Changes to INCOTERMS 2020

The International Chamber of Commerce (ICC) has announced the update of the previous version INCOTERMS 2010. With this new edition, the ICC responds to the modern requirements of trade practice and ensures that the rules correspond to current developments.

The history of INCOTERMS dates back to 1936 when they were first published by the ICC, then known as Incoterms-1936. Since then, INCOTERMS have secured a fixed place in international sales contracts and define standardized terms.

To address the ongoing changes in trade practice, the ICC generally publishes an updated version of INCOTERMS at the beginning of each decade. The previous updates occurred in 1953, 1967, 1976, 1980, 1990, 2000, and 2010.

INCOTERMS and Trade Requirements

INCOTERMS 2020 have been developed to meet today's global trade requirements and provide clear guidelines for international trade. Companies around the world can now benefit from the updated rules.

Stay informed about the latest INCOTERMS and utilize these updated rules to successfully conduct your international business. The ICC is happy to provide advisory support and assist you in applying INCOTERMS 2020.

The New Version of Incoterms 2020

The new version of the Incoterms, which came into effect on January 1, 2020, introduces a number of innovations to meet the current requirements and developments in international trade.

Here are some of the anticipated innovations included in Incoterms 2020:

1. Introduction of new clauses: Incoterms 2020 may introduce new clauses to better cover specific requirements and situations in international trade. These new clauses can provide parties with more flexibility and clarity.

2. Responsibility: Incoterms 2020 will define clear and updated responsibilities for exporters and importers. This aims to reduce misunderstandings regarding risk allocation and cost coverage during the transport process.

3. Consideration of modes of transport: The new Incoterms 2020 may better account for various modes of transport, such as air freight, sea freight, or road transport. This aims to meet specific needs.

4. Digitalization and electronic documents: In light of the ongoing digitalization in trade, Incoterms 2020 could facilitate the use of electronic documents and communication to improve the efficiency and transparency of trade transactions.

5. Adaptation to trade practices: Incoterms 2020 aim to address current trade practices to accommodate the changing needs of global trade.

Please note that the exact innovations of Incoterms 2020 will be determined by the International Chamber of Commerce (ICC). It is advisable to consult the official publication of Incoterms 2020 for detailed and binding information.

Incoterms provide a valuable opportunity for companies to optimize their trade transactions and adapt to the requirements of the global market. Familiarize yourself with Incoterms 2020 to benefit from the new opportunities.

Abolition of the Term EXW

The EXW delivery terms were often used only for domestic trade and were less common in international trade. This discrepancy led to uncertainties and misunderstandings in cross-border trade transactions.

With the abolition of the term EXW, the new Incoterms 2020 can now provide a clear and uniform basis for international trade that is more applicable to all parties involved.

Another important reason for the abolition of EXW is the harmonization with the new Customs Code of the European Union. This code establishes the responsibilities of the exporter after the export customs clearance of export goods.

Since the EXW terms may not have been in line with current customs regulations, the adjustment of Incoterms 2020 is a sensible measure to facilitate international trade.

The introduction of Incoterms 2020, without the term EXW, allows companies to rely on clear and uniform delivery terms that meet the requirements of today's global trade. This innovation further simplifies international trade and increases the security and transparency of trade transactions.

Abolition of the Term FAS

The abolition of the term FAS in Incoterms 2020 represents a significant adjustment that meets the current realities and needs of international trade. The use of FAS delivery terms was rare in practice, as they were only applied when goods were delivered at the exporter's departure port in the exporter's country.

Instead, the use of FCA delivery terms, which also allows delivery to the port, has become established, as the dock is considered part of the seaport. This adjustment creates clarity and flexibility for international trade and facilitates the processing of transactions.

Another important aspect is the unpredictability of shipping delays, which can cause problems when using FAS. If the ship arrives late, the goods are only available for the buyer at the dock, which can lead to delays and inconveniences.

Conversely, it can also happen that the ship arrives too early and the goods are not yet available to the buyer. These situations can lead to uncertainty, which is why FAS delivery terms were mainly used for the export of bulk goods.

By abolishing the term FAS in Incoterms 2020, the focus is placed on practical and widely used delivery terms such as FCA. It is recommended to familiarize yourself with Incoterms 2020 and use them accordingly.

Division of the Term FCA into Two Delivery Bases

The division of the term FCA into two delivery bases in the Incoterms is a promising development aimed at meeting the needs of international trade.

