INCOTERMS 2020. The updated version of the terms of reference for international trade takes effect on 1.1.20 and applies until 31.12.29. What’s new-presented by the International Chamber of Commerce (ICC), 10.9.20 in Paris, in brief remarks to follow.
Incoterms, a century of unambiguous clauses for international sales
Paris, 1919. The Peace Conference and the establishment of the League of Nations stimulated the resumption of international trade, which was all the more necessary for post-war reconstruction. The Chambre de Commerce Internationale, ICC, is established as the reference institution to settle agreements and resolve any disputes. In 1936, the ICC published the first version of Incoterms, i.e., a group of wording that unambiguously expresses the different criteria for allocating obligations and responsibilities between the parties under international contracts for the sale of goods.
Each acronym – e.g., EXW(Ex Works), FOB(Free on Board), CIP(Carriage and Insurance Paid) – expresses a different scope of services offered by the vendor, to which precise responsibilities and risk coverage correspond. These are rules of a covenant nature, which apply only to the extent that the parties have referred to them in the contract (including the simple order confirmation). They do not apply in any case to regulate other essential elements of the contract (e.g., form, validity, applicable law, consequences of non-performance).
The updating of Incoterms takes place every decade, taking into account the evolution of international trade practices, communication tools, and transportation safety requirements. The bilingual edition in English and Italian can be purchased online, on the International Chamber of Commerce website.
Incoterms 2020, what’s new
The 2020 edition is not particularly innovative in content. Rather, it is in the participation of representatives from China and Australia, for the first time, in the national committees that contributed to the work. Which, as is customary, were carried out by ICC Technical Commissions and a Committee of Experts(Drafting Group), in synergy with national committees and international bodies.
Among the most notable changes in Incoterms 2020 are the following:
– Transportation by own means is explicitly allowed for coding. Referring to the formulas FCA(Free Carrier), DA(Delivery at Place), DPU(Delivery at Place Unloaded) and DDP(Delivered Duty Paid),
– As for the FCA(Free Carrier), the possibility of agreeing to cover the goods with a bill of lading on board (i.e., bearing notation that the goods were loaded on board) has been codified. A major change, where the FCA surrender term means the delivery made at the time the cargo is entrusted to the carrier of the buyer’s choice but that carrier often does not coincide with the carrier of the cargo on the ship,
– all risks coverage on the CIP(Carriage and Insurance Paid To) is always due from the seller. Even in the absence of a specific request by the buyer, the named perils insurance policy is no longer sufficient,
– the DPU (Del ivered at place unloaded) replaces the DAT(Delivered at terminal). DAT, introduced in 2010, referred to the ‘agreed terminal at the port or place of destination.’ To be understood as any place of delivery. The practice of identifying DAT with surrender to the customs terminal only suggested that the name ‘terminal’ be excluded from the wording.
Incoterms 2020, the confirmations
The total number of surrender terms (11) remained unchanged. And the division between general IncoTerms (those that can be used for any type of transport) and terms specifically referring to maritime transport (namely FAS, FOB, CFR, CIF) has been maintained.
The FAS(Free Alongside Ship, ex-board) and EXW(Ex Works, ex-factory) yield terms were finally confirmed. Although some lamented the poor application of the former and others insisted on the elimination of the latter. This is good news for the many Italian companies that rightly favor the EXW clause to export their goods while minimizing any risk related to transportation and customs operations.
Dario Dongo and Selena Travaglio
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
Lawyer, specializing in intellectual property rights. LL.M. in agri-food law.
