Incoterms 2020 – some responses from the industry

It is now around six months since the Incoterms 2020 rules were published, and over three months since they came into force.

Here are some responses from the logistics sector:

DAT now DDU

One of the major changes in this revision is the name change.  In Incoterms 2020, Delivered At Terminal is referred to as Delivered at Place Unloaded.   The rationale for this is that the named place need not be a terminal – it can be an inland logistics hub, a customs clearance depot or the buyer’s premises.

Many logistics providers have pointed out a danger here.  DAT/DPU is the only Incoterms rule where delivery is only complete once the seller has unloaded the goods from the arriving ship, truck etc.

Where the named place is a container terminal, this presents no problems.  However for other places, unloading the goods may be highly problematical for the seller.

Where the last leg of the journey is by truck to, say, the buyer’s premises, this task will typically be outsourced to a local operator, who may not be familiar with arrangements at the destination.  Nor can the drivers make use of fork-lift trucks or other equipment that may be available at the seller’s premises – there will often be insurance and Health and Safety issues.

This situation will be the converse of Ex Works, which obliges the buyer to load the goods, even though the seller is more likely to be better placed to undertake this.

So in practice, Delivered At Place is the preferred rule for these situations.

The on-board bill of lading

This is FCA paragraph B6 in Incoterms 2020 – buyer’s obligation, when requested by the seller, to ask the carrier to furnish the seller with an on-board transport document.

The context here is the letter of credit, where the bank will typically require an on-board bill of lading as proof that the goods are on the high seas and on their way to the buyer.

This provision has been widely criticized as being of very little practical value. One obvious limitation is that the carrier is under no obligation to comply with this request.  There remains the over-riding concern about letters of credit and FCA; the buyer has the contract with the carrier, and so can frustrate the transaction in various ways.

Is the Incoterms 2020 revision fit for purpose?

There is a more general concern about the Incoterms 2020 revision; this has been most forcefully expressed by Bob Ronai, an independent consultant who was a member of the Incoterms 2020 Drafting Group – and hence privy to the discussions that took place during the revision process.

He argues that the Incoterms rules remain out of touch with the realities of patterns of trading in Asia.  Specifically,  he believes that the “water” rules, where risk transfers to the seller upon loading of the goods on board the vessel, are more appropriate for container movements.  Such an arrangement will align better with the mindset of other parties such as the customs authorities, who will calculate duty based on the date of export of the goods, and not the date when the goods were taken in charge by a carrier.