International commerce terms (Incoterms) 2010

New Incoterms 2010 elaborated by the International Chamber of Commerce became effective on 1 January 2011,
and they were amended mainly due to the international practice of USA, as well as the fact that
borders have lost their significance in the international trade, for example, in the territory of the European Union.

Incoterms regulations are widely used in the international commerce practice regarding international freight delivery agreements to align differences in the national laws of different countries, commercial practices and understanding of terms. They define accurate division of obligations of the purchaser and seller regarding the product delivery. The new version of the regulations consists of 11 terms, while the last Incoterms 2000 version had 13 terms divided into four groups.

Explanation of term groups:

E

A term describes the minimum liabilities of the seller: the seller must deliver the goods to the purchaser in a previously agreed place, usually — in the premises of the seller. In practice the seller often helps to load the goods in the purchaser's transport. If the purchaser wishes that the seller takes further steps, it must be stipulated in the sales agreement of goods.

C

The terms oblige the seller to conclude a transport agreement on common conditions and pay for that. Therefore the location until which the transport fee is applicable must be indicated according to a respective C term. According to CIF and CIP terms the seller must insure the goods and pay for that.

F

The terms stipulate that the seller delivers the goods to be transported in accordance with the purchaser's instructions. If delivery location is the premises of the seller, the delivery is complete when the goods are loaded in the purchaser's transport; in other cases the delivery is complete when the goods are transferred in the possession of the purchaser without unloading from the seller's transport.

D

According to D terms the seller is responsible for delivery of goods in the agreed location or place in the country of import. The seller must assume all risks and costs from delivery of goods until that place.

Terms such as EXW, FCA, FAS, FOB, CFR, CIF, CPT and CIP Incoterms 2010 apply just like in previous Incoterms 2000 version, however, the changes pertain to the D terms, because DAF, DDU, DES and DUQ terms are excluded and two new ones are introduced:

DAT - Delivered At Terminal

DAP- Delivered At Place

Comparison of Incoterms 2000 and Incoterms 2010

When the parties include Incoterms conditions in the sales agreement, it is important to include a clear reference to currently applicable version of said terms..

#	Terminu grupa	Incoterms 2000	Incoterms 2010
1	Group E	EXW	EXW
2	Group F	FCA	FCA
3		FAS	FAS
4		FOB	FOB
5	Group C	CFR	CFR
6		CIF	CIF
7		CPT	CPT
8		CIP	CIP
9	Group D	DAF	-
10		DES	-
11		DEQ	-
12		DDU	-
13		DDP	DDP
14		-	DAT
15		-	DAP

Classification and division of Incoterms 2010 terms depending on the type of transport

Any type of transport

#	Term group	Explanation
1	EXW	No rūpnīcas (nodošanas vietas nosaukums)
2	FCA	Franko pārvadātājs (nodošanas vietas nosaukums)
3	CPT	Transportēšana apmaksāta līdz (galamērķa vietas nosaukums)
4	CIP	Transportēšana un apdrošināšana apmaksāta līdz (galamērķa vietas nosaukums)
5	DAT	Piegādāts līdz terminālam (galamērķa vietas vai ostas termināla nosaukums)
6	DAP	Piegādāts līdz vietai (galamērķa vietas nosaukums)
7	DDP	Piegādāts ar nodevas samaksu (galamērķa vietas nosaukums)

Maritime and inland waterways transport

#	Term group	Eksplanation
1	FAS	Franko gar kuģa bortu (iekraušanas ostas nosaukums)
2	FOB	Franko uz kuģa klāja (iekraušanas ostas nosaukums)
3	CFR	Cena un frakts (galamērķa ostas nosaukums)
4	CIF	Cena, apdrošināšana un frakts (galamērķa ostas nosaukums)

Effectiveness of the new version of Incoterms 2010 will not affect liabilities undertaken by the parties according to previous versions of Incoterms. We note that provisions of Incoterms are not a generally binding legal act, but rather a set of commercial practice, binding on parties only if they have included a reference to an applicable version and certain term of Incoterms in their product sales agreement. As of 1 January 2011, if an agreement does not contain a reference to any of previous Incoterms versions, it will be deemed that the reference pertains to Incoterms 2010./p>

Traditionally the only valid document, which the seller may submit pursuant to CFR and CIF terms, is on-board bill of lading. Bill of lading has 3 important functions:

Proves delivery of goods to the ship

Confirms transport agreement

It is a document confirming the handling of goods

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Usually several original copies of the bill of lading are issued and it is very important for the purchaser or the bank which acts according its instructions when making the payment, to ensure delivery of all original copies to the purchaser (so called "full set'’). It is also a requirement included in the ICC Rules for Documentary Credits and ICC Uniform Customs and Practice, "UCP". Any entry in transport documents, indicating at goods not received in appropriate condition, renders that document "dirty" and unacceptable pursuant to UCP.

Source:http://www.vid.gov.lv/

Authors of the page exclude any liability which may arise concerning the interpretation or application of the document provisions provided here.

Incoterms