Incoterms 2020 revision (ICC publication no. 723) is here
The long-awaited Incoterms 2020 revision was published in September 2019, and came into force on 1st January 2020.
The rationale that is usually presented for Incoterms revisions is that of aligning the rules with changes in transport and logistics practices – for example containerization, the spread of integrated transport networks, increased concern with maintenance of freight security throughout the logistics process.
The Incoterms 2020 revision therefore comes as a considerable surprise.
During 2019 there were a number of articles on the internet that suggested substantial changes were on the way – the introduction of a “C” rule where the seller provides freight insurance but not transport; a re-organisation of the “D” rules and so on
However the Incoterms 2020 drafting group have decided to make very few substantive changes to the provisions of the rules themselves. Instead, their efforts have gone into restructuring the Incoterms 2020 book and the welcome inclusion of a good deal of explanatory material.
So what does Incoterms 2020 have to offer?
- The Incoterms 2010 rule DAT Delivered At Terminal has been renamed. In Incoterms 2020 it is called Delivered at Place Unloaded. The rationale here is that “terminal” can be construed as restricting the use of the rule to transport hubs and the like, whereas in fact the named place can be anywhere – a warehouse, the buyer’s premises and so on.
- In Incoterms 2020, the “default” minimum insurance cover for CIP becomes Institute Cargo Clauses (A) – a higher level than the Incoterms 2010 minimum cover of Institute Cargo Clauses {C}. The Incoterms 2020 situation for CIF remains unchanged at Institute Cargo Clauses C). The rationale here is that manufactured goods that will usually travel in containers will typically require a higher level of cover than commodities.
- Incoterms 2020 recognises that buyers and sellers are not obliged to outsource the transport of the goods, but may use their own vehicles – the wording now reads “… must contract or arrange at its own cost” for the carriage of the goods.
- Incoterms 2020 now refers to an option under FCA which addresses the situation where an on-board shipping document is required for presentation under a letter of credit, but is not normally available to the seller, e.g. when the goods have been taken in charge at an inland location.
- Those who are familiar with Incoterms 2010 will know that it says absolutely nothing of any use about the costs arising from compliance with cargo security regimes that have assumed increasing importance in recent years.As security practices have evolved, it is recognized that compliance costs may arise under the headings of transport, the export clearance process and the import clearance process.So Incoterms 2020 explicitly addresses security-related costs with statements such as that for the “C” rules, the seller must comply with any transport-related security requirements for transport to the destination – and pay any associated costs.
If you have read so far, you may be wondering whether these can really be all the significant changes that Incoterms 2020 has introduced.
Consider this. Many readers will know the LinkedIn Incoterms discussion group, which has more than 19.000 members. When Incoterms 2020 became available – around September 3rd – we were expecting a torrent of new threads and discussions about its impact and the precise meaning of the new provisions.
At the time of writing, the discussion group has been eerily quiet – only a handful of postings that refer to the new edition!
Roger Kreitman
Principal Consultant
Mantissa Limited
Last edited January 3rd 2020