News & Insights

Incoterms 2020

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

In September 2019, the International Chamber of Commerce (ICC) published the Incoterms 2020 which replaced the Incoterms 2010 from 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.

The 2020 version made several changes:

  • The new version aligns different levels of insurance coverage in Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP).
  • It includes arrangements for carriage with own means of transport in Free Carrier (FCA), Delivery at Place (DAP), Delivery at Place Unloaded (DPU) and Delivered Duty Paid (DDP).
  • There has been a change to the three-letter name for Delivered at Terminal, from DAT to DPU (Delivered at Place Unloaded). This name change highlights the fact that delivery can happen anywhere, not just at a terminal. This is the only rule that requires the seller to unload goods at their destination.
  • Incoterms 2020 tries to assist the seller when the FCA rule is used in conjunction with a letter of credit. The parties can agree that the buyer should instruct the carrier to issue the seller with a document such as an on-board bill of lading – something that banks often require under a letter of credit. Whilst this helps to address the banks’ requirement, it doesn’t alter the risks associated with allowing a byer to arrange transport.
  • The new version includes security-related requirements within the carriage obligations and costs provisions.
  • The rules now cover the situation where either the buyer or the seller transports the goods using their own vehicles, without engaging the services of a third party

The full rules can be purchased on the ICC website (https://2go.iccwbo.org/). There is also an Incoterms® 2020 mobile app which enables users to access essential information on the rules while on the move.

Those wishing to incorporate any of Incoterms 2020 into their contracts should review the changes and if necessary update their T&C or other standard documents to ensure consistency with the new rules. Contracts can continue to refer to the 2010 version after the 2020 version is released, provided the contract is clear which version applies.

If you have any queries about the new Incoterms, or how to update your contracts to incorporate these terms, please do contact a member of the commercial & technology team.