Since 1990, there has always been a revision of Incoterms Rules every decade. The new Incoterms 2020, presently being drafted in the International Chamber of Commerce (ICC), are to be published by the last quarter of 2019 and will enter into force on January 1, 2020.
Firts of all, let us review the meaning of Incoterms:
- Incoterms beginning with an E: are Departure Incoterms, i.e. the buyer takes care of everything while the seller simply makes the goods available. For example: EXW.
- Incoterms beginning with an F: are Incoterms whose main transport is not paid for by the seller, it is the buyer who must pay for them. For example: FOB, FCA or FAS.
- Incoterms beginning with a C: are Incoterms whose main transport is paid by the seller. For example: CIF, CIP, etc.
- Incoterms beginning with a D: are said to be Incoming Incoterms, i.e. the buyer takes care of nothing, everything is managed and paid for by the seller. For example: DAP, DDP, etc.
Although the official list of new Incoterms is not yet known, we do have an indication of the changes addressed by the Drafting Committee:
Removal of Incoterms EXW and DDP
This will be a significant change because EXW (ExWorks) is a very commonly used Incoterms by many companies.
The DDP (Delivered Duty Paid) is commonly used for goods (e.g. spare parts) and it handles all logistics and customs clearance up to delivery to the buyer's address.
The reason behind the removal of these two terms is that they should only cover domestic transactions, i.e. by the exporter-seller for the EXW by the importer-buyer for the DDP.
Removal of Incoterm FAS
FAS (Free Alongside Ship) is an Incoterm used when merchandise is delivered at the port of departure in the exporter's country.
Actually, FAS is only used for the exportation of some commodities (minerals and cereals) and, in this sense, the Drafting Committee is evaluating the convenience of creating a specific Incoterm for this type of products.
Unfold FCA in two Incoterms
FCA (Free Carrier) is the most used Incoterm (about 40% of the international trade operations).
It is very versatile and allows the delivery of goods in different places (seller's address, land transport terminal, port, airport, etc.) that, most of times, are in the seller's country. The Committee is evaluating the possibility of creating two Incoterms FCA; one for terrestrial delivery and another for maritime delivery.
FOB and CIF for container shipping
The modification made in the edition of Incoterms 2010 that when the merchandise does not travel in a container, Incoterms FOB (Free on Board) and CIF (Cost, Insurance, Freight) should not be used, but their counterparts FCA and CIP. The vast majority of exporting and importing companies do not apply these Incoterms and continue using the old ones.
This is due to the fact that FOB and CIF are two very old Incoterms and the International Chamber of Commerce has not made an effort to transmit this change adequately, which is very important, since approximately 80% of the world trade is made in a container. In the Incoterms 2020, it is possible that FOB and CIF can be used again for container shipping, as was the case with Incoterms 2000 and earlier versions.
Creation of a new Incoterm: CNI
The new Incoterm would be denominated as CNI (Cost and Insurance) and would cover a gap between FCA and CFR/CIF (Cost and Freight/Cost, Insurance, Freight). Unlike FCA, which would include the cost of international insurance on account of the seller-exporter, and as opposed to CFR/CIF that would not include freight. As in the other Incoterms in "C", this new Incoterm would be an "Arrival Incoterm", i.e. the risk of transport would be transmitted from the seller to the buyer at the port of departure.
Unfold DDP in two Incoterms
As with FCA, DDP (Delivery Duty Paid) also generates some problems due to the fact that the customs duties in the importing country are paid by the seller-exporter, regardless of the place of delivery of the goods. For this reason, the Drafting Committee is considering creating two Incoterms based on DDP:
DTP (Delivered at Terminal Paid): When the goods are delivered to a terminal (port, airport, transport center, etc.) in the country of the buyer, and the seller assumes the payment of customs duties.
DPP (Delivered at Place Paid): When the goods are delivered at any place other than a transport terminal (for example, at the buyer's address), and the seller assumes the payment of the customs duties.
In addition to the removal and creation of some Incoterms, the Drafting Committee is analyzing other issues to include in the new version of the Incoterms 2020. Among them are:
- Transportation security;
- Regulations on transportation insurance;
- The relationship between the Incoterms and the International Sale Contract.
We will keep you informed of the final changes that will be retained.
In the meantime, our sales teams remain at your entire disposal to respond to your inquiries.
