From 1st January 2020, the ICC will implement a revised set of rules, Incoterms® 2020. 

The International Chamber of Commerce (ICC) sets out the rules for where the responsibility and liability associated to domestic and international shipping is assigned.  These rules are called “Incoterm® Rules” and sometimes referred to as ‘terms of sale’ or ‘terms of trade’.  They govern three areas:

1. Transfer of risk
2. Transfer of cost
3. Obligations of seller and buyer

From 1st January 2020, the ICC will implement a revised set of rules, Incoterms® 2020.  When booking a shipment that will collect after 1st January 2020, please indicate clearly on your purchase order whether the 2020 rules or a previous version applies. 

What’s new in the Incoterms 2020?

The two principal changes in Incoterm® Rules 2020 versus 2010 are the following

  1. Delivered at Terminal (DAT) has been changed to Delivered at Place Unloaded (DPU) to clarify that the place of final delivery is not necessarily a “terminal”.
  2. CIP now requires that the insurance subscribed by the seller to cover the buyer's risk during transport should conform to The Institute Cargo Clauses A. This corresponds to what is commonly referred to as "All risks, subject to itemized exclusions".

Other changes include:

  • In case of FCA terms, the buyer and seller may agree that the buyer instruct its carrier to issue an “on board” Bill of Lading to the seller after the loading of the goods.
  • Inclusion of security-related requirements within carriage obligation and costs
  • Incoterm rules FCA, CAP, DPU, DDP, now take into consideration that the buyer or seller may arrange carriage using their own vehicles, rather than contracting with a third-party carrier   

Help to understanding Incoterm® Rules

All Incoterm® rules are associated with a named place or point. According to which Incoterm® rules are used, the named place will correspond either to the “place of delivery” or to the “place of destination”: 

Place of delivery – where the risk transfers from buyer to seller, which will not necessarily be the same as the final point of delivery as discussed with your freight forwarder

Place of destination – the final location where the goods will be transported to as discussed with your freight forwarder

How do these two key notions apply to the different Incoterm® rules?

EXW, FCA, FOB, FAS

Example: FOB Rotterdam. Rotterdam, as named place, is the “place of delivery” where the transfer of risk occurs between seller and buyer.

CIP, CPT, CFR and CIF

Example: CPT New York. New York, as named place, will be the “place of destination” to which seller must contract carriage. Place of delivery (“transfer of risk”) will be the place where the seller hands over the goods to the contracted carrier at origin.

DAP, DPU and DDP

Example: DAP Chicago. Chicago, as named place, will be both the “place of delivery” (transfer of risk) and “place of destination” (place to which the seller must contract carriage)

The complete Incoterm® rules 2020 can be obtained from the ICC (www.iccwbo.org

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