Posted on September 11, 2019
On September 10, 2019 the International Chamber of Commerce launched Incoterms® 2020. Incoterms® rules on the use of domestic and international trade terms and facilite the conduct of global trade.
In order to be effective, contracts will have to specify that Incoterms® 2020 are being used. This updated edition of trade terms seeks to provide clarity to companies in several areas:
Key Changes for 2020
Change in the three-letter name from DAT to DPU
Incoterms® 2020 replaces DAT (Delivered at Terminal) with DPU (Delivered at Place Unloaded). This broadens delivery to places other than a terminal. DPU is the only term that requires the seller to unload the goods.
On-board bills of lading under FCA
If goods are sold FCA for carriage by sea, a bill of lading with an on-board notation could be required (an example might be if a letter of credit is in place). Normal delivery for FCA takes place prior to the delivery of the goods. Incoterms ® 2020 FCA has an option where the buyer and seller can agree that the buyer’s carrier will be instructed to provide an on-board bill of lading to the seller post loading.
Alignment of insurance coverage in CIF and CIP
Incoterms® 2020 lists different levels of insurance coverage in Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP).
In 2010, the levels of insurance for both CIF and CIP had to comply with the minimums provided in Clause C of the Institute of Cargo Clauses. Clause C covers very limited risk, most of which must happen during transit. For 2020, CIF will remain having to meet the standard of Clause C. However, CIP transactions will have to meet the minimum levels of Clause A, which covers all risks.
Arrangement for carriage with own means of transport
In 2010 all terms assumed that carriage would be carried out by a third party contracted by either the seller or the buyer. For FCA, DAP, DPU and DDP, the 2020 rules now allow for sellers to arrange for carriage using their own means of transport rather than contracting carriage to a third party.
Security related requirements
The increasingly security-focused shipping industry dictated that 2010 rules included mentions of security related requirements, but the mentions weren’t necessarily clear or prominent. For 2020 security related obligations are expressly mentioned under each rule, and the costs associated with them are given a clearer description in each rule.
While the ICC continues to take steps to make each edition of the Incoterms easier to understand and use, they are still widely misinterpreted. If you have any questions about how to properly use Incoterms to facility your trade and understand your costs and risks, please contact Allyn at email@example.com.
Contributor: Matthew Dreckman
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, U.A.E. For more information, visit www.allynintl.com.