You cannot get around the Incoterms if you are involved in international trade. As an internationally recognized set of regulations, the “International Commercial Terms” provides a basis for sellers and buyers ‘ rights and responsibilities in worldwide trafficking in products. There will be new rules beginning January 1–we will give you a summary of the most significant changes in the Incoterms 2020 and shed some light on the history of this industry standard.
what is going to change in Incoterms?
The Incoterms 2020 leads a series of changes for exporters, importers and logistics providers. Here is what you should know:
- DAT becomes DPU
- Increased insurance coverage for CIP
- Bill of Lading for FCA
- Carriage with own means of transport
- Clearer distribution of security obligations
DAT becomes DPU
In the previous model of the 2010 Incoterms, DAT (Delivered at Terminal) indicated that goods would be deemed delivered as soon as they were unloaded at the approved terminal. Users also demanded an Incoterm in the reviews obtained by ICC, which involves delivery to another venue. That is why DAT has now been substituted with the more common DPU (Delivered at Unloaded Place) wording.
2. Increased insurance coverage for CIP
Carriage and Insurance Paid ensures the seller must deliver the goods to the vendor but will pay for transportation and insurance up to the destination. The very same regulations apply to CIF (Carriage and Freight Insurance). This Incoterm can also be used in freight at sea.
Clause A, which is also the top level of insurance that covers all risks, is increased with the latest 2020 version the minimum coverage for CIP. The rationale behind this is that CIF is commonly used bulk materials, while CIP is used more often for manufactured goods.
3. Bill of Lading for FCA
If the Incoterm FCA has been negotiated between seller and purchaser, the seller shall deliver the goods to a place and individual identified by the purchaser. The cost and risk at this stage pass to the purchaser.
Consumers who, once shipped to the terminal, want to avoid bearing the risks for potential damage to their goods often choose this choice. Until recently, the downside was that the vendor was unable to collect a lading bill, and thus no letter of credit to ensure the goods were paid.
4. Carriage with own means of transport
The Incoterms 2020 stated that when the Incoterms FCA, DAP, DPU or DDP are implemented, the transportation of goods among sellers and buyers is carried out by a third party. The concept has been expanded to include carriage with the seller’s or buyers’ own means of transport in the new edition of the Incoterms, which come into force as of January 1 2020.
5. Clearer distribution of security obligations
Ultimately, the Incoterms also provide a more detailed allocation between buyer and seller of the related security requirements, including the associated costs. On the one side, this move can be seen as a response to the heightened international trade security regulations. And on the other round, it is intended to limit disputes about the costs that may occur, mainly at the port or distribution stage.
Visit ICC https://iccwbo.org/ (International Chamber of Commerce ) for further information: Incoterms 2020