The new Incoterms

All current and potential exporters should be aware that new Incoterms are expected to take effect in 2011.

Incoterms is the abbreviation for “International Commercial Terms” and were introduced by the International Chamber of Commerce back in 1936 to provide people engaging in international trade a common set of trade terms that would be understood across the world.

You would have all heard of FOB “Free on Board”, probably the most used but also misused of the Incoterms. The current version of Incoterms is called Incoterms 2000.

Incoterms are crucial when trading across borders and should be included in all international sale of goods contracts. They stipulate in one short acronym exactly who will pay for the freight, who wears the risk in the goods at which point in time, who pays for insurance and duty. You should always make sure you seek legal advice if you don’t understand the Incoterm(s) that might show up in your contract.

Incoterms 2010 are currently in the works and are expected to be more userfriendly, with expanded explanations of terms to help users. Some of the changes include:

• Clear distinction between multimodal Incoterms and those for Marine Use only;
• Cargo security to be covered;
• Some of the 13 Incoterms will be eliminated;
• A new term will be introduced for use in domestic transactions and transactions where no import or export clearance obligations exist.

Incoterms 2010 are expected to take effect on January 1, 2011 but the final version is not yet available. Keep an eye on the www.icc.org International Chamber of Commerce Website and talk to your lawyer to ensure that your trading terms are appropriate for your transaction.

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Lynda Slavinskis is an outgoing, intuitive and commercially savvy lawyer. She has worked in-house at Sussan Corporation and Tattersall’s and now assists small and medium businesses with import, export, leases, franchising, employment and general business advice as principal solicitor of Lynda Slavinskis Lawyers & Consultants. Lynda is on the Victorian State Government’s Small Business Advisory Council.