- Introduction – Beware of false reports
- General changes
- no consideration of VGM
- The 11 Incoterms 2020 terms
- New sorting order
- Changes in the clauses
- Different levels of coverage in CIF and CIP
- DAT becomes DPU
- Validity of Incoterms 2010 and Incoterms 2020
Even before the publication of Incoterms 2020 on September 10, 2019, there was much speculation about the planned changes. The ICC therefore also repeatedly pointed out false reports. For example, experts predicted the elimination of clauses such as EXW and FAS, and new Incoterms such as CNI (Cost and Insurance) were predicted. However, all this proved to be false. You can read more about this in this blog post.
Incoterms 2020 – what changes?
The ICC has invested a lot of work to supplement the existing rules in a sensible and practical way. Special attention was paid to the following adaptations to the work. With the introduction of the Incoterms 2020 rules, an improved overview is intended to enable users to always find the appropriate clause for the respective business case. This includes the following:
- Exact explanation of the connection or demarcation between the sales contract and its subordinate contracts
- Increased focus on selecting the right clause
- New instructions for use, through explanation of the respective clauses
- Optimized sequence within the Incoterms to place more emphasis on transfer of risk and delivery
No consideration of VGM
After careful consideration, the ICC has decided that the costs and obligations related to the determination of the Verified Gross Mass (VGM) will not be included in the new plant. The reason for this is the high complexity of the regulation introduced in 2016, which prescribes and regulates the weighing of freight containers in international shipping.
The 11 Incoterms 2020 terms
Terms for all types of transport
The 7 Incoterms for multimodal transport regulate the transfer of risk to the buyer and all other decisive conditions. EXW – EX Works FCA – Free CArrier CPT – Carriage Paid To CIP – Carriage and Insurance Paid to DAP – Delivered At Place DPU (new!) – Delivered at Place Unloaded DDP – Delivered Duty Paid
Clauses for sea and inland waterway transport
The 4 Incoterms maritime terms are exclusively intended for scenarios in which the seller unloads his goods to or on a ship in a port. There have been no changes in the designation of these terms: FAS – Free Alongside Ship FOB – Free On Board CFR – Cost and FReight CIF – Cost Insurance Freight
New order of the A/B rules within the terms
The important 10 A/B rules within each term have been rearranged as follows. In addition, the obligations regarding goods/payment, delivery and transfer of risk of the contracting parties listed in the Incoterms 2010 under A1 have been moved to more appropriate places such as A2 and A3. However, it is hoped that the changes will require some time and effort on the part of the users, and that the better positioning of these important conditions for the parties will improve the clarity and comparability of the individual Incoterms clauses.
- A1/B1 General obligations
- A2/B2 Delivery/acceptance
- A3/B3 Transfer of risk
- A4/B4 Transport
- A5/B5 Insurance
- A6/B6 Delivery/transport document
- A7/B7 Export / import clearance
- A8/B8 Testing / Packaging / Marking
- A9/B9 Allocation of costs
- A10/B10 Notifications
What changes have been made to the Incoterms 2020 terms?
Different levels of coverage in CIF and CIP
Almost all transport insurance policies worldwide are based on the IUA (International Underwriting Association of London) transport insurance conditions, known as Institute Cargo Clauses. These basically distinguish between three insurance clauses: The Institute Cargo Clauses (C) offer only a minimum insurance protection against explicitly predefined damage claims, the Institute Cargo Clauses (B) include additional coverage for further events and the Institute Cargo Clauses (A) again offer the highest insurance protection and cover all risks (All Risks). At least if not explicitly mentioned in the exclusions. This common practice in insurance cover is taken into account in the Incoterms 2020 in the clauses CIP (carriage and insurance paid) and CIF (cost, insurance and freight). In the case of CIF, the previous regulation with the standard position of Institute Cargo Clauses (C) is retained. In the case of the CIP clause, the seller is henceforth responsible for the insurance cover according to Institute Cargo Clauses (A). In both clauses the parties are free to agree on a lower or higher level of insurance cover.
Change of clause DAT to DPU
The only difference in the Incoterms 2010 between the clauses DAT (Delivered At Terminal) and DAP (Delivered At Place) was that for the seller at DAT the delivery was considered fulfilled when the goods were completely unloaded from the incoming means of transport at a terminal. The delivery of the goods at DAP took place when the goods were ready for unloading by the buyer on the means of transport. In order to emphasize that the delivery cannot be made only to one terminal, the clause DAT was changed to DPU (Delivered at Place Unloaded). In addition, the DAT clause has been brought forward and now appears in order before the newly named DPU clause.
Bills of lading with on-board notation and the Incoterms clause FCA
A new option has been added for FCA. The parties to the contract can agree with it that delivery is made at a container terminal in accordance with FCA. In this case the buyer then instructs his carrier to hand over a “Bill of Lading” to the seller. The seller can then send this “Bill of Lading” to the bank and thus receive payment from the documentary letter of credit. This new variant of the FCA clause is an additional, optional choice. However, it is often necessary because in many countries buyers and banks still require an “On board Bill of Lading”.
There were also fundamental adjustments in the following areas:
- Organization of transport with the seller’s or buyer’s own means of transport in FCA, DAP, DPU and DDP
- Inclusion of safety-related requirements with transport obligations and transport costs
We cannot discuss all changes and recommended procedures in this context. On the Incoterms website you can order the new book as well as book seminars that prepare the user appropriately.
How long do the Incoterms 2010 remain valid?
The new Incoterms 2020 will come into force on January 1, 2020. The Incoterms 2010 can still be used; however, it is essential that the name of the applicable version, e.g. EXW Incoterms 2010, be stated.
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