28 November 2019
The International Chamber of Commerce (“ICC”) has published the latest version of its international commercial terms, the Incoterms 2020. The Incoterms rules are a set of standards used worldwide in international and domestic contracts for the delivery of goods. They explain a set of 11 of the most commonly-used three-letter trade terms (e.g. CIF and FOB), and describe how obligations, risk and costs are allocated between parties to a contract for the sale of goods.
Compared to Incoterms 2010, the previous version of the rules, Incoterms 2020 features:
- greater emphasis on how to choose the most appropriate Incoterms rule for a given transaction;
- a clearer explanation of the demarcation and connection between the sale contract and its ancillary contracts;
- upgraded Guidance Notes now presented as Explanatory Notes to each Incoterms rule; and
- a re-ordering within the Incoterms rules giving delivery and risk more prominence.
Apart from the above general changes, substantive changes to the following areas have also been made:
- bills of lading with an on-board notation and the FCA Incoterms rule;
- costs, where they are listed;
- different levels of insurance cover in CIF and CIP;
- arranging for carriage with seller’s or buyer’s own means of transport in FCA, DAP, DPU and DDP;
- change in the three-letter initials for DAT to DPU; and
- inclusion of security-related requirements within carriage obligations and costs.
Incoterms 2020 was published in September 2019 and will come into effect on 1 January 2020. It should be noted that parties to a contract for the sale of goods can agree to choose any version of the Incoterms rules. Nonetheless, the ICC recommends using the most current version of the rules.