25/07/19

INCOTERMS 2020

Leeward describes for you the main changes of the Incoterms 2020.
Since 1936, Incoterms have described the tasks, costs and risks associated with the delivery of goods by sellers to buyers. In order not to be outdated by changes in the market, the International Chamber of Commerce ("ICC") revises its Incoterms every 10 years. On 1 January 2020, Incoterms 2020 will replace the 2010 version.
The main changes are as follows:


DPU (Delivery at Place Unloaded) replaces DAT (Delivered at Terminal).

At DAT Incoterms 2010 (Delivered at Terminal), the seller bears all risks and costs until the goods have been unloaded from the vehicle and are at the disposal of the buyer at the named terminal. However, the market requires an Incoterm that allows the goods to be delivered to locations other than a terminal. The mere change of name, DPU instead of DAT, allows the buyer and seller to choose a place of unloading. Furthermore, this new term does not change the transfer of risks and costs.

On-board bill of lading for the seller at FCA Incoterms 2020

For container transport by sea, the maritime FOB Incoterms 2010 (Free on Board) is often used, whereby the risk is transferred upon delivery on board at the port of departure. The seller takes a significant risk because he loses effective control of the containers when they arrive in port, while his liability continues until the containers are loaded onto the ship. The seller could therefore insist on using FCA Incoterm 2010 (Free Carrier) and secure payment by documentary credit, which in many cases required the presentation of the bill of lading. Unlike FOB Incoterm 2010, at FCA Incoterm 2010 it is not evident that the seller will obtain the bill of lading. At FCA Incoterms 2020, the ICC therefore provides for the possibility that the parties agree that the carrier will provide the bill of lading to the seller with on-board notation as soon as the goods have been loaded onto the vessel.

Additional safety requirements

It is more and more common for parties to stipulate additional safety requirements around the purchase and transport, such as mandatory screening of containers. Incoterms 2010 already mentioned these obligations, but they are even more prominent in the new edition.

Different levels of insurance coverage at CIP and CIF Incoterms 2020

At CIP Incoterm 2010 (Carriage and Insurance Paid to) the seller delivers to the carrier and pays for the carriage and insurance. CIF Incoterm 2010 (Carriage Insurance and Freight) involves the same but is only used in maritime transport.

Under Incoterms 2010, the seller was required to offer the buyer insurance equivalent to Clause C (Institute of Cargo Clauses). This basic insurance is usually used for bulk goods and is often not suitable for other goods. For CIF Incoterms 2020, the insurance level will remain the same. This is different for CIP Incoterms 2020, where the level of insurance cover rises from Clause C to Clause A.

Own transport at FCA, DAP, DPU and DDP Incoterms 2020

The starting point for Incoterms 2010 was that the buyer and seller rely on a third party carrier for the transport of the goods. Incoterms 2020 clarifies the situation in which transport is arranged by the buyer or seller themselves. For example, FCA Incoterms 2020 stipulates that the buyer is responsible for the transport contract and the associated costs or that he arranges the transport. The same applies to Incoterms 2020 FCA, DAP, DPU and DDP.

Protective measures for DDP Incoterms 2020

DDP Incoterms means that the seller is in charge of the customs formalities. Incoterms 2020 provides more protective measures for this.

What should you do in preparation for the entry into force of Incoterms 2020?

Check which Incoterms your company uses in its standard contracts;
Assess whether you are using the correct Incoterms;
Check whether the Incoterms you use have changed and whether this will have any impact on your business.

Leeward

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