The International Chamber of Commerce recently published the Incoterms 2020, international trade terms for the sale of goods, which became effective from 1st January 2020.

Incoterms communicate the responsibilities between a seller and buyer in terms of costs and risks associated with the global transportation of goods.

What Are the Changes?

Many of the existing incoterms are still included, however some have been slightly amended. Also, new terms have been added –

FCA (Free Carrier – named place of delivery) has been amended slightly to allow the seller to require the buyer to procure an on-board bill of lading.

Historically, a seller of a containerised shipment under FOB (Freight on Board) terms lost control of the goods on their arrival at the export container port but still remained liable until the container was loaded onto the ship. This exposed the seller to potential cost and risk.

Incoterm FCA now answers this problem and allows the parties to agree for the buyer to direct the carrier to issue the onboard bill of lading to the seller.

Change of Insurance in CIP/CIF

Both CIF (Cost Insurance Freight) and CIP (Carriage and Insurance Paid to) require the seller to provide a basic level of insurance for the buyer equivalent to Clause C (Institute of Cargo Clauses).

However, these two terms usually apply to different classes of goods which call for different levels of insurance coverage.

In Incoterms 2020, the ICC has sought to clarify this distinction.

CIF now keeps the same insurance requirements (i.e. Clause C) but CIP has increased the level of insurance required to Clause A (Institute of Cargo Clauses).

DAT Replaced by DPU

DAT will be replaced by DPU (Delivered at Place Unloaded). The ICC says this change was made primarily to eliminate confusion between DAT and DAP (Delivered at Place) in terms of where and how delivery takes place.

DPU is now the only Incoterm where the seller has the responsibilities and costs of unloading at final destination. Import Customs clearance and related costs, however, remain the buyer’s responsibility.

For further information regarding this please feel free to get in touch.