The main explanations of Incoterms\u00ae\u00a02020 have remained the same, with a few key updates and changes.\u00a0 The main change includes a new DPU term replacing DAT, along with other changes to Incoterms\u00ae\u00a0as below.\u00a0 It\u2019s imperative that all parties involved in global trade understand these updates and how they may affect your supply chain.<\/p>\n
New Incoterm\u00ae DPU Replaces DAT<\/strong><\/p>\n The previous Incoterm\u00ae DAT (Delivered at Terminal) is now called DPU (Delivered at Place Unloaded.\u00a0 It was decided to change the term to DPU to remove confusion that arose in the past. In the past, DAT required \u2018Delivery at Terminal (unloaded)\u2019, however the word \u201cterminal\u201d caused confusion.\u00a0 The new term DPU (Delivery at Place Unloaded) covers \u2018any place, whether covered or not\u2019.<\/p>\n Different level of insurance cover between CIF and CIP<\/strong><\/p>\n CIF and CIP are the only two Incoterms\u00ae that require the seller to purchase insurance in the buyer\u2019s name.\u00a0 Under Incoterms\u00ae 2010 the insurance cover for both CIF and CIP was required under Institute Cargo Clause C. Under the new Incoterms\u00ae 2020, CIP requires insurance cover complying with Institute Cargo Clause A.\u00a0 Clause A covers a more comprehensive level of insurance which is usually suitable for manufactured goods, where Clause C would likely apply to commodities.<\/p>\n In summary:<\/p>\n Updated Costs and Listings<\/strong><\/p>\n Costs became quite a problem with Incoterms\u00ae 2010 with some parties.\u00a0 In some cases carriers were changing their pricing so sellers were often faced with new back charged terminal handling charges.\u00a0 Incoterms\u00ae 2020 now provides much more detail around costs and now appear under the A9\/B9 sections of the rule. This clearly states which costs are allocated to each party.<\/p>\n Increased Security Requirements, Allocations and Costs<\/strong><\/p>\n In a world with increasing security requirements, the Incoterms\u00ae 2020 rules now provide more detail around security allocations and necessary costs.\u00a0 For each Incoterm\u00ae rule, the security allocations have been added to A4\/A7 and the associated costs have been added to A9\/B9.<\/p>\n Buyer\u2019s and Seller\u2019s Own Transport<\/strong><\/p>\n Under Incoterms\u00ae 2010 it was assumed that all transport would be undertaken by a third party transport provider.\u00a0 Updates to Incoterms\u00ae 2020 allows for the provision for the buyer or seller\u2019s own means of transport. This recognizes that some buyers and sellers are using their own methods of transport, including trucks or planes to get goods delivered.<\/p>\n FCA, FOB and the Bill of Lading Process<\/strong><\/p>\n Updates were made to the previous Incoterms\u00ae 2010 to encourage exporters of containerized goods to use the FCA Incoterm\u00ae.\u00a0 In reality most parties were still using FOB when they should have been using FCA. This is because even experienced sellers still wanted to use FOB because they wanted the contract to be under a Letter of Credit.<\/p>\n Therefore provisions have been made to the Incoterms\u00ae 2020 to state that the buyer must instruct the carrier to issue a transport document stating that the goods have been loaded \u2013 i.e a Bill of Lading with an \u2018on board\u2019 notation.\u00a0 In the past carriers have frequently refused to issue a Bill of Lading with a notation to the seller if they have received the goods from an intermediary transport (such as a truck), instead of directly from the seller.<\/p>\n How to put Incoterms<\/strong>\u00ae\u00a02020 into Practice on Sales Contracts<\/strong><\/p>\n The new Incoterms\u00ae 2020 have come into effect on the \u2018effective\u2019 date of the 1st January 2020.\u00a0 What does that actually mean for your business? Trading partners can still carry on using Incoterms\u00ae 2010 if they prefer to, which may occur when it is being used to confirm complex commercial agreements.<\/p>\n All parties must make it clear in contracts which Incoterms\u00ae version is being referred to in order to avoid any misunderstanding.\u00a0 Different trading partners will incorporate Incoterms\u00ae into contracts at different times.<\/p>\n It is imperative that you check existing contracts to ensure that the Incoterms\u00ae edition year is included.\u00a0 If there is no year stated then the following will apply:<\/p>\n The below is the structure that should be used on Sales Contracts:<\/strong><\/p>\n [Incoterm\u00ae rule] [Named port\/place\/point] Incoterms\u00ae 2020<\/p>\n Examples:<\/strong><\/p>\n CIF Longbeach Incoterms\u00ae 2020<\/p>\n DPU 4300 Longbeach Blvd, Longbeach, United States Incoterms\u00ae 2020<\/p>\n How to Prepare your Business for Incoterms<\/strong>\u00ae\u00a02020<\/strong><\/p>\n As Incoterms\u00ae are updated you should always take the time to assess how any changes may impact your business.\u00a0 It\u2019s much better to be proactive rather than reactive should some big issues arise with any of your orders or shipments.\u00a0 Always refer to professional legal advice before making any changes to your business.\u00a0 To prepare for the changes, here are a few things that you may consider:<\/p>\n Can Incoterms<\/strong>\u00ae\u00a0be used in the United Kingdom?<\/strong><\/p>\n Because the United Kingdom\u2019s position, trade is regulated by the\u00a0\u2018Uniform Laws of the Sale of Goods Act 1979\u2019<\/a>\u00a0and case laws.\u00a0 However, the terms of trade can be agreed by both parties before the trade is to take place. Throughout sales contracts the buyer and seller can follow either the ICC guidelines of the Sales of Goods Act 1979\u2019s enactments.<\/p>\n Get a copy of the official ICC Incoterms<\/strong>\u00ae\u00a02020 book<\/strong><\/p>\n You can purchase the official Incoterms\u00ae 2020 book from the\u00a0International Chamber of Commerce here<\/a>.<\/p>\n Read also our\u00a0Incoterms 2023<\/a>\u00a0guide.<\/p>\n <\/p>\n\n
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