Incoterms 2020 now in force

The Incoterms 2020 revision (ICC publication no. 723) came into force on 1 January 2020

Nine years on from the last revision, the Incoterms 2020 text has a very different layout and style of presentation.

However there are very few significant changes to the rules themselves

Incoterms 2020 features many changes to the sequencing and presentation of the rules, and a welcome expansion of the explanatory notes.

However there have been very few substantive changes from the Incoterms 2010 revision.

There are still eleven rules. They are still divided into four “water” rules and seven rules that can be used with any transport mode.

No rules have been removed or added, but one rule has been renamed!

The main differences between Incoterms 2020 and Incoterms 2010 are:

1. The DAT rule Delivered At Terminal has been renamed DPU Delivered at Place Unloaded.This name change underlines the fact that delivery can happen anywhere, and not just at a transport “terminal”.As with DAT, this is the only rule that requires the seller to unload the goods at their destination.
   
   
2. Freight insurance.
   For the CIP rule (Carriage and Insurance Paid to), the level of cover required (unless otherwise specified in the agreement) is Institute Cargo Clauses (A), a higher level of cover than specified in Incoterms 2010, where the level of cover is Institute Cargo Clauses (C).For the CIF rule, there has been no change – the default level of cover remains at Institute Cargo Clauses (C).The reasoning here is that CIF is popular with commodities transactions, where this lower level of cover is widely accepted.
   
   
3. Incoterms 2020 tries to assist the seller when the FCA rule is used in conjunction with a letter of credit.The parties can agree that the buyer should instruct the carrier to issue the seller with a document such as an on-board bill of lading – something that banks often require under a letter of credit.  This is clearly a “stopgap” solution to banks’ insistence on asking for on-board bills of lading for containers.It also does little to mitigate the underlying risk when allowing a buyer to arrange transport.
   
   
4. The Incoterms 2020 rules now cover the situation where either the buyer or the seller transports the goods using their own vehicles, without engaging the services of a third party
   
   
5.  There is more detail on allocation of costs arising from security-related obligations.
   
   

Implications for commercial practice

The authors of the Incoterms 2020 revision have clearly intended to make it an effective teaching document as well as a reference work.

However the very limited changes from Incoterms 2010 do not provide much incentive for its adoption, especially where the 2010 revision has been incorporated into complex trading agreements.

As always, trading partners remain free to adopt the Incoterms revision of their choice by specifying it in their commercial contracts.

On the positive side, organisations who have already established a good Incoterms 2010 practice will not need to undertake a major retraining exercise for Incoterms 2020

Mantissa’s Incoterms 2020 training

We now have the “2020” version of our “Introduction to Incoterms rules” course – follow this link for details

Incoterms 2010 will continue to be important for some years to come, so the new course does not ignore it!   At the appropriate places, we identify the points where it differs from Incoterms 2020.

Students will therefore be well placed to work with both revisions.

For more details of our training plans, please send us a message

Roger Kreitman
Principal Consultant
Mantissa Limited