Incoterms®

2010 Incoterms® © STTAS 2010 10

2010 Incoterms®

Key point!! It is important to understand the term "delivery" - this term has not changed, but was NOT previously defined.

Definition of Delivery

2010

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.

Rotterdam and obtaining insurance in the name of the Buyer. So do not confuse " delivery"

So do not confuse " delivery" with freight destination costs.

2010 Incoterms®

Eliminated “Ship’s Rail” – FOB, CFR, and CIF (Marine only terms).
Eliminated
“Ship’s Rail” – FOB,
CFR, and CIF
(Marine only terms).
Rail” – FOB, CFR, and CIF (Marine only terms). Now “On Board” Seller is responsible for
Now “On Board” Seller is responsible for goods until they are on board vessel.
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)**

2010 Incoterms®

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®

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®

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.

Pros & Cons of DDP

Pro’s Pros of DDP Transactions

Cons of DDP Transactions DDP Transactions

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

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.

customs clearance and import trade compliance.

supply chain. customs clearance and import trade compliance. • Possible delays in release of merchandise if

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.).

UPDATE - 2010 Incoterms®

UPDATE - 2010 Incoterms® © STTAS 2010 17

QUESTIONS?

Donna L. Bade

SANDLER, TRAVIS & ROSENBERG, P.A.

312.641.0000

Or

Dennis L. Wright

Sandler & Travis Trade Advisory Services, Inc.

248.474.7200