The Incoterms 2010 revision is of particular interest to companies in the United States (and their trading partners) for the following reasons.
Incoterms vs the Uniform Commercial Code
Trade practitioners in the U.S. will be aware that the terms FOB, CIF and so on are defined within the United States federal Uniform Commercial Code (UCC). First published in 1952, UCC covers many aspects of commercial contracts. It contains “shipment and delivery” provisions that have similar aims to those of the Incoterms rules.
Some UCC expressions have the same three-letter abbreviations as those within the Incoterms system; but their definitions are totally different. Notoriously, “FOB” can have a number of different meanings within UCC, most of which do not correspond with the ICC Incoterms FOB definition.
The situation is confused further by variations between different US states. In 2004, there was a major revision of the UCC, which abolished many of these terms. However for reasons unrelated to its “shipment and delivery” provisions, many states have failed to adopt the 2004 revision; so in these states, the former UCC revision remains law.
Companies in the US are therefore faced with the prospect of mastering two versions of the UCC for use with domestic transactions, plus ICC Incoterms rules for use with cross-border transactions.
The logical solution to this confusion is to standardise on the use of ICC Incoterms rules for all transactions, whether domestic or international.
The Incoterms 2010 revision has been drafted to make the interpretation of the rules very straightforward for domestic trades. For example, all obligations in respect of import or export procedures need only be considered ‘where applicable.’