The Incoterms rules are the world’s essential terms of trade for the sale of goods. Whether you are filing a purchase order, packaging and labeling a shipment for freight transport, or preparing a certificate of origin at a port, the Incoterms rules are there to guide you. The Incoterms rules provide specific guidance to individuals participating in the import and export of global trade daily.
What is the difference between Incoterms 2010 and Incoterms 2020?
Although the layout of the text is very different from Incoterms 2010, there are very few substantive changes to the meaning of the rules.
The two most important changes that have taken place within the Incoterms 2020 are:
- The rule DAT Delivered at Terminal (DAT) has been renamed Delivered at Place Unloaded (DPU)
- For Carriage and Insurance Paid (CIP), the level of freight insurance provided is now Institute Clauses (A), and not the lower level Institute Clauses (C). For Cost Insurance and Freight (CIF), the level of freight insurance provided has remained unchanged at Institute Clauses (C)
Additional new issues and changes that have been considered in the meetings of the Drafting Committee and, therefore, have been introduced in the new edition of the Incoterms 2020 are:
FCA: Option of Bill of Lading (BL) with the onboard notation
In the Incoterms 2020 version, this option is specified, for maritime transport, so that the buyer may instruct the carrier (shipping company or its agent) which has been contracted in order to issue a Bill of Lading (B/L – Bill of Lading) on behalf of the seller with the annotation of “aboard” (on-board), which specifies that the goods have been loaded aboard the ship.
Customs clearance: export, transit, and import
In Incoterms 2020 is more precisely explained which party, seller or buyer, is responsible for carrying out customs formalities and clearance, assuming the costs and risks thereof. And the release of goods in transit is included for the first time. For the latter, the rule which is used is that the liability is assigned to whoever assumes the risk of transport to the place of delivery. Therefore in the Incoterms EXW, FCA, FAS, FOB, CPT, CFR, CIP and CIP wherein the risk of transport is transferred at origin (country of the seller) the liability in the customs transit clearance is assumed by the buyer; on the contrary, in Incoterms DAP, DPU, and DDP the risk is passed on at the destination (country of the buyer), the seller bears the liability..
Transport security requirements
In the Incoterms 2020, liability as regards to security is addressed more precisely under two circumstances: transport from the country of origin to that of the destination and customs clearance formalities and procedures (export/transit/import).
During the transport of the goods, the security liability is assumed by the party who executes the carriage of goods contract: The Seller (CPT, CFR, CIP, CIF, DAP, DPU, and DDP) or the buyer (EXW, FCA, FAS, and FOB). As customs clearances are concerned, the safety liability lies with the party which must undertake the clearance.