Here’s What You Need to Know

incoterms 2020

As 2020 approaches, a new decade is upon us and new rules and systems are to be put in place. For those in the logistics industry, the International Chamber of Commerce’s Incoterms are a good place to start. Last updated in 2009, this set of rules help govern the terms of trade for the sale of goods throughout the world.

These rules dictate how to correctly approach all essential areas of trade, including issuing a purchase order, packaging and labeling shipments for freight transportation, preparing certificates at their port of origin, and more.

The Incoterms are set in place as a guide to assist everyone and ensure that there are governing rules that can be followed by everyone participating in the import and export industry on a day-to-day basis. It can help eliminate language barriers and things that may get lost in translation among the various participating countries around the world.

Past Versions of the Incoterms

The first version of the Incoterms was originally published in 1936, and since then they have been revised various times to help improve the language and add updates as they become relevant. Generally, the changes are minimal, but they tend to reflect important topics that may arise in the shipping industry. In some cases, they may be corrections to past versions or even layout changes to help make the guide easier to navigate.

The most recent version of the Incoterms that was published before the 2020 version, was in 2009. This iteration is known as Incoterms 2010 and still remains in effect today.
Since its inception, the Incoterms has existed as the primary guide for a variety of critical topics in regards to importing and exporting across the world.

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.

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.

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 FREE QUOTE.