Updated Incoterms® 2020 Rules go into effect January 1, 2020. The International Chamber of Commerce (ICC) set out to make Incoterms® 2020 easier to access and the updated rules define who, between a seller and buyer is responsible for the costs and risks associated with delivering goods. As a shipper, you should review and identify what Incoterms your business typically uses and once understood, check to see if they are in alignment with the changes introduced by the 2020 terms and what impact they could have on your shipping.
With one exception, you should be familiar with the 11 universally recognized terms subdivided into two categories or ‘mode of transport’. However, some of these terms have changed in style and substance to improve the overall understanding.
Rules for any mode or modes of transport:
Rules for sea and inland waterway transport:
What’s changed and what’s new
DAT is changing to DPU
A new Incoterm DPU (Delivered at Place Unloaded) has been created to replace DAT (Delivered at Terminal). DPU is the only Incoterm in which the goods are delivered unloaded at the place of destination. The ICC renamed this term because at times, the buyer and/or seller want the delivery of goods to occur somewhere other than a terminal. This is the only term that tasks the seller with unloading the goods.
One important change relates to the term Free Carrier (FCA). Under FCA, the seller is now responsible for having the shipment ready for pickup at its own location or a named location. In either case, the seller is responsible for having the goods directly loaded on the buyer’s transport in order for the buyer’s carrier to issue a bill of lading to the seller.
CIF and CIP
With CIF (Cost of Insurance and Freight), the seller delivers the shipment to the carrier and pays the shipping costs and insurance to the final destination regardless of how the shipment is transported. For 2020, CIP (Carriage and Insurance Paid) increases the amount of insurance required.
DAP, DPU and DDP
DAP (Delivered at Place), DPU (Delivered at Place Unloaded), and DDP (Delivery Duty Paid) now take into account the buyer and seller arranging their own transport rather than using third party companies
Security-related obligations are now more prominent and Incoterms® 2020
“Explanatory Notes for Users” for each Incoterm® have replaced the 2010 edition’s Guidance Notes and are designed to be easier for users. As with all trade compliance, it is important that all involved in international trade gain a thorough understanding of the amended Incoterms 2020 rules set to roll out on the first of the new year.
For a simplified visual guide, download DB Schenker's Incoterms Quick Reference Guide for more information, reach out to your local DB Schenker representative.
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