Here’s What You Need to Know

In the last quarter of 2019, the International Chamber of Commerce launched the Incoterms 2020. A set of rules that guide the trade community on the day-to-day transactions. One of the main roles of these rules is to alleviate disputes between traders (importers and exporters) at an international level. The Incoterms eliminate common challenges such as language barriers and geographical locations and ease the path of doing business many times with unknown suppliers in foreign lands.

The beginning of the current pandemic of Covid‐19 virus took place pretty much while the new Incoterms 2020 started to be known and used by many in the trade community. With urgent imports and exports arising from the demand for medical equipment and PPE’s all over the world, these rules have become an essential tool to ensure clear communication between the parts; especially for many companies not usually engaged in the trading of these commodities.

Current Version of the Incoterms and Its Changes

In the nine years since the last version was released, the Incoterms have undergone some changes. The 2020 text is using a new layout and a new style of presentation; this is the most noticeable change. The changes to the rules themselves are minor, and none have been added or removed.

The Incoterms 2020 include features that help make improvements to the sequencing and presentation of the rules, as well as an expository welcome of the explanatory notes. Aside from this, the rules are still presented within two categories: four water rules, and seven that may apply to all forms of transport. This brings us to a total of eleven rules, which is unchanged from the 2010 version. Aside from this, one rule has been renamed.

incoterms history infographic
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Main Differences Between Incoterms 2010 and 2020

  • The DAT rule (Delivered At Terminal) has been renamed to DPU, to stand for “Delivered at Place Unloaded”. This highlights the fact that deliveries can occur at more than just the transport terminal. This is the only rule that requires sellers to unload their cargo at the designated destination.
  • Freight insurance. The CIP (Carriage and Insurance Paid to) rule has been changed slightly to require a higher level of cover than previously specified in Incoterms 2010. This raises the level of coverage for freight insurance from Institute Cargo Clauses (C) to Institute Cargo Clauses (A).

    For the CIF rule, there is no change – the default cover requirement remains at Institute Cargo Clauses (C). This is because CIF is popularly used among commodities transactions, which typically allows this lower level of cover.

  • The Incoterms 2020 also makes changes to the FCA rule to help assist sellers when they are using it in conjunction with a letter of credit. Both parties may agree that the buyer can instruct the carrier to issue the seller with a document, such as an on-board bill of lading or similar, which banks typically require under a letter of credit.

    This is an obvious “stopgap” fix to the banks’ insisting for on-board bills of lading for containers. However, it doesn’t help mitigate the underlying risk that arises when a seller allows the buyer to arrange transport.

  • The Incoterms 2020 now cover situations where either party (the buyer or the seller) transport goods using their own vehicles, without using the services of a third-party transportation or freight forwarding company.
  • A higher level of detail regarding the allocation of security-related costs has also been addressed in more detail.
Download a PDF Copy of Incoterms 2020

Licensed Freight Forwarder Ready to Help

Hiring an expert is the best way to ensure that you don’t miss any critical information when it comes to the new Incoterms. As a licensed Freight Forwarder and US Customs Broker, Promptus is always on top of the latest updates in the industry and can work closely with your business to ensure that you are up-to-date on all import and export proceedings as well. Contact us today at 1-877-776-6799 for a quote.