Incoterms were first published by the ICC in 1936. Since then, there have been numerous publications. In recent times, the ICC publishes a news version of the Incoterms every 10 years. Therefore, as of January 2020, a new version of the Incoterms, Incoterms 2020, has been published by the ICC updating the 2010 version. This article discusses the main changes brought by the new publication.
1) FCA and Bills of Lading
In the context of FCA sales by sea transport, it may happen that the seller, perhaps the recipient of a documentary credit, is interested in obtaining a Bill of Lading with an on board notation. Remember that art.20 UCP 600 ICC governing documentary credits requires, in point a ii, the following:
“A bill of lading, however named, must appear to:
indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit by:
• pre-printed wording, or
• an on board notation indicating the date on which the goods have been shipped on board. “
In the FCA term, however, the delivery of the goods is perfected before it is loaded on board the ship and the carrier would be obliged to issue a “shipped” Bill of Lading or a “received” Bill of Lading with an on board notation only when the goods are actually loaded on board.
To resolve this problem, a new option is foreseen in the term FCA Incoterms® 2020: the commercial counterparties can agree that the buyer will instruct his carrier to issue and deliver an on board Bill of Lading to the seller – after loading the goods on board the ship – and the seller will be obliged to forward the Bill of Lading to the buyer using (usually) the banking channel. With this indication, the ICC has recognized a market need while detecting a theoretical inconsistency between the “delivery” point envisaged by the term FCA and the request for an on board Bill of Lading. Finally, ICC underlines the opportunity to use the term FCA for the sale of containerized goods (manufactured cargoes) avoiding the FOB as this term should be used exclusively for the sale of non-containerized goods, such as commodities. (grain, oil, iron ore, etc.)
2) Costs, where they are listed
In Incoterms 2020, costs appear in articles A9 / B9 (section A The Seller’s Obligation, section B The Buyer’s Obligation – A9 / B9 Allocation of costs) of each Incoterms rule. In essence, with the new approach, the identification of the costs borne by each counterparty is decidedly more immediate than in the previous edition of Incoterms. It should be noted, however, that the references to the so-called costs, are reported anyway in the respective articles: for example the costs relating to obtaining the documents in the FOB return appear both in articles A9 / B9 and in articles A6 / B6.
3) Different levels of insurance coverage in CIP and CIF terms
In the Incoterms 2010 the seller was obliged, in the context of sales with CIP or CIF yield, to “obtain at its own expense cargo insurance complying at least with the minimum cover as provided by Clauses (C) of the Institute Cargo Clauses ( Lloyd’s Market Association / International Underwriting Association ‘LMA / IUA’) or any similar clauses. ” It should be remembered that the Institute Cargo Clauses (C) cover a defined number of risks while the Institute Cargo Clauses (A) cover all “all risks” (in both clauses, however, some “exclusions” are provided).
The new Incoterms have different levels of insurance coverage required under the CIP and CIF terms.
In the CIF, the obligation remains with the seller, unless otherwise agreed, “to obtain, at its own cost, cargo insurance complying with the cover provided by Clauses (C) of the Institute Cargo Clauses (LMA / IUA) or any similar clauses “. In the CIP, however, the obligation on the seller is that of, unless otherwise agreed, “to obtain, at its own cost, cargo insurance complying with the cover provided by Clauses (A) of the Institute Cargo Clauses (LMA / IUA) or any similar clauses as appropriate to the means of transport used “.
4) Organization of transport by the seller’s or purchaser’s own means in FCA, DAP, DPU and DDP terms
Unlike the previous edition of the terms of delivery, the Incoterms 2020 provide for the possibility that the transport in FCA / DAP / DPU and DDP returns is carried out not with third-party carriers but using the seller’s own means of transport (within the terms D) and the buyer’s (in the term FCA).
5) Change in “three-letter initials”: from DAT to DPU
In Incoterms 2010, the only difference between the term DAT and the term DAP was that in the DAT the seller delivered the goods “once unloaded from the arriving means of transport into a” terminal “; while, in the term DAP the seller delivered it the goods “when the goods were placed at the disposal of the buyer on the arriving means of transport for unloading”. In Incoterms 2020 two changes were made. The order in which the terms are presented was reversed (in the edition of the Incoterms 2020 the DAP was reported before the DPU, while in the Incoterms 2010 the DAT was reported before the DAP). The name of the term was changed from DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded). This modification is intended to emphasize that the place of destination can be any place and not necessarily a terminal. Obviously, if the place of destination is not a terminal, the seller must ensure that there is a technical possibility of unload the goods.
6) Insertion of the so-called “security-related requirements” within carriage obligations and costs
The so-called “security-related obligations” have been added to sections A4 and A7 of each Incoterms. Furthermore, the costs relating to these “requirements” are better highlighted in the cost sections A9 / B9.
7) Explanatory Notes for Users
The “Guidance Notes” reported at the beginning of each Incoterms in the 2010 edition, are now referred to as Explanatory Notes for User. These notes report the “fundamentals” of each Incoterms 2020, indicating when the term can be used, when the risks are transferred and how the costs are shared between the parties. The stated goal is to help operators correctly use Incoterms 2020.
Globartis Research
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