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ICC publishes Incoterms 2020
10/15 2019 // International

ICC publishes Incoterms 2020

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The International Chamber of Commerce (ICC) has revised its renowned rules for international trade. The new clauses will come into force on 1 January 2020, but existing Incoterms can still be used.

The ICC has released a new version of its Incoterms. "Incoterms 2020" will be valid from 1 January 2020 and will replace the previous "Incoterms 2010". However, the new version is not a radical transformation as was the case with the Incoterms of 2010, according to the office of the ICC Germany in Berlin. On the contrary, the update is intended to simplify the application and handling of Incoterms in some areas, for example through a clearer and more user-friendly structure and better comparability of the clauses with each other.

Incoterms 2020: the most important changes

·    The DAT clause (Delivered at Terminal) will be changed in the Incoterms 2020 to DPU (Delivered at Place Unloaded), which will allow for any (agreed) location to be the destination.

·    For goods sold under the FCA clause (Free Carrier) and intended for maritime transport (such as goods in containers), FCA intends to introduce a new option in the future. Buyers and sellers can agree that the buyer instructs its carrier to issue the seller with an on-board bill of lading after loading the goods. At the same time, the seller is obliged to hand over the on-board bill of lading to the buyer. This is typically done through participating banks.

·    The Incoterms 2020 adapt the insurance cover in CIF (Cost Insurance Freight) and CIP (Carriage Insurance Paid) to current business practice. Previously, it was regulated that the seller closes insurance coverage for the buyer at a minimum level, which covers a number of listed default risks. Under the new rules, this minimum coverage will remain in CIF, while for CIP, standard insurance coverage has moved towards more comprehensive all-risk coverage.

·    The new Incoterms also take into account that more and more trading partners are organizing the transport of goods by their own means of transport. So far, it has consistently been assumed that the goods would be carried by a third-party supplier commissioned either by the buyer or the seller for this purpose (depending on which clause was used). However, in the discussions on Incoterms 2020 it became clear that there are situations where the buyer or the seller wishes to use its own means of transport to transport the goods. Therefore, in the Incoterms it will be possible in the future for the buyer or seller either to conclude a contract of carriage or simply to organize the necessary transport itself.

·    The last major innovation concerns the increased safety requirements for the carriage of goods. The Incoterms 2020 contain clear rules on the distribution of security obligations and the associated costs. An explicit distribution of security-related obligations has been added to many articles. The resulting costs are moved to the foreground in some articles.

Incoterms regulate delivery, customs, and more

The international commercial terms, as they are known in full, regulate the place of delivery of goods (and thus the transfer of risk from the seller to the buyer) in international trade transactions, cost allocation for freight and customs, as well as transport and insurance issues.

A total of 500 experts from 40 countries worked on the most recent revision process of the Incoterms, which took three years. Of this number, around 20 experts came from Germany. "We evaluated over 3,000 comments from commercial practice and incorporated them according to their relevance," says Prof. Burghard Piltz, partner at the law firm Ahlers & Vogel and member of the ICC Editorial Committee.

Incoterms 2020 not mandatory

The Incoterms 2020 of the ICC - just like all previous versions – are not mandatory for international trade. Furthermore, the Parties may effectively resort to the Incoterms 2010 or even older versions. According to the ICC, Incoterms are used in 90 percent of all international contracts. There are seven clauses for all types of transport, and four more for sea and inland waterway transport.

From November, BME will also be offering various seminars on the correct application of Incoterms 2020 in contracts in purchasing and logistics .

The Incoterms 2020 were also presented and discussed at the 2nd Customs & Trade Summit of BME in Darmstadt at the beginning of September .

Tobias Anslinger, BME

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