An Overview of Key Changes in ICC Incoterms 2020

February 1, 2020

The International Chamber of Commerce (ICC) Incoterms® 2020 were released in 2019 and entered into force on January 1, 2020.

A set of globally accepted trade terms, Incoterms provide clear guidance for the import and export of goods in all countries. The terms specify delivery points, and costs, risks and responsibilities born by both seller and buyer. This is vital in the smooth and conflict-free transport of goods.

According to the ICC, key changes made in the new incoterms include:

Options to request a bill of lading with an on-board notation in the Free Carrier (FCA) term

In the Freight On Board (FOB) Incoterm, a seller loses control of cargo when it arrives at the port. Despite losing control, they remain liable for cargo until it is on-board a vessel. As a result, the seller faces unpredictable expenses and risk. For instance, sellers have been hit with surprise storage and loading fees from port terminal operators.

To avoid this financial risk, sellers would use the FCA Incoterm. However, it is difficult to obtain an on-board bill of lading using this term. To ramify this, the 2020 FCA Incoterm allows buyers to direct carriers to issue a bill of lading with an on-board notation to sellers.

Different insurance coverage requirements in Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP)

In Incoterms 2010, both CIP and CIF shipping terms required the seller to pay for insurance specified in Clause C of the Institute if Cargo Clauses. This basic insurance level suits bulk commodities but is typically insufficient to cover manufactured goods.

The CIP Incoterm is predominantly used for manufactured goods. Hence, in the 2020 Incoterms, CIP requires higher Clause A insurance coverage.

Arrangements for sellers and buyers to use their own transport

2010 Incoterms assumed third party carriers would transport goods. Terms overlooked transport provided by the seller or buyer. Incoterms 2020 accounts for this in FCA, Delivery at Place (DAP), Delivery at Place Unloaded (DPU), and Delivered Duty Paid (DDP) Incoterms.

Changed name from Delivered at Terminal (DAT) to DPU

The name change reflects the need for a term that permits deliveries to a place outside of a terminal, such as a factory.

Security-related requirements within carriage obligations and costs

2010 Incoterms did not explicitly assign security obligations and costs to a party. The 2020 Incoterms assigns these responsibilities to the seller.

The ICC has also improved Incoterm understandability through the increased use of visuals and the inclusion of explanatory notes.

Find out more on the ICC website. Alternatively, Seabridge’s import and export specialists can help you expertly navigate new Incoterms. Avoid costly confusions and unwanted delays by contacting us on 1800 727 195.