Incoterms 2020

Update on the international delivery terms for commodity trade

23 December 2019 09:10

Download updated Incoterms

Never before has the interest for a new Incoterms version been stronger than for the 2020 presentation, despite the fact that the changes in relation to the 2010 version are few and of no vital importance.

The International commercial trade terms (Incoterms) are decided in the International Chamber of Commerce in Paris – I.C.C. - and have since 1936 been revised approximately every tenth year.  Incoterms are part of the trade agreement between seller and buyer and regulate among other things two important elements in connection with delivery of goods. Who – seller or byer – shall pay for the freight charges and who shall bear the risk for damages to goods during transport. It is also worth mentioning that the specified point of passing of risk clearly defines the place where the actual delivery takes place. 

Incoterms, which are the best choice of formalised rules, are used worldwide. The parties are, however, free to use other and older delivery terms. But a common reference – such as Incoterms 2020 – contributes to avoid misunderstandings.

Summary of the most important changes in 2020:
  • DAT (Delivery at Terminal) was introduced as a new term in 2010, but has now been deleted.
  • DPU (Delivery at Place Unloaded) is new in the 2020 version. This term puts seller under the obligation to arrange and pay for unloading at the place agreed close to buyer’s place, and it replaces the DAT term.
  • CIP and CIF (Carriage, Insurance Paid) and (Cost, Insurance and Freight) instruct seller to take out goods in transit insurance to cover buyer’s risk. I.C.C. has decided that the insurance on the CIP term must be taken out on “all risk” terms, i.e. equal to the international Institute Cargo Clause’s A term.  However, the insurance coverage requirement for CIF has not been tightened, and the insurance may still be taken out on less favourable conditions.
  • For the FCA term, I.C.C. now admits subsequent issue of original Shipped on board Bill of Lading from shipping line/NVOCC. 
  • As for the graphic design, I.C.C. has encouraged a different presentation and layout of the Incoterms list:  listing first the Incoterms applicable to all modes of transport followed by the four special sea freight terms. Download the Incoterms list below to get an overview.

 

Aside from the aforementioned requirements in the CIP term instructing seller to take out a better insurance, it does not affect the need to take out a goods in transit insurance when shipping your expensive commodities to near and far destinations. The carriers are in certain cases exempt from liability to pay damages which results in the fact that you cannot always rest assured that you have full coverage in case of damages to or loss of your goods. Therefore, you always ought to make sure to be covered by a goods in transit insurance.  This insurance shall as a minimum cover the period during which your goods – according to Incoterms – will be exposed to risk, but most often the insurance is taken out on door to door terms. As a natural part of the transport solution, Blue Water offers such insurance – on the best terms and at a competitive price.

23 December 2019 09:10

For further information

Contact

Allan Junge

Allan Junge

Head of Insurance, Legal

& Strategic Projects

avjp@bws.net

+45 7913 4011