The revision of the Incoterms 2020 Rules will be published by the second half of 2019, at the same time as the celebration of the ICC Centenary, and will enter into force on 1 January 2020. Incoterms support companies in avoiding unnecessary costs to define the parties’ obligations, costs and risks incurred by each of them during freight 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 for the first time includes representatives from China and Australia, is reviewing the Incoterms to ensure that they clearly and accurately reflect current business practices. Below are the possible changes under discussion.
FAS (Free Alongside Ship) is a little-used Incoterm. The term FAS yield is used only for the export of certain products (minerals and cereals) and the Editorial Committee is considering the convenience of creating a specific Incoterm for this type of product.
40% of the 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.
Incoterms FOB (“Free On Board”) and CIF (“Cost Insurance and Freight”) are part of the Incoterms of maritime transport. In Incoterms 2010, their use was discouraged in the case of containerized transportation of goods, and Incoterms FCA and CIP for containerized goods were indicated in their place. However, this change has not been fully implemented by most of the parties involved in international trade, generating an improper use of 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 that alone accounts for 80% of world trade.
The abolition of EXW Ex Works, usually preferred by companies with little export experience or not willing to take responsibility for after-sales logistics services, would be planned.
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 yield would include the cost of international insurance to be borne by the seller-exporter. Whereas, 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”, i.e. 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 has caused problems such as the responsibility of the customs import procedure. For this reason, the editorial board may consider it appropriate to create two separate DDP-based Incoterms:
DTP (Delivered at Terminal Paid): the seller pays for transport to the terminal (port, airport, transport centre, etc.) and customs duties;
DPP (Delivered at Place Paid): the seller pays for the transport to a place other than a terminal (e.g. to the buyer’s address), and the customs duties.