The Incoterms® rules are the regulations that define responsibilities of buyers and sellers operating in the international trade system. They are the authoritative rules for determining how costs and risks are allocated to the parties. Incoterms rules are regularly incorporated into contracts for the sale of goods worldwide and have become part of the daily language of trade.
International Chamber of Commerce (ICC) has launched Incoterms® 2020 set that contains the rules for use of the 11 Incoterms® trade terms. It takes into account the latest developments in commercial practice, and updates the rules to make them more accessible and easier to use.
The new rules will enter into force on 1 January 2020. As of this date, all sales contracts should make reference to the Incoterms® 2020 rules as the latest version of the Incoterms rules.
Differences between Incoterms® 2010 and 2020:
- The Incoterms® FCA (Free Carrier) now provides the additional option to make an on-board notation on the Bill of Lading prior loading of the goods on a vessel.
- The costs now appear centralized in A9/B9 of each Incoterms® rule.
- CIP now requires at least an insurance with the minimum cover of the Institute Cargo Clause (A) (All risk, subject to itemized exclusions).
- CIF requires at least an insurance with the minimum cover of the Institute Cargo Clause (C) (Number of listed risks, subject to itemized exclusions).
- The Incoterms® rules Free Carrier (FCA), Delivered at Place (DAP), Delivered at Place Unloaded (DPU) and Delivered Duty Paid (DDP) now take into account that the goods may be carried without any third-party carrier being engaged, namely by using its own means of transportation.
- The rule Delivered at Terminal (DAT) has been changed to Delivered at Place Unloaded (DPU) to clarify that the place of destination could be any place and not only a “terminal”.
- The Incoterms® 2020 now explicitly shifts the responsibility of security-related requirements and ancillary costs to the seller.
The Incoterms® do not constitute a complete contract of sale, but rather become a part of it. For its application, the following structure should be used :
“ [The chosen Incoterm® rule] [Named port, place or point] Incoterms® 2020”
Example : “CIF Shanghai Incoterms® 2020” or “DAP 10 Downing Street, London, Great Britain Incoterms® 2020“
If there is no year stated in the Incoterms® then the following applies:
until December 31st 2019 the Incoterms® 2010 apply.
from January 1st 2020 the Incoterms® 2020 apply.
If a different year is stated, e. g. Incoterms® 1980, then respective terms apply.