A Modernization of the Incoterms

Abstract

The International Chamber of Commerce has published the first revision in over a decade to its rules for the use of domestic and international trade terms. These rules reduce the risk associated with the sale of goods by creating a mechanism that buyers and sellers can use to clearly communicate their respective obligations. The new rules, published as Incoterms 2010, include several noteworthy changes. This article identifies and discusses these changes. One of the most significant changes in Incoterms 2010 is its expanded application to domestic sales contracts. This expansion has encouraged the replacement of Uniform Commercial Code terms with Incoterms in sales contracts where one party is located in the US. In order to simplify the use of Incoterms and make Incoterms more accessible to new users, significant changes have also been made to terms themselves. These changes include the introduction of new terms and the reclassification of existing terms. More subtle changes, including the treatment of terminal handling charges, the clarification of insurance obligations and the timing of risk transfer from the seller to the buyer, are also included. In addition, Incoterms 2010 has introduced new rules that allocate security-related obligations, address the expanded use of electronic documents and recognize the use of string sales. Overall, the changes to Incoterms 2010 appear to have succinctly addressed the evolution of trade practices over the past decade while providing continued clarity in the increasingly complex world of international trade.