Incoterms 2020 has arrived and there have been a handful of changes made in the newest revised version.
Published by the ICC (International Chamber of Commerce), Incoterms 2020 serve as industry standards for determining the duties of buyers and sellers of goods in international trade.
When comparing to the last revision made in 2010, it is important to note that no rules have been removed and no new rules have been added – there still are a total of eleven terms.
So, what are the changes that have been made?
DAT renamed to DPU
The most noticeable change in the Incoterms 2020 revision is the renaming of DAT (Delivery at Terminal) to DPU (Delivery at Place Unloaded). This change in acronym expresses the fact that goods can be delivered at any place, and not exclusively at transport “terminals”. Although this Incoterm has been renamed, the responsibilities of buyers and sellers remain exactly the same when applying DPU.
FCA and Bills of Lading
Another important change in Incoterms 2020 pertains to the term FCA (Free Carrier). When applying FCA, the seller is liable for making the goods available at its own property (ex.: warehouse) or at another predetermined location. Furthermore, when the FCA Incoterm is used, the seller is always responsible for loading the goods onto the buyer’s transport.
However, complications with the application of FCA arose when the seller was responsible for only loading goods onto the transport hired by the buyer, and not onto the international carrier. This brings up further issues regarding payment – international carriers typically will not provide sellers with bills of lading if the goods are not directly provided, and banks won’t pay sellers who do not provide a bill of landing with an on-board notation.
In the revised Incoterms 2020, FCA will now allow the buyer to instruct the carrier to issue an on-board bill of landing to the seller once loading is complete.
Freight Insurance Revisions in CIP and CIF
CIP (Carriage and Insurance Paid To) and CIF (Cost Insurance and Freight) are the only Incoterms that assign the seller the responsibility of purchasing insurance. In the previous 2010 revision, sellers were accountable for buying the minimum level of freight coverage. Incoterms 2020 has changed this rule – the seller must now purchase a higher level of insurance when CIP is applied. This insurance revision in Incoterms 2020 comes from a need for flexibility depending on the type of goods and the mode in which these goods are transported.
Incoterms 2020 will be effective starting January 1st, 2020.
