Legal Update: Incoterms 2020 – Coming into force on 1st January, 2020
The ICC Incoterms rules define the responsibilities of buyers and sellers for the delivery of goods under sales contracts, and determine how costs and risks are allocated between the parties.The ICC published Incoterms 2020 (“the rules”) on 10 September and the terms will come into force on 1 January 2020. The style and layout of the rules have been changed to give them greater clarity, and to make the rules more user friendly.
Below is a brief comparison of Incoterms 2020 with Incoterms 2010:
- There are still eleven rules; seven multimodal transport rules and four water rules.
- Responsibility for costs has been clarified. Broadly, the seller is responsible for costs up to the point of delivery, and the buyer for costs beyond that point.
- Delivered at Terminal (DAT) has been renamed Delivered at Place Unloaded (DPU)). The place of delivery is thus no longer restricted to the terminal. As under DAT, the goods remain the seller’s responsibility until unloaded from the carrying vessel, and made available to the buyer at a specified place within the terminal.
- For Carriage and Insurance Paid (CIP), a multimodal term, the level of cover provided is now Institute Clauses (A), a higher level than Institute Clauses (C). For Cost Insurance and Freight (CIF), a maritime only term, the level of cover remains unchanged at Institute Clauses (C)
- Parties contracting under Free Carrier (FCA) terms may now agree for the buyer to instruct the carrier to issue to the seller (at the buyer’s costs and risks), an on-board bill of lading. This will assist sellers e.g. in the container trade where containers are delivered to the container storage facilities at the loadport and not to the ship as banks require on-board bills of lading under letters of credit.
- Incoterms 2020 recognise that parties may use their own transport, instead of third party transport, for the carriage of the goods.
- Parties are now required to comply with transport related security requirements, where applicable.
- Parties remain free to adopt the Incoterms revision of their choice by specifying it in their contracts. Should they fail to do so in a contract entered into after 1 January 2020, Incoterms 2020 shall likely apply.
Incoterms® 2020 is available for purchase on ICC’s new e-commerce platform ICC Knowledge 2 Go in both print and digital formats.
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