On January 1st, the Incoterms, the most widely used international trade rules worldwide, were updated. The main changes in the Incoterms 2020 focus on the security of international exchanges.
What are Incoterms?
Incoterms were created in 1936 by the International Chamber of Commerce (ICC) to improve trade relations between different countries. The acronym stands for International Commercial Terms.
This set of rules, which establishes the rights and obligations of importers and exporters, is updated every ten years to adapt to changes in the international trade landscape.
This year, 2020, there has been a revision of the Incoterms that every importer must know, as they are valid worldwide and serve as a basis for resolving any disputes in transactions.
The Most Used Incoterms
Incoterms are a set of 11 rules that define the terms under which import and export contracts are conducted. These clauses establish, among other things, the responsibilities of the buyer and seller and who is responsible for the costs of the operation.
Here is a list of the most commonly used Incoterms:
EXW
With this agreement, the supplier’s responsibility ends once the goods are made available to the buyer at the point of origin. Although it is more economical, it offers few guarantees to the importer, who must handle transportation, insurance, etc.
FCA, FAS, and FOB
This group of Incoterms extends the supplier’s responsibility until the goods are delivered to the means of transport contracted by the importer.
CFR, CIF, CPT, and CIP
The Incoterms in this group include the supplier’s commitment to arrange transportation. They must also prepare the invoice and the Bill of Lading, further easing the importer’s processes. However, the supplier is not responsible for damage or loss of goods.
DAT, DAP, and DDP
With these Incoterms, the supplier must cover all costs and risks up to the destination country. In this case, the importer avoids many formalities, although it is always advisable to supervise the entire process to ensure that the documentation is correct.
Basically, each Incoterm determines when the responsibility is transferred from the supplier to the importer. Thus, the seller can be responsible only for sending to the port of origin, loading onto the ship, or delivery at the destination.
FOB Incoterms are generally the most recommended for most cases. However, since they are complex terms, it is advisable to seek expert advice before choosing.
New Features of Incoterms 2020
The final text of the Incoterms 2020 was approved in May 2019 by the ICC World Council and published in September of the same year, although the rules did not come into force until January 1.
The main new features of Incoterms 2020 are as follows:
- ICC