INCOTERMS 2020: CHANGES FROM 1st JANUARY 2020

Incoterms have been in existence since 1930, being an acronym standing for international commercial terms.  They include terms commonly seen on invoices, bills of lading etc, such as FOB (“Free on Board”), DAP (“Delivered at Place”) EXW (“Ex Works”), CIP (“Carriage and Insurance Paid To”), which all have very precise meanings for the sale of goods around the world.  New Incoterms 2020 drafted by the International Chamber of Commerce (ICC) come into force on 1st January 2020. In the last decades, there has always been a revision of Incoterms Rules coinciding with the first year of each decade 1990, 2000, 2010, which is the latest version and currently in force.  The new Incoterms are expected to appear in the last quarter of 2019.  The changes being considered include –

  • Removal of FAS – an Incoterm very little used and is only used for the exportation of some commodities (minerals and cereals) and, in this sense, the Drafting Committee is evaluating the convenience of creating a specific Incoterm for this type of products;
  • Split FCA into 2 separate Incoterms – FCA is the most used Incoterm (about 40% of the international trade operations are carried out with this Incoterm) since it is very versatile and allows the delivery of goods in different places (seller’s address, land transport terminal, port, airport, etc.) that, most of the times, are in the seller’s country.
  • A new Incoterm: CNI – CNI (Cost and Insurance) would cover a gap between FCA and CFR/CIF. Unlike FCA, which would include the cost of international insurance on account of the seller-exporter, and as opposed to CFR/CIF that would not include freight. As in the other Incoterms in “C,” this new Incoterm would be an “arrival Incoterm,” i.e., the risk of transport would be transmitted from the seller to the buyer at the port of departure.
  • Possible new Incoterm DTP – Delivered at Terminal Paid (separated out from DDP) would be when the goods are delivered to a terminal (port, airport, transport centre etc) in the country of the buyer, and the seller assumes the payment of customs duties.

The current Incoterms are –

  • EXW – Ex-Works
  • FCA – Free Carrier
  • FAS – Free Alongside Ship
  • FOB – Free on Board
  • CPT – Carriage Paid To
  • CFR – Cost & Freight
  • CIP – Carriage & Insurance Paid To
  • CIF – Cost, Insurance & Freight
  • DAT – Delivered at Terminal
  • DAP – Delivered at Place
  • DDP – Delivered Duty Paid

https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/

https://www.globalnegotiator.com/en/practical-guide-incoterms

 

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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