Incoterms®: 2000 vs 2010

Incoterms are revised periodically to keep up with changes in the international trade industry. The current version is called Incoterms® 2010. All contracts made under Incoterms® 2000 (the previous version) remain valid. Although we recommend using Incoterms® 2010, parties can agree to choose any version of the incoterms rules. It is important, however, to clearly specify which version you have chosen (Incoterms® 2010, Incoterms® 2000, or any earlier version). Figure 1 highlights the main differences between Incoterms® 2000 and Incoterms® 2010.

NOTE: For more information on what incoterms are, and a more in-depth explanation of individual terms, read our article Incoterms: A guide to international buying & selling terms.

An image summarising the main differences between Incoterms® 2000 and Incoterms® 2010

 

Summary: The main differences between Incoterms® 2000 and Incoterms® 2010

The following changes were made to the Incoterms® terms when they were updated for the release of the 2010 version:

  • “Over the ship’s rail” vs “on board the vessel”

The Incoterms® 2010 framework eliminates the concept of delivery “over the ship’s rail” or “past the ship’s rail” for the FOB, CFR, and CIF terms.

In the 2010 framework, the seller’s responsibility extends until the goods are “on board the vessel” rather than “past the ship’s rail” (this is a very small technical difference). The concept of goods being loaded “over the ship’s rail” dates back to a time when most cargoes were loaded in break bulk and actually hoisted by cranes over the ship’s rail. Previous versions of the Incoterms® framework specified that the seller’s risk of loss, for example, passed to the buyer at the specific point when the goods passed over the ship’s rail on their way to being loaded.

Today, most cargo is loaded in containers and, although those containers are also loaded over the ship’s rail, it has been decided that “on board” is the appropriate term to use for the 2010 Incoterms. The transfer of risk provision remains the same, aside from the clarification that risk passes when the goods are on board the vessel, not when they pass over the ship’s rail.

  • Packaging

For the FOB incoterm, the seller must package the goods rather than provide the packaging.

Even though in practise this was usually already the case, cementing it in the 2010 version provides clarity.

  • Insurance

Under the CIF term, the seller is required to pay more for insurance than previously.

Additionally, the Incoterms® 2010 framework features insurance and security-related obligations of the seller and buyer more prominently under the various terms.

  • DEQ replaced by DAT

The “Delivered Ex Quay”(DEQ) incoterm is replaced by the new term “Delivered at Terminal” (DAT). This rule applies for any mode of transport, and specifies that the seller is responsible for arranging carriage and for delivering the goods that are unloaded from the arriving vehicle.

Under DAT, a “terminal” refers to any place where the goods may be unloaded; for example, a wharf, a container yard, or an air cargo terminal.

The parties to the sale contract should be careful to specify as precisely as possible the specific terminal point within the terminal where the goods are to be unloaded (as many terminals are very large). It is important to be specific, because the risk of loss remains with the seller until delivery at the specified point has taken place. It is important that there is no confusion about the point at which risk of loss passes to the buyer.

  • DAF, DES & DDU replaced by DAP

The “Delivered at Frontier” (DAF), “Delivered Ex Ship” (DES), and “Delivered Duty Unpaid” (DDU) incoterms are replaced by the new term “Delivered at Place” (DAP).

Under DAP, the seller is responsible for arranging carriage, and for delivering the goods (which are ready for unloading from the arriving carriage) at the named place. This is different to DAT, where the seller is responsible for the actual unloading too. Under DAP, the seller is only required to ensure that the goods ready for unloading at the right place for the buyer.

If the seller chooses to use the DAP term, they must ensure that their transportation contract matches the DAP obligations. If there is a mismatch, the seller could be charged unloading costs by the carrier, and may not be able to recover them from the buyer.

NOTE: Under the DAP term the seller is responsible for clearing goods for export, but the buyer is responsible for clearing goods for import. If the buyer wishes the have the seller take responsibility for import clearance too, they should use the “Delivered Duty Paid” (DDP) term instead.

  • Documentation: Hard copies and electronic versions

Incoterms® 2010 recognises electronic means of communication as being equivalent to paper communication, when the parties agree. Therefore, if you need to receive hard copies (as opposed to electronic versions) of your shipping documents, be sure to make this point clear in your contract.

If parties to a sale contract wish to specify that electronic communications are the equivalent of paper communications, they should insert a term that addresses this in their sale contract.