The Most Important Changes in Incoterms 2020

What are Incoterms?

Incoterms are the international rules that determine the responsibilities, costs and risks between the seller and the buyer. They are universal rules that bring predictability to the business. It’s important to keep in mind that this is not the full sales contract, only part of it incorporated into the contract. From time to time the International Chamber of Commerce (ICC) releases new changes and improvements, and this article will discuss some of those most relevant topics.

Incoterms define responsibilities

The first important thing is to see the type of incoterm chosen, the delivery place and the version of incoterms being used must be mentioned, e.g. DAP Stora Marknadsvägen 15, 7tr, 183 34 Täby Incoterm 2020. Mentioning the Incoterm in the right way will avoid any misunderstanding about payments and risks of each party, because each business partner must understand their own responsibility and in case of a judiciary dispute, a judge might be able to analyze the responsibilities involved easily. Another change is about the “on board” term on the BL. On FCA Incoterms both parties might agree that the buyer has to instruct the carrier to issue a bill of lading on board to the seller after the goods are loaded. However, the seller is under no commitment to the purchaser regarding the details of the transportation contract.

It is important to note the year of the incoterm because they can change over time. For example, from the incoterm 2010 to the incoterm 2020 the DAT incoterm has been changed to DPU – Delivery-At-Place Unloaded. And the new rule says that the seller delivers the goods in an agreed place at destination and is responsible until the cargo being unloaded. After that, all costs and responsibilities are at buyer’s side (including import customs clearance and any other delivery, if necessary). This rule was revised to be more general because the previous one indicated the terminal as a point of changing responsibilities and was not mentioning the time of unloading. This blind spot on DAT arises for both sides of a question about who would pay if any damage occurs while taking off the cargo from a vessel or a truck, for example. Now, this new DPU incoterm makes evident that the risk changes from one party to another after the cargo has been unloaded onto the floor. It is also more general, as any place at destination can be picked, instead of the pre-designated terminal.

Thinking about these difficulties, Centersource have developed the platform with an easy way to keep the exporter on track. The platform reminds you to indicate exactly the right place of delivery, as well as reminding the users about the costs involved, so they won’t forget any cost. Of course, in the end, it is a choice of the user, and Centersource provides all the tools to make the planning as smart as possible. The final choice is always left for the user – although he platform is updated to use the Incoterms 2020, it is still is possible to negotiate using the Incoterms 2010 terms.