• George Abi Nakad

Incoterms 2020 - Changes In Effect January 1, 2020

Incoterms are a set of trade terms used in international and domestic sales contracts. Published by the International Chamber of Commerce and revised every decade. The Incoterms rules define the division of responsibilities between a seller and a buyer for the tasks, costs and risks involved in delivering merchandise.

The changes in the Incoterms 2020 are:

DAT is changing to DPU: DAT means Delivered-At-Terminal, will be replaced by DPU – Delivery-At-Place Unloaded. DPU mean that the seller delivers the goods and transfers risk to the buyer once the goods unloaded at place of destination agreed. The import customs clearance and related costs remain for the account of the buyer. DPU is basically a DAP Delivered at Place, with unloading. The reference to terminal has been removed to make it more general.

Change of insurance in CIP/CIF. Cost of Insurance and Freight (CIF) means the seller delivers to the carrier and pays the carriage and insurance to named destination in any mode of transport. For 2020, the same insurance requirements apply but Carriage and Insurance Paid (CIP) has increased the insurance required under this term. The reason is CIF is generally used with bulk goods (waterways only) and CIP (multimodal)I s often used for manufactured goods. This is revised for the need of flexibility depending on the type and transport of goods.

Costs clarification: Incoterms 2020 has all the cost obligations for both buyer and seller. The principle is that the seller is responsible for costs up to the point of delivery and the buyer for costs beyond that. This change is in response to feedback received about the increasing number of disputes about allocation of costs especially those in or around the port of place of delivery.

Security requirements: Transportation security has become the new norm (example: mandatory screening of containers).  Incoterms 2020 brings security related obligations to the forefront in each Incoterm at A4 and A7 of each rule and the costs are featured under A9/B9 of each rule.

FCA and FOB: FOB term is generally used for container shipments, for this the seller takes risks as seller loses control of container on arrival at port and still liable until container is loaded which exposes the seller to cost and risk. FCA has been changed to allow the parties to agree for the buyer to direct the carrier to issue the onboard bill of lading to the seller.

In 2020, the buyer can instruct the carried to issue an on-board bill of lading after loading to the seller. The seller will be obliged to tender the bill of lading to the buyer. When this option is used the seller does not take on an obligation to the buyer in respect of the terms of contract of carriage.

You may obtain your copy of the Incoterms 2020 through the ICC website.

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