What has changed with Incoterms 2020

Contrary to the expectation that had been created, the new version of Incoterms does not present much changes compared to Incoterms 2010 (the latest version).
 
Incoterms are rules issued by the International Chamber of Commerce (ICC). It consists of terms of sale, which regulate the obligations of each party (seller and buyer) with regard to the conditions for the supply of goods, notably with regard to transport, insurance, risk transfer, customs procedures, delivery operation and cost allocation. As is well known, they are very important in the transaction of goods, especially in international trade. However, for Incoterms to be binding, the parties must expressly refer to them in the contract or equivalent document.
 
On January 1 of this year, a new version of these rules came into effect - Incoterms 2020 -, which were released by ICC in September 2019. Contrary to the expectations that had been created, the new version of Incoterms does not present many changes for Incoterms 2010 (the latest version).
 
Incoterms continue to be divided into two categories: those applicable to any means of transport (7 Incoterms: EXW, FCA, CPT, CIP, DAP, DPU and DDP) and those applicable only when the transaction involves sea or waterway transport ( 4 Incoterms: FAS, FOB, CFR and CIF). Fundamentally, each Incoterm corresponds to certain supply conditions.
 
In summary, the most significant novelties are the following:
 
Replacement of Incoterm DAT (Delivered at Terminal) with Incoterm DPU (Delivered at Place Unloaded). Contrary to what happened with DAT, in the DPU there is no doubt that the destination can be anywhere (including the buyer’s premises) and not just a terminal in the strict sense. It should be noted that the only difference between the DPU and the Incoterm DPA (Delivered at Place) is that in the DPU the goods are only considered delivered after unloaded by the seller at the destination. Thus, the seller must check the conditions of the place, given that the risk inherent in the operation of unloading the goods is borne by him.
 
Flexibility of means of transport in Incoterms FCA (Free Carrier), DAP (Delivered at Place), DPU (Delivered at Place Unloaded) and DDP (Delivered Duty Paid). The party responsible for transport will no longer be obliged to hire a professional carrier and may use their own means of transport.
 
Possibility of issuing a bill of lading on board the carrier vehicle ("on-board bill of lading") at Incoterm FCA (Free Carrier). The Parties may agree that the buyer will instruct the carrier to issue and deliver a bill of lading directly to the seller attesting that the goods have been loaded on the vehicle. This option is intended to solve the problem faced by the seller in obtaining payment in this situation, since, as a rule, the bank issuing the letter of credit requires the presentation of a bill of lading, but this document was not made available to the seller.
 
Differentiation between the insurance required by Incoterm CIP (Carriage Insurance Paid to) and Incoterm CIF (Cost, Insurance and Freight). In the 2010 Incoterms version, both CIP and CIF required the seller to provide insurance that, in terms of covered risks, meets clause C) of the "Institute Cargo Clauses" (ie the lowest level in terms of risks protected). However, in the Incoterms 2020 version, CIP now requires the seller to take out insurance that complies with clause A) of the "Institute Cargo Clauses" (which is equivalent to the improperly called "insurance against all risks"). In the case of CIF (which is specific to maritime or inland waterway transport), the coverage offered by said clause C remains sufficient. It should be noted that, in both modalities (CIP and CIF), Incoterms 2020 maintained, among other requirements, the requirement that the insurance cover at least 110% of the price of the goods.
 
Strengthening the specification of security-related obligations. Incoterms 2020 introduced several adequacy and / or information and / or cooperation obligations of one or both parties in relation to security issues, especially those related to transport or the formalities of the goods clearance process.
 
It should be noted that, to avoid doubts, it is essential that the parties, when subjecting the transaction to an Incoterm, specify which version of Incoterms (2010 or 2020) they want to be applicable.
 
As a result of the entry into force of Incoterms 2020, and as disclosed by the News Siscomex Export 001/2020, the term "DPU: Delivered At Place Unloaded" was included in the Siscomex table (however, the substituted term "DAT: Delivered has been maintained, At Terminal ").
 
Rodrigo d’Avila Mariano and Nuno Correia dos Santos
Chiarottino e Nicoletti