A Quick Guide to Incoterms 2020
Incoterms are a set of rules that guide domestic and international trade, facilitating the conduct of imports and exports, defining the costs, risks, and obligations of buyers and sellers in international transactions.
The International Chamber of Commerce (ICC) recently released Incoterms® 2020 featuring an updated presentation of the 11 trade terms.
All international sales contracts should refer to Incoterms® 2020 as the latest version of the Incoterms rules.
Important Changes You Need to Know:
- DAT (Delivered at Terminal) changed to DPU (Delivered at Place Unloaded): This means the seller delivers the goods, and transfers the risk to the buyer. Removing the terminal reference allows for a more general use.
- Change of Insurance in CIP: In Incoterms 2020, CIP (Carriage and Insurance Paid to) has increased the insurance required to Clause A (Institute of Cargo Clauses), with no change to CIF (Cost, Insurance and Freight). The reasoning is that CIF is often used with bulk commodity trades, and CIP is more often used for manufactured goods.
- FCA (Free Carrier) and Bills of Lading: In Incoterms 2020, FCA has been changed to allow the parties to agree for the buyer to direct the carrier to issue the on-board bill of lading to the seller.
- Costs are Clarified: Incoterms 2020 clearly details the allocation of costs between seller and buyer, as a response to the increasing disputes about the allocation of costs, especially those in or around the port or place of delivery.
- Security Requirements: Transport security requirements have become more prevalent, as they bring cost, and risk delay if not fulfilled. Incoterms 2020 makes security obligations more prominent.
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterm® Rules may be obtained from the ICC website iccwbo.org.