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What’s new in the 2020 Incoterms


The recently launched 2020 edition of Incoterms contains relatively few substantive changes, but efforts have been made to make the terms easier to understand and allow buyers and sellers to more easily identify the most appropriate term


The 2020 edition of Incoterms, which will become effective from the 1 January 2020, was introduced at an event in London recently by the International Chamber of Commerce (ICC). These terms define the contractual relationship between buyers and sellers. In addition, they influence supplementary contracts such as forwarding and insurance contracts. Internal records maintained by BIFA indicate that two terms


cause the greatest problems: Ex Works (ExW) and Delivery Duty Paid (DDP). The issues usually stem from a conflict between the contractual terms and regulatory responsibility. For instance, under ExW terms, the seller delivers the goods to the buyer by making them available to be loaded on the collecting means of transport. This can lead to problems establishing who will be the exporter and zero rating the export invoices for VAT purposes. It is noted that the 2020 Incoterms does emphasise in section 6 of the explanatory notes that where export clearance is required “the buyer would be better advised to choose the FCA rule, under which the obligation and cost of obtaining export clearance lies with the seller”. At the other end of the spectrum lies the DDP term, and the


The emphasis is very much on the buyers and sellers to select the correct incoterm and ensure that they understand its implication regarding costs and risks.


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most frequently asked question relating to who pays for delays and whether VAT is included? In general terms, VAT is included unless specifically excluded. However, it is recommended that local customs/VAT requirements are verified before sending DDP shipments. Some BIFA Members state in their agency agreements that they will only accept DDP shipments where VAT is excluded, and when there is an importer of record in the country of import. The emphasis is very much on the buyers and sellers to


select the correct incoterm and ensure that they understand its implication regarding costs and risks. The single most important point to remember is to define the ‘place of delivery’. As ever, the 11 most popular terms are divided into 10 articles in the latest edition. The articles have been re-ordered to give greater emphasis to those covering delivery/taking delivery and the transfer of risks. It should be remembered that there are also local terms which are used that have not been published – for instance a Member recently asked us about DoT, which apparently means ‘delivered on train’. There are relatively few substantive changes to the


Incoterms, although, the ICC has taken the opportunity to change the structure of the Incoterms publication. The publication has grown from 128 to 193 pages, following the traditional layout until page 134. From page 135, article by article the relevant terms are analysed, the aim being to make selecting the relevant term easier to identify. Within the traditional part of the publication, there are expanded Explanatory Notes replacing the Guidance Notes, giving greater detail about each item. One of the main ambitions of the drafting committee was to


make the terms easier to understand and allow buyers and sellers to more easily identify the most appropriate term. Having read the 2020 terms, the improved pictorial layout, use of clearer English and the previously mentioned changes in layout have ensured that this has been achieved.


Seven changes In essence there are seven changes between the 2010 and 2020 editions of Incoterms: • Clarification of the arrangements between a ‘buyer’ and ‘seller’ for maritime shipments moved under bills of lading with an FCA term where an ‘on-board’ bill of lading is required;


• Costs and where they are listed – these are now consolidated into Article A9/B9;


• Different levels of insurance cover between the terms CIF and CIP;


• Acknowledgment that sellers or buyers arrange carriage in FCA, DAP, DPU and DDP;


• The term Delivered at Terminal (DAT) becomes Delivery Place Unloaded (DPU);


• Security related requirements within carriage obligations and costs are more accurately defined;


• Enhanced Explanatory Notes for users which replace Guidance Notes. There is a relatively short period between the publication of


the 2020 Incoterms and their effective date. Members wishing to buy the latest edition can purchase


them for £45 directly from the ICC at https://iccwbo.uk/pages/incoterms-publications


December 2019


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