Transactions in international trade are often complex. To ensure

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Date/Issue:
March 2011/Issue 70
Title:
Revised Incoterm rules take effect in 2011
Author:
Andriana Davis, Senior Product Manager, Avalon Risk Management
Transactions in international trade are often complex. To ensure consistent interpretation of trading rules
and responsibilities, the International Chamber of Commerce (ICC) created “Incoterms,” a series of
standard trading terms outlining the tasks, costs and risks involved in the delivery of goods from sellers to
buyers.
To keep pace with trends in world trade, Incoterms are revised approximately once a decade. The newest
version, Incoterms® 2010, took effect on Jan. 1, 2011. Understanding the new Incoterms® 2010 rules is
crucial for accurate negotiation of sales contracts and to determine the financial interest in insuring
shipments.
Changes to Classification and Number of Terms
While previous versions of the Incoterms grouped items into four categories: E, F, C and D, the terms are
now separated into two groups: those available for all modes of transport, and those only applicable to sea
and inland waterway transport. The complete list of Incoterms now includes:
Any Mode of Transport
EXW – Ex Works
FCA – Free Carrier
CPT – Carriage Paid To
CIP – Carriage and Insurance Paid To
DAT – Delivered at Terminal
DAP – Delivered At Place
DDP – Delivered Duty Paid
Sea and Inland Waterway Transport Only
FAS – Free Alongside Ship
FOB – Free On Board
CFR – Cost and Freight
CIF – Cost, Insurance and Freight
It is important to note that the total number of terms decreased from 13 to 11. There were two new additions
(DAP, DAT) and four deletions (DAF, DDU, DEQ, DES). The ICC noted that the previous D-terms were
similar, which resulted in confusion on what term to use. Both new terms DAP and DAT may be used in
any mode of transit. The only D-term that was left unchanged is DDP – Delivered Duty Paid.
DAP (a new D-term that stands for “Delivered at Place”) replaces DAF, DES and DDU. Of the previous
terms, DDU is most similar to the new DAP term. Under DAP, goods are delivered at the named
destination, but not unloaded or import cleared. Goods are delivered to the named destination with the seller
bearing all risks and costs (other than applicable import costs).
DAT stands for “Delivered at Terminal” and replaces DEQ. DAT is primarily used for containerized goods,
which are delivered, unloaded and placed at the buyer’s disposal at the named destination, which may be a
The Quest Newsletter is published quarterly and is designed to provide critical information in the transportation industry. Avalon
Risk Management is not responsible for the accuracy or reliability of information contained in articles. The reader/user assumes
all risk in the use of such information.
150 NORTHWEST POINT BOULEVARD • 4TH FLOOR • ELK GROVE VILLAGE, IL 60007
PHONE: (847) 700-8100 • FAX: (847) 700-8116 • www.avalonrisk.com
Page 2 of 2
port. Goods are delivered with the seller bearing all risks and costs (other than applicable import costs) to
the named destination.
Cargo Insurance Requirements
Obligations to obtain Cargo Insurance were also updated with the new rules. Now, when using the CIF
term, the seller must obtain coverage with at least ICC-C minimum clauses. ICC-C coverage is similar to
the American Cargo Insurance term “Free of Particular Average (FPA).” In addition, the seller must secure
additional coverage when required by the buyer, such as ICC-A, which is similar to the American Cargo
Insurance term “All-Risk.”
When using Incoterms® 2010 in contracts, trading documents should note the particular Incoterm, the
location and the updated 2010 version. For example, a commercial invoice should state “FCA Chicago,
United States, Incoterms® 2010.”
Avalon continues to make the issuance of Cargo Insurance as simple as possible for you. We work with
strong insurance markets and have the highest service standards for answering your questions and
processing claims when they do occur. Our flexible policies allow our customers to insure most
commodities immediately, and those requiring Special Quotes within a 24-hour turnaround time. With our
Cargo Insurance program, you receive competitive rates, marketing support and exclusive Merlin
technology to streamline certificate issuance.
For more information, please contact your local Avalon office or Andriana Davis, Senior Product Manager
at (847) 700-8087 or at [email protected] A list of our offices may be found at www.avalonrisk.com.
The Quest Newsletter is published quarterly and is designed to provide critical information in the transportation industry. Avalon
Risk Management is not responsible for the accuracy or reliability of information contained in articles. The reader/user assumes all
risk in the use of such information.
150 NORTHWEST POINT BOULEVARD • 4TH FLOOR • ELK GROVE VILLAGE, IL 60007
PHONE: (847) 700-8100 • FAX: (847) 700-8116 • www.avalonrisk.com
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