The Incoterms® rules define the important responsibilities of buyers and sellers for the delivery of goods under sales contracts. They are the authoritative rules for determining how costs and risks are allocated to the parties. Incoterms rules are regularly incorporated into contracts for the sale of goods worldwide and have become part of the daily language of trade.

The 9th version of the Incoterms 2020 will come into effect on the 1st of January 2020 and contains the rules for use of the 11 Incoterms® trade terms. It takes into account the latest developments in commercial practice and updates the rules to make them more accessible and easier to use.

What are the changes seen in Incoterms 2020?

In the last version of Incoterms 2010, there were 11 Incoterm rules. They were divided into two classes:

  1. Rules For Any Mode Of Transport
    EXW (EX WORKS)
    FCA (FREE CARRIER)
    CPT (CARRIAGE PAID TO)
    CIP (CARRIAGE AND INSURANCE PAID TO)
    DAT (DELIVERED AT TERMINAL)
    DAP (DELIVERED AT PLACE)
    DDP (DELIVERED DUTY PAID)
  2. Rules For Sea And Inland Waterway Transport
    FAS (FREE ALONGSIDE SHIP)
    FOB (FREE ON BOARD)
    CFR (COST AND FREIGHT)
    CIF (COST INSURANCE AND FREIGHT)

The most obvious change to the 2010 Incoterms is renaming the term Delivered at Terminal (DAT) to Delivered at Place Unloaded (DPU). The ICC renamed this term because it became apparent that sometimes the buyer and/or seller want the delivery of goods to occur somewhere other than a terminal.

This term is often used for consolidated containers with multiple consignees, and it is the only term that tasks the seller with unloading the goods.

  1. Rules For Any Mode Of Transport (2020)
    EXW (EX-WORKS)
    FCA (FREE CARRIER)
    CPT (CARRIAGE PAID TO)
    CIP (CARRIAGE AND INSURANCE PAID TO)
    DAP (DELIVERED AT PLACE)
    DPU (DELIVERED AT PLACE UNLOADED)
    DDP (DELIVERED DUTY PAID)
  2. Rules For Sea And Inland Waterway Transport (2020)
    FAS (FREE ALONGSIDE SHIP)
    FOB (FREE ON BOARD)
    CFR (COST AND FREIGHT)
    CIF (COST INSURANCE AND FREIGHT)

Apart from this, the other differences between the 8th revision (2010 rules) and 9th revision (2020 rules) are that:

  • The Incoterms® FCA (Free Carrier) now provides the additional option to make an on-board notation on the Bill of Lading prior loading of the goods on a vessel.
  • The costs now appear centralized in A9/B9 of each Incoterms® rule.
  • In Incoterms 2020 rules, the seller is now responsible for purchasing a higher level of insurance coverage—at least 110% of the value of the goods as detailed in Clause A of the Institute Cargo Clauses—under the revised term CIP. The insurance requirement hasn’t changed for CIF
  • CIF requires at least an insurance with the minimum cover of the Institute Cargo Clause (C) (Number of listed risks, subject to itemized exclusions).
  • The Incoterms® rules Free Carrier (FCA), Delivered at Place (DAP), Delivered at Place Unloaded (DPU) and Delivered Duty Paid (DDP) now take into account that the goods may be carried without any third-party carrier being engaged, namely by using its own means of transportation.
  • The rule Delivered at Terminal (DAT) has been changed to Delivered at Place Unloaded (DPU) to clarify that the place of destination could be any place and not only a “terminal”.
  • The Incoterms® 2020 now explicitly shifts the responsibility of security-related requirements and ancillary costs to the seller.

 

Are you ready for INCOTERMS 2020?