New Incoterms® 2020 – What changes in international trade?
What are the Incoterms® ? The Incoterms® stand for International Commercial Terms, which are globally recognized sets of rules that are of great importance in foreign trade. They regulate the rights and obligations of buyers and sellers in international trade, but can also be applied nationally.
They regulate all rights and obligations of the contracting parties in connection with the delivery of goods: Cost allocation, the risk and the transfer of risk.
On its website (https://www.incoterms2020.de/), the ICC lists the following four advantages of using its Incoterms® in national and international trade:
– Clear regulation of mutual contractual obligations
– Faster conclusion of contracts
– No more misunderstandings
– Avoidance of cost-intensive legal disputes
Who drafts the Incoterms® ?
The International Drafting Committee of the ICC (International Camber of Commerce) consists of over 500 experts from more than 40 countries representing different user groups. Together, they agreed on the changes to the 2010 version of Incoterms®. The revision of the rules has the objective to update and include new global trade practices.
Adjustments and additions in the 8th revision
FCA | Free Carrier:
„Seller shall deliver the goods cleared for export to the carrier named by Buyer by loading on Seller’s premises or at another location.
New – Transportation may also be made by the seller’s own means of transport.
New – Optional: issuance of an on-board bill of lading to be delivered by the seller to the buyer.“
CIP | Carriage Insured:
New – „Seller delivers the goods cleared for export by handing them over to its designated carrier. In addition to paying the freight charges for transportation to the named destination, Seller agrees to enter into a Comprehensive Coverage Transportation Insurance Contract (Institute Cargo Clause A).“
DAP | Delivered Named Place:
„Seller shall make the goods cleared for export available to Buyer on the arriving means of transportation ready for unloading at the named place of destination.
New – The goods may also be transported by the seller’s own means of transport.“
DPU | Delivered named place unloaded:
New – „DPU replaces the DAT Incoterms2010® clause. Seller shall unload the goods cleared for export at the place of destination. The destination may be a terminal, but may also be any other place.“
DDP | Delivered Duty Paid:
„The seller makes the goods available at the destination ready to be unloaded and cleared through customs.
New – Transportation of the goods can also be done by own means of transport.“
Meeting the challenges of the market
It is important to note that the new published rules do not automatically apply, but you must agree on a version of the Incoterms® clauses with your contractual partner and fix them accordingly in your sales contract. Often the rights and obligations of buyers and sellers are regulated in the general terms and conditions of purchase of companies, these need to be adapted. Thus, purchase contracts already signed and general terms and conditions of purchase used for this purpose are not affected by the new amendments.
Regular revision and updating of accompanying documents and sets of rules in the purchasing process is important in order to keep up with the times and meet the current requirements of the market. In the current times, expanding a sustainable, CSR-compliant supply chain is an important part of securing business with an eye on the upcoming Supply Chain Act. Only the „large“ companies, from 3000MA and later from 1000MA will be affected by the draft law at first, but they will pass on the requirements to their suppliers for compliance. Do not miss the opportunity to adapt your purchasing conditions accordingly! We as ADCONIA GmbH are experts in the field of procurement and supply chain and will be glad to assist you with words and deeds.
Consultant, ADCONIA GmbH