News & Insights

Overview of the 2020 Incoterms Rules

The International Chamber of Commerce (ICC) published Incoterms® 2020, which came into force on 1 January 2020.

Incoterms® are a standardised set of international trade terms which are published by the ICC. They are a common and internationally recognised set of rules that traders in different countries can choose to incorporate into contracts for the sale of goods. They are jurisdiction-neutral so that no one jurisdiction, or legal system, is favoured over another. Although designed for international contracts of sale, Incoterms® can also be used for UK-only contracts.

Incoterms® address the following:

  • Location of delivery.
  • Transfer of risk.
  • Packaging and marking.
  • Responsibility for loading and unloading of the goods.
  • Arrangement of contract of carriage.
  • Allocation of costs of carriage.
  • Responsibility for export and import clearance.
  • Responsibility for supply chain security measures.

The first set of Incoterms® were published in 1936, and they have been updated periodically since then.

The current version was published in January 2020 and contains 11 different rules. Changes from the previous 2010 Incoterms were mainly presentational, with only several substantive changes that are non-extensive. For instance, the DAT (Delivered at Terminal) term was removed and a new DPU term introduced. Under the previous DAT term, the seller delivered the goods once unloaded from the arriving means of transport into a terminal, whereas the DPU term emphasises that the place of destination where the seller unloads the goods could be a place other than a terminal.

Another noteworthy change relates to the insurance obligation under the CIP and CIF terms. These terms represent (limited) exceptions to the general rule that the Incoterms do not require either party to arrange insurance. In accordance with these terms under the 2010 Incoterms, the seller was obligated to obtain insurance cover in the buyer’s name complying with at least the minimum cover as provided by Clause C of the Institute Cargo Clauses. Under the 2020 Incoterms, whereas the position remains unchanged in relation to the CIF term, the CIP term requires the seller to obtain insurance cover complying with the (more extensive) Clause A of the Institute Cargo Clauses.

Contracts can continue to refer to the 2010 version, provided it is made clear which version applies. Therefore, parties can use the DAT term even though it is not included in the 2020 version of the rules.

It should also be noted that the Incoterms are unaffected by the end of the Transition Period on 31 December 2020. However, the new trade controls on imports and exports between the UK and EU could mean that Incoterms are increasingly added to these contracts.

If we can be of any assistance with updating your standard contract documentation after the new Incoterms® are released, please do contact a member of the Commercial & Technology team.