The International Chamber of Commerce (ICC) has revised the internationally accepted trade clauses. The new Incoterms® 2020 are to come into force on 01.01.2020. Please note the following in your trade agreements:
1. The Incoterms® are not automatically renewed. If you have agreed the validity of Incoterms® 2010 in your contracts, then Incoterms® 2010 will continue to apply as commercial clauses for your contractual relationships. However, you should ensure that you have designated the Incoterms® accordingly, i.e. not only the abbreviation from the known three letters (e.g. EXW), but also the Incoterms® with the respective year.
2. As known with the previous Incoterms® 2010, the parties can choose from eleven clauses. Although the number of clauses remains the same, individual clauses have been adapted or modified to the needs and wishes of the practical application and experience.
The following Incoterms® have been amended or deleted and should be reconsidered in your contracts if you have used them so far.
The DAT clause has been deleted. This clause should now only be used with the addition Incoterms® 2010 so that its validity remains unaffected.
There have been changes and adaptations to three Incoterms®, each of them has been better tailored to the needs of the parties and practice:
First, the delivery terms CIP and CIF were extended by one function and made more flexible for the parties. CIP “Carriage and Insurance Paid to” means as much as carriage paid and insured and CIF “Cost Insurance and Freight” is mainly applied to ship freight. Previously, the clauses always covered insurance with minimum coverage. For a transport according CIP, an all insurance (A) must now be taken out by the seller on behalf of the buyer. The parties can also agree on an insurance with the maximum coverage (A), the minimum coverage (C) or a middle way (B). These recognized abbreviations for transport insurance (A), (B) or (C) are provided by the Cargo Clauses Institute (ICC). Although these insurance conditions and terms originate from the sea freight business, they are also increasingly being incorporated into the overland freight transport or multimodal transport of goods. The exact scope and coverage of the Cargo Clauses Institute is determined and issued by the International Underwriting Association of London (IUA).
The conditions associated with the FCA “Free Carrier” clause, have also been adjusted. This also mainly concerns international sea freight transport and the possibility for the seller to receive payment by means of a documentary letter of credit once the goods have been handed over to the shipper. Prior to the modification, the parties usually only used FOB “Free on Board”, which transferred the risk and cost burden to the buyer at the port of departure. After an explicit agreement of the parties in addition to FCA, the seller now has the possibility to request the “Bill of Lading” with the “On-Board” note from the carrier after unloading at a terminal. The buyer may instruct his carrier to surrender the Bill of Lading. This has the advantage for the parties that delivery according to FCA to the final terminal is guaranteed by the seller, but the seller can already initiate payment with the bill of lading from his documentary letter of credit as soon as the goods are handed over to the carrier.
3. The following Incoterms® are new:
The deleted clause DAT previously described “Delivered at Terminal”. However, this clause is now more general and had been renamed in DUP by the International Chamber of Commerce. This means, “Delivered at unloaded place” and gives the parties more leeway and flexibility, as the clause now regulates that the goods are delivered at the place where they should be unloaded. Hence, the transfer of risk is independent of a terminal. This now opens the clause to a wider application also on multimodal transports.
4. Please note that the Incoterms® contain only limited provisions regarding place of delivery, place of performance, costs and transfer of ownership. The Incoterms® do not replace a well thought-out contract.
5. The clauses FAS, FOB, CFR and CIF are designed only for contracts of sale with delivery by ship and in particular are not suitable for shipment by container. You should choose other clauses more appropriate for container transport.
6. Very often, the parties agree on the EXW and DDP clauses. Nevertheless, be aware that these clauses are problematic due to customs implications for international transports.
