Updated Incoterms® 2020 Rules will go into effect January 1, 2020. The International Chamber of Commerce (ICC) set out to make Incoterms® 2020 easier to access and use and has included detailed examples of the responsibilities for both importers and exporters under each rule. Incoterms® are the internationally recognized standard for both international and domestic contracts for the sale of goods. The rules are developed and maintained by experts and practitioners brought together by the ICC and are the standard in international business rules setting trade terms to help traders avoid costly misunderstandings and identify which fees and potential liabilities can impact the price of their goods.
How you may be affected with Incoterms® 2020.
Shippers should review and identify what Incoterms their business typically uses and once understood, check to see if they are in alignment with the changes introduced by Incoterms® 2020 and what impact they could have on their shipping. With one exception, everyone should be familiar with these 11 universally recognized terms subdivided into two categories or ‘mode of transport’:
Rules for any mode or modes of transport:
- EXW: Ex Works
- FCA: Free Carrier
- CPT: Carriage Paid To
- CIP: Carriage and Insurance Paid To
- DAP: Delivered at Place
- DPU: Delivered at Place Unloaded*
- DDP: Delivered Duty Paid
Rules for sea and inland waterway transport:
- FAS: Free Alongside Ship
- FOB: Free on Board
- CFR: Cost and Freight
- CIF: Cost Insurance and Freight
A new Incoterm DPU (Delivered at Place Unloaded) has been created to replace DAT (Delivered at Terminal). DPU is the only Incoterm in which the goods are delivered unloaded at the place of destination. The ICC renamed this term because at times, the buyer and/or seller want the delivery of goods to occur somewhere other than a terminal. This is the only term that tasks the seller with unloading the goods.
As compared to 2010, Incoterms 2020 has also revamped its formatting and arrangement. Here’s a quick look at what’s new in Incoterm 2020 rules.
- FCA – One of the most important changes relates to the term Free Carrier (FCA). Under FCA, the seller is now responsible for having the shipment ready for pickup at its own location or a named location. In either case, the seller is responsible for having the goods directly loaded on the buyer’s transport in order for the buyer’s carrier to issue a bill of lading to the seller.
- CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid to) set new standard insurance arrangements identifying which party needs to purchase insurance and at what level.
- FCA (Free Carrier), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), and DDP (Delivery Duty Paid) now take into account the buyer and seller arranging their own transport rather than using third party companies
- Security-related obligations are now more prominent
“Explanatory Notes for Users” for each Incoterm® have replaced the 2010 edition’s Guidance Notes and are designed to be easier for users. As with all trade compliance, it is important that all involved in international trade gain a thorough understanding of the amended Incoterms 2020 rules set to roll out on the first of the new year.
For a simplified visual guide, download DB Schenker’s Incoterms 2020 At a Glance or for more information, reach out to your local DB Schenker representative.
Take any of our new Incoterms® 2020 courses and learn from the experts, what changes have been made and how to apply the rules. Click here.
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