by Frank Reynolds

On 16-17 September, the ICC Executive Board adopted the final version of Incoterms®2010, which will come into force on 1 January 2011.

The Drafting Group met a total of 12 times, including the November 2007 Commercial Law and Practice (CLP) Commission meeting when the decision to revise Incoterms® was made, and the May 2010 when the fourth draft was approved. Each of the over two thousand national committee comments were reviewed for possible inclusion in the three draft revisions that preceded the final version.

There were several unusual situations during the revision. Unlike previous Incoterms® revisions, we followed the CLP schedule and met for several days each in Lyon, Vienna, Helsinki, Brussels and Prague, as well as multiple times in Paris and London. The decision to change was not without strong opposition within the CLP. However, in the end, several of the most outspoken revision opponents became its most active contributors. Also, we lost our Swedish delegate towards the end of the revision for the best of reasons: he was appointed to serve as a justice on that country's Supreme Court.

As the only non-lawyer on the Drafting Committee, I was pleasantly surprised by the interest and at times deference shown to commercial practice. We even toured a seaport to see for ourselves the way things really work.


The following changes will demonstrate that Incoterms® 2010 is truly a major revision:

- The layout differs from all previous versions. Omnimodal and vessel-only rules are covered separately, thereby reducing the likelihood of improper use of marine rules for air and ground transport. Also, this version is written in gender-neutral style. While that may require some getting used to, it is definitely modern writing technique.

- Since many Incoterms® users failed to read the Introductions in previous versions, the Introduction has been streamlined to bare essentials.

- Individual Incoterms® 2010 are now accompanied by guidance notes, which are more likely to be read because of their location near the rules themselves.

- Taking a cue from UCP 600, Incoterms® 2010 provide definitions for key terms in their Incoterms® context. Key words like "delivery," "carrier" and "packaging" are now defined in the Introduction.

- The former Delivered At Frontier (DAF), Delivered Ex Ship (DES) and Delivered Duty Unpaid (DDU) were deleted, and have been replaced by one new Incoterms® 2010 rule, Delivered At Place (DAP). This should accommodate all the situations where the old rules were commonly used (see below).

- DDU was quite popular. The only issue was with the "Unpaid" part of its name, which made it difficult to use with domestic sales of pre-cleared imported goods. In these situations, the ever-dangerous Delivered Duty Paid (DDP) was actually more appropriate. As DDP could result in unfortunate situations when used by inexperienced domestic persons in international transactions, the decision was made to "duty neutralize" DDU by including it in the new DAP.

- The former Delivered Ex Quay (DEQ) has been expanded to accommodate all manner of transportation as the new Delivered At Terminal (DAT) rule. This now becomes a rule under which the seller is responsible for the unloading of aircraft, lorries, etc., as well as vessels.

- All reference to the "ship's rail" has been removed from the FOB, CFR and CIF rules. This effectively changes the delivery point to "on board" for these rules. Sellers and buyers are urged to define exactly what this means in their purchase/sales contracts, as this can vary by product type or from one contract of carriage to another.

- A potentially dangerous situation resulting from the default position of delivery to the "first carrier" in the CPT and CIP rules has been described. We couldn't change the default, as it mirrors what is contained in the UN Convention on the International Sale of Goods and other major bodies of law, but we were able to suggest remedies.

- Container loading is specifically not covered as "packaging". Sellers and buyers are cautioned to cover this important task elsewhere in their purchase/sales contracts.

- Cargo security information obligations have been assigned to both buyers and sellers for the first time. Because of the many different and ever-changing security regimes, our coverage is limited to informing the parties that these regulations exist and that they must consult with each other to ensure compliance.

- Insurance is covered in greater detail than ever before. The recent revisions to the LMA/IUA Institute Cargo A, B, War and Strike Clauses are mentioned as possible additions to the "minimum cover" C clauses.

Recommendations not included

There were two insurance-related recommendations with wide support that we couldn't accommodate. The first was a request that the default position for CIP and CIF be changed to maximum cover rather than the current minimum cover. The problem here was how to define "maximum cover", since much insurance is written around the needs of individual assureds and particular industry practices. We mentioned at every opportunity that the default position is minimum cover, and that the parties could consider additional cover, citing the more extensive and recently revised Institute Cargo Clauses by name.

The second request was for a rule whereby the seller would insure but the buyer would handle transportation. Insurers pointed out that they would then be asked to cover shipments for which they or their customers had no first-hand information, let alone any potential for loss reduction practices commonly employed by insurers and assureds.

While we couldn't satisfy all requests - some, in fact, contradicted others - it is the unanimous opinion of the Drafting Group that Incoterms® 2010 are a definite improvement and are consistent with the way trade is conducted throughout much of the world. We'll see how they stand up over time.

Frank Reynolds is President of International Projects, Inc. in Ohio (US). His e-mail is