A new decade traditionally comes with a new edition of the Incoterms. The main differences between the Incoterms 2010 and the new version of 2020 are discussed below.
The Incoterms 2020 contain seven major changes compared to the Incoterms 2010. These cover:
- Bills of lading with an on-board notation and the FCA Incoterms rule;
- Costs, where they are listed;
- Different levels of insurance cover in CIF and CIP;
- Arranging for carriage with seller’s or buyer’s own means of transport in FCA, DAP, DPU and DDP;
- Change in the three-letter initials for DAT to DPU;
- Inclusion of security-related requirements within carriage obligations and costs;
- Explanatory Notes for Users.
Bills of lading with an on-board notation and the FCA Incoterms rule
As delivery under FCA is completed before the goods are loaded onto a vessel, though parties sometimes need an on-board notation (especially when there is a letter of credit from a bank involved), this was an issue under Incoterms 2010.
Incoterms 2020 introduces an option under FCA term A6/B6 that parties can agree that the buyer asks the carrier to deliver this on-board notation to the seller after the loading of the goods, who in his turn has to tender the on-board notation to the buyer, when applicable through the bank.
Costs, where they are listed
As opposed to Incoterms 2010, costs are relocated to A9/B9 under Incoterms 2020. Furthermore, A9/B9 becomes a list of all costs relevant for the Incoterms rule, while under Incoterms 2010 costs were treated separately for each subject. However, they are also still separately mentioned under the relevant subject in Incoterms 2020.
Different levels of insurance cover in CIF and CIP
In the Incoterms rule CIF, often used in maritime commodity trades, the situation stays the same with regard to insurance (A3): insurance has to be obtained at the expense of the seller complying with the minimum cover as provided by Clauses (C) of the Institute Cargo Clauses. Parties can agree a higher level of insurance though.
However, with regard to CIP, the seller is now obliged to obtain insurance complying with Institute Cargo Clauses (A), which is an insurance covering all risks. However, as is the case with CIF, parties can deviate from this obligation and agree upon a lover level of cover.
Arranging for carriage with seller’s or buyer’s own means of transport in FCA, DAP, DPU and DDP
The Incoterms 2020 now expressly allow not only the making of a contract of carriage, but also simply arranging for the necessary carriage without any involvement of a third-party carrier under the above mentioned rules.
Change in the three-letter initials for DAT to DPU
In order to clarify that under Incoterms rule DAT delivery can take place at any place and not only at a ‘terminal’, its name was changed to DPU, which stands for ‘Delivered at Place Unloaded’.
Furthermore, the order in which DAT (now DPU) and DAP are presented, is inverted.
Inclusion of security-related requirements within carriage obligations and costs
As opposed to Incoterms 2010, an express allocation of security related obligations has been added to A4 and A7 of each Incoterms rule in Incoterms 2020, as well as the costs incurred by these requirements, which can be found under A9/B9.
Explanatory Notes for Users
The Guidance Notes used in Incoterms 2010 have been replaced by Explanatory Notes for Users in Incoterms 2020.
These Explanatory Notes aim to steer users toward the appropriate Incoterms rule for a specific transaction, as well as provide guidance on how to interpret certain Incoterms rules.
