THE DECADE OF INCOTERMS 2010 COMES TO AN END
THE DECADE OF INCOTERMS 2010 COMES TO AN END. THE NEW INCOTEMS 2020 ARE TO BE RELEASED BY THE END OD THE YEAR AND WILL ENTER INTO FORCE ON JANUARY 1,2020.
Incoterms are set of rules which are aimed to facilitate global trade. Incoterms are drafted by International Chamber of Commerce (ICC) and revised every 10 years. The current version is Incoterms 2010, but the new one is to be published by the end of this year and will enter into force on January 1,2020.
In the current version the Incoterms were updated and organized by modes of transport.
Incoterms that apply to any mode of transport are:
EXW – Ex Works
FCA – Free Carrier
CPT – Carriage Paid To
CIP – Carriage and Insurance Paid To
DAT – Delivered at Terminal
DAP – Delivered at Place
DDP – Delivered Duty Paid
Incoterms that apply to sea and inland waterway transport only:
FAS – Free Alongside Ship
FOB – Free on Board
CFR – Cost and Freight
CIF – Cost, Insurance, and Freight
Based on the Drafting Committee reports we may expect the following changes in the Incoterms 2020.
DAT changes to DPU
DAT (Delivered at Terminal) means the goods are delivered once unloaded at the named terminal. In Incoterms 2020 DPU (Delivered Named Place Unloaded) the reference to the terminal has been removed to make it more general.
Change of insurance requirements in CIP/CIF
Under Incoterms 2010 the seller is obliged to provide insurance for the buyer that is equivalent to Clause C (Institute of Cargo Clauses). This is a basic level of insurance. In ICC Incoterms 2020 CIF keeps the same insurance requirements (i.e. Clause C) but CIP has increased the insurance required to Clause A (Institute of Cargo Clauses). The reasoning behind this is that CIF is more often used with bulk commodity trades and CIP (as a multimodal term) is more often used for manufactured goods.
EXW and DDP are to be removed
Although EXW (ExWorks) and DDP (Delivered Duty Paid) a very commonly used by companies it was agreed that these two terms should only cover domestic trade.
Nevertheless, based on DDP two new Incoterms are to be create:
DTP (Delivered at Terminal Paid): When the goods are delivered to a terminal in the country of the buyer, and the seller assumes the payment of customs duties.
DPP (Delivered at Place Paid): When the goods are delivered at any place other than a transport terminal, and the seller assumes the payment of the customs duties.
Removal of Incoterm FAS
FAS (Free Alongside Ship) is only used for the exportation of some commodities (minerals and cereals) and, in this sense, the Drafting Committee is evaluating the creation of some specific term. And
Splitting FCA in two Incoterms
FCA (Free Carrier) is the most used Incoterm (about 40% of the international trade operations). The creation of two Incoterms FCA is expected, one for terrestrial delivery and another for maritime delivery.
New Incoterm – CNI
The Drafting Committee is intended to fill an existing gap in regulation between the FCA INCOTERM and the CFR and CIF.
The new term is to be under the group “C”. This means that the risks and responsibilities are transferred from the seller to the purchaser in the port of departure.
The main objective of the new Incoterm is that the exporter will be able to assume the insurance and that would not include freight.
The above is the most general approach of some key changes to Incoterms. The Drafting Committee is considering some other amendments concerning transportation security; regulations on transportation insurance;the relationship between the Incoterms and the International Sale Contract.
The final list of changes will be available after the release of new list of Incoterms. We will keep you updated.