Five major changes in Incoterms® 2020
New rules

Five major changes in Incoterms® 2020

The International Chamber of Commerce has released Incoterms® 2020 and points to five changes as important to contracts in global trade.

The International Chamber of Commerce, ICC, recently released the 2020 edition of its International Commerce Terms of Sale, better known in global trade by their familiar and trademarked name, Incoterms.®

The terms were first introduced by the ICC in 1936 to establish commonly accepted definitions and rules related to the delivery of goods between trading partners worldwide. Since then, the ICC has periodically revised the rules to reflect changes in the international trade system.

“Incoterms® 2020 rules make business work for everyone by facilitating trillions of dollars in global trade annually,’’ said ICC Secretary General John W.H. Denton AO, in a statement.

“Because they help importers and exporters around the world to understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions, and help build confidence in our valuable global trading system.”

New terms are more accessible and easier to use

The ICC says the 2020 terms are more accessible and easier to use, with more detailed explanatory notes and enhanced graphics, to illustrate the responsibilities of importers and exporters for each rule. It adds that the introduction to Incoterms® 2020 includes a more detailed explanation on how to choose the most appropriate rule for a given transaction, or how a sales contract interacts with ancillary contracts.

These are the major changes

At the time of their September publication the ICC pointed to the following changes in Incoterms® 2020, saying the new document:

  • Provides for demonstrated market need in relation to bills of lading (BL) with an on-board notation and the Free Carrier (FCA) rule.
  • Aligns different levels of insurance coverage in Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP).
  • Arranges for carriage with own means of transport in FCA, Delivered at Place (DAP), Delivered at Place Unloaded (DPU), and Delivered Duty Paid (DDP).
  • Changes the three-letter name for Delivered at Terminal (DAT) to DPU.
  • And includes security-related requirements within carriage obligations and costs.

Despite the new rules, companies can still refer to Incoterms® 2010. You will need to make it clear in your contracts which version of the terms you are referring to.

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