If you are a trader who uses Incoterms for your sales contracts, it is important to be aware that the latest version, Incoterms® 2020 came into force on 1 January 2020.
The new rules replace and update the existing Incoterms® 2010 to reflect changes to the market over the previous decade.
Key changes
There is a key focus under Incoterms® 2020 on traders choosing the right Incoterms® rule for their sales contracts.
The International Chamber of Commerce states that the updated Incoterms® include:
- more detailed explanatory notes with enhanced graphics to illustrate the responsibilities of importers and exporters for each of the 11 Incoterms® rules; and
- a more detailed explanation in the introduction to Incoterms® 2020 on how to choose the most appropriate Incoterms® rule for a given transaction, or how a sales contract interacts with ancillary contracts.
Other key changes are:
- Provision for bills of lading with an on-board notation under the FCA Incoterms® rule;
- Costs and where they are listed, reflecting the re-ordering of the terms in the new version;
- Different levels of insurance cover between CIF and CIP, recognising the need for flexibility in insurance in relation to these two terms;
- Clarification that EXW, FCA, DAP and DPU can be used for domestic trade;
- Clarification that FAS, FOB, CFR and CIF are recommended for conventional sea freight only and not containerised freight;
- Providing for carriage with the seller’s or buyer’s own means of transport in FCA, DAP, DPU and DDP;
- Change in the three-letter initials for DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded); and
- Inclusion of security-related requirements within carriage obligations and costs.
Brexit
After Brexit, it is likely there will be an introduction of import and export controls on trade in goods between the UK and the EU. Therefore, UK businesses may need to consider including Incoterms® in their standard sales contracts where they typically trade with the rest of the EU.
Conclusion
While Incoterms® 2020 is the most current version of the trade terms, Incoterms® 2010 is still in effect and it is still possible to agree a contract on Incoterms 2010.
Where parties use Incoterms, in practice (and to avoid confusion), it is important to clarify which Incoterms should apply and state this in each sales contract.
If you would like any advice in relation to your sales contracts or any guidance or advice on Incoterms 2010 or 2020, please contact one of our lawyers on 0161 941 4000 and ask for our Corporate/Commercial department or email us.