New Incoterms® 2020: Key Changes, Rules and Obligations

What are Incoterms?

Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). Incoterms® were first created by the ICC in 1936. The Incoterms® rules are created and published by the ICC and are normally revised every 10 years, since 1980. The ICC describe the Incoterms® 2020 rules as:

The Incoterms® rules are the world’s essential terms of trade for the sale of goods. Whether you are filing a purchase order, packaging and labelling a shipment for freight transport, or preparing a certificate of origin at a port, the Incoterms® rules are there to guide you. The Incoterms® rules provide specific guidance to individuals participating in the import and export of global trade on a daily basis.

Incoterms® 2020 Rules

The new Incoterms® rules define the following main areas:

• The obligations between the seller and the buyer for arranging carriage and/or insurance of the goods.

• Who is responsible for obtaining the shipping documentation and export or import licences.

• Where and when the seller delivers the goods to the buyer, subsequently confirming the transfer of risk between the seller and buyer.

• When the seller is or is not responsible for costs, such as packing, loading, transport, security compliance, unloading and checking of goods shipped and/or delivered.

• When the buyer is or is not responsible for costs, such as packing, loading, transport, security compliance, unloading and checking of goods shipped and/or delivered. 

• The Incoterms®2020, as per previous Incoterms®, do NOT handle the transfer of ownership or title of the goods sold.

Key Changes

• The ICC have enhanced Incoterms® 2020 to better assist the international trading community in selecting the correct Incoterms® rule for their sales contract. Therefore, ensuring more efficient export / import transactions.

• Delivery At Terminal (DAT) in Incoterms® 2010 has been replaced by Delivered at Place Unloaded (DPU). Under the new DPU Incoterms®, the seller is required to unload the goods at the destination. This is the only Incoterms® rule which requires the seller to unload goods, therefore the seller needs to ensure they can organise unloading at the named place.

• Incoterms® 2020 now include security-related requirements within the carriage obligations and costs.

• Under the new Incoterms®, Cost Insurance and Freight (CIF) keeps the same insurance requirements i.e. Clause C (Institute of Cargo Clauses), but under Carriage and Insurance Paid To (CIP) the insurance requirement has been increased to Clause A (Institute of Cargo Clauses). This is because CIF is mostly used with bulk commodity movements and CIP is mostly used for manufactured goods via multimodal solutions.

Your choice of Incoterms® will be an integral part of your commercial transaction stated within the contract and must be applicable to the type of goods that will be shipped and the type of transportation that will be used.

If you would like more details, please call +44 (0) 118 932 8447 or email info@icsglobalservices.co.uk  

ICS Global Services Limited