Incoterms 2020

 

The revision of the Incoterms 2020 Rules will be published within the second half of 2019, simultaneously with the celebration of the ICC Centenary, and will enter into force on 1 January 2020. The Incoterms are of support to companies in avoiding incurring unnecessary costs, to define the obligations of the parties, the costs and risks incurred by each of them during goods transport operations.

The ICC published the first Incoterms rules in 1936 and since then they have been developed and updated. The Drafting Group editorial board, which includes representatives from China and Australia for the first time, is reviewing the Incoterms to ensure that they reflect current business practices clearly and accurately. Below are the possible changes under discussion.

FAS (Free Alongside Ship) is a little-used Incoterm. The FAS delivery term is used only for the export of some products (minerals and cereals) and the Editorial Board is considering the convenience of creating a specific Incoterm for this type of products.

40% of global trade is managed under FCA to offer flexibility in the place of delivery and be applicable to all types of transport. One of the changes envisaged in Incoterms 2020 is the division of FCA into two categories: one for land transport and another for maritime transport.

The Incoterms FOB (“Free On Board” or Franco on board) and CIF (“Cost Insurance and Freight” or Cost, Insurance and Freight) are part of the Incoterms of maritime transport. In Incoterms 2010 their use was not recommended in the case of transport of goods in containers, and the Incoterms FCA and CIP for goods in containers were indicated instead. However, this change has not been fully implemented by most of the subjects involved in international trade, generating an improper use of the Incoterms 2010 by sea. It is very likely that the FOB and CIF clauses will again apply to shipments of goods in containers, a mode of transport which, alone, represents 80% of world trade.

The abolition of the EXW Ex Works, usually preferred by companies that have little export experience or that are not willing to take on the responsibility of post-sales logistics services, would be scheduled.

Creation of a new Incoterm called CNI (Cost and Insurance) which would cover a gap between FCA and CFR / CIF. Unlike the FCA, the CNI return would include the cost of international insurance paid by the seller-exporter. While, unlike CFR / CIF, CNI would not include freight transport.
As in the other Incoterms of class “C“, this new Incoterm would be an “Incoterm of arrival”, that is the transport risk would be transmitted from the seller to the buyer in the port of departure.

With the DDP return the seller pays the customs duties in the importing country, regardless of the place of delivery.
Therefore, the use of the DDP terms was the cause of problems such as the responsibility of the customs import procedure. For this reason, the editorial committee may consider it appropriate to create two separate Incoterms based on DDP:
DTP (Delivered at Terminal Paid): the seller pays transport to the terminal (port, airport, transport center, etc.) and customs duties;
DPP (Delivered at Place Paid): the seller pays transport to a place other than a terminal (for example, to the buyer’s address), and customs duties.