Currently, FCA is the most commonly used term for Incoterms, as it offers high flexibility and adaptability. The main advantages of the FCA basis lie in the ability to use any mode of transport and choose any delivery location within the seller's country. This allows the parties to select the most suitable location for the delivery of goods, whether it be a store, a warehouse, a seaport, an airport, or even the seller's address.

The analysis currently being conducted to split the FCA basis in Incoterms 2020 into two separate terms, one for land deliveries and one for sea container deliveries, makes a lot of sense. This division can help further optimize the use of FCA and better address the needs of specific transport types and delivery locations.

By creating two different delivery bases for FCA, parties are enabled to tailor the delivery terms even more precisely to their respective requirements. It facilitates communication between trading partners and increases transparency and clarity in defining responsibilities and costs associated with the delivery of goods.

Changes to FOB and CIF Delivery Terms

The changes to the FOB and CIF delivery terms for container transport in Incoterms 2020 are undoubtedly of great significance for international trade practice. Given the widespread use of containers in global trade, the update of these delivery terms is expected to have a substantial impact.

The current situation, where FOB and CIF are classified as old Incoterms and the placement of goods in containers by the seller at the terminal is not adequately considered, can lead to uncertainties and misunderstandings. The application of FCA or CIP in such cases can be impractical for many trade participants.

The anticipated changes in Incoterms 2020, which allow FOB and CIF to be used for container transport, will adapt the delivery terms to today's realities and needs of international trade.

New Terms in Incoterms 2020

The introduction of the new term CNI (Cost and Insurance) in the Incoterms is undoubtedly a practical addition that further improves the delivery terms for trade.

The new term CNI, which falls under group C of the Incoterms, allows the seller-exporter to be responsible for international goods insurance. This fills an important gap between the previous terms FCA and CFR/CIF by including the costs of international insurance on the seller's side, but not the freight costs.

The delivery basis of CNI means that the seller has delivered once the insured goods are placed at the specified shipping port. The risk of transport and damage to the goods then transfers from the seller to the buyer at the shipping port.

The introduction of CNI as a new term in Incoterms 2020 provides a balanced and flexible solution for international trade that meets the needs of both the seller and the buyer. It allows the seller to retain control over the goods insurance while keeping the delivery terms clear and transparent.

The subdivision of the delivery terms of FSA in Incoterms 2020 by mode of transport is also a useful measure that meets the requirements of today's trade. This differentiation creates more precision for different transport types and facilitates trading partners in selecting the most suitable delivery terms.

New Regulations on DDP Delivery Terms

The introduction of two new rules regarding DDP delivery terms, namely DTP (Delivered at Terminal Paid) and DPP (Delivered at Place Paid), in Incoterms 2020 is a significant development that meets the needs of modern international trade.

Currently, DDP delivery terms are mainly used for shipping goods such as samples or spare parts sent by couriers or express shipping companies. Under DDP, the exporter bears all costs associated with transport to the buyer's destination, including customs clearance and payment of duties and taxes.

With the introduction of DTP and DPP, two specific delivery terms are created that build on the basis of DDP but cover different delivery locations:

1. DTP means that the seller is responsible for all duty-bound transport costs and the delivery of the goods to the terminal (e.g., port, airport, or logistics center) in the buyer's destination country. This is particularly relevant for the transport of goods that must be delivered to specific terminals before being handed over to the buyer.

2. DPP means that the seller is responsible for all duty-bound transport costs and the delivery of the goods to a location that is not a specific transport terminal, but rather, for example, the buyer's address. This rule offers more flexibility and allows the seller to deliver the goods directly to the buyer's destination.

The introduction of these new delivery terms closes an important gap between the previous DDP delivery terms and provides trading partners with better adaptation to various delivery locations and transport requirements. This facilitates the processing of international trade transactions and contributes to the transparency and clarity of delivery terms.

Summary of Innovations in Incoterms 2020

The emergence of Incoterms 2020 promises a further development and optimization of delivery terms in trade. In addition to the already known changes, other issues are also being analyzed, including cybersecurity and transport insurance regulations.

The adaptation of Incoterms to current developments in the transport industry, including the consideration of cybersecurity aspects, is of great importance as international trade increasingly relies on digital technologies.

The review of transport insurance regulations in connection with the Incoterms is also crucial to ensure that all parties involved are adequately protected. The transparent regulation of insurance responsibilities in the delivery terms can help avoid potential conflicts and uncertainties.

The use of Incoterms conditions in international contracts is another important aspect that must be thoroughly analyzed. The correct and appropriate application of Incoterms is essential to clearly define the rights and obligations of the parties and ensure a smooth processing of trade transactions.