FAQs
The key changes relate to the DAT clause, which has been replaced by the DPU clause, the insurance points are clarified according to C-conditions, road safety is now well defined, own transport is considered, the changes also apply to FCA/FOB clauses regarding freight invoices, etc.
What is the new Incoterms addition for 2020? ›
DAT Becomes DPU
The most obvious change to the old Incoterms is renaming the term Delivered at Terminal (DAT) to Delivered at Place Unloaded (DPU). The ICC renamed this term because it became apparent that sometimes the buyer and/or seller want the delivery of goods to occur somewhere other than a terminal.
What changes between Incoterms 2010 and 2020? ›
Change in three-letter initials from DAT to DPU
The rule known as DAT (Delivered At Terminal) under Incoterms 2010 has been renamed DPU (Delivered at Place Unloaded) under Incoterms 2020. This change is to reflect the reality that the place of delivery may not necessarily be a terminal.
What are the changes to FCA Incoterms 2020? ›
Incoterms 2020 now has provisions for shipping goods Free Carrier (FCA) with a Bill of Lading with an on-board notation. This is especially useful for containerized shipments. Under Incoterms 2010 many buyers were using FOB, because of the Bill of Lading that was required to be present under FCA.
What are the 2 key changes in Incoterms 2020? ›
The key changes relate to the DAT clause, which has been replaced by the DPU clause, the insurance points are clarified according to C-conditions, road safety is now well defined, own transport is considered, the changes also apply to FCA/FOB clauses regarding freight invoices, etc.
What is the summary of Incoterms 2020? ›
Incoterms 2020 formally defines the delivery point in the transaction where 'the risk of loss or damage to the goods passes from the seller to the buyer'. In contrast, previously, the term had a more informal explanation. Knowing the point of risk transfer eases the transaction for different trade finance parties.
Is Incoterms 2020 still valid? ›
Although the ICC recommends using Incoterms® 2020 beginning January 1, 2020, parties to a sales contract can agree to use any version of Incoterms after 2020. They need to clearly specify the chosen version of Incoterms being used (i.e., Incoterms® 2010, Incoterms® 2020, or any earlier version).
Which rules of Incoterms 2010 are replaced by Incoterms 2020? ›
Incoterms® 2010 Replaced With Incoterms® 2020
- 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”)
In Incoterms 2010, there is no mention of any safety and security measures taken by the seller while in the 2020 version of Incoterms, it is clearly mentioned that the seller is required to take any necessary measures for the safety and security of the goods during transportation process and pay for any necessary ...
What is the latest revision of Incoterms? ›
Incoterms® Guide to use in 2024
The International Chamber of Commerce ICC published the latest version of Incoterms® 2020. These changes came into effect on the 1st of January 2020 and are being being used in 2024 and beyond, until the next changes are published sometime in future.
FOB is only used in waterway shipments. Under FOB, the seller is responsible for loading the cargo onto the vessel, but with FCA, it is the buyer's responsibility. FCA transfer risk takes place at an agreed-upon point, whereas with FOB, the buyer assumes the risk on the vessel.
What is the difference between FCA and CPT Incoterms 2020? ›
The same buyer responsibilities apply to CPT as to FCA. However, there is one difference; the seller pays the delivery costs. However, it is still the seller's responsibility to deliver the goods to the buyer's carrier.
What is the difference between EXW and FCA Incoterms 2020? ›
EXW and FCA are similar in many aspects, but there are key differences in responsibilities and control. Both Incoterms place most of the responsibilities on the buyer, but FCA allows the buyer to assume significant responsibility without handling export duties.
What are the three main Incoterms? ›
Incoterms Rules for Any Mode of Transport
Some common examples of Incoterms rules for any mode of transportation include Delivered Duty Paid (DDP), Delivered at Place (DAP), and Ex Works (EXW).
What are the factors of Incoterms? ›
Four factors which are “relations with forwarding agents, type of goods, complexity of transportation and distance” differ according to importers and exporters in their selections.
What three main issues do Incoterms deal with? ›
Incoterms (or International Commercial Terms) are specific terms used in international commercial transactions. Simply put, they are three-letter acronyms used to clearly communicate the risks, costs, and tasks associated with international transportation and the delivery of goods.
What is the basis of Incoterms 2020? ›
The Incoterms® 2020 rules are updated and grouped into two categories reflecting modes of transport. Of the 11 rules, there are seven for ANY mode(s) of transport and four for SEA or LAND or INLAND WATERWAY transport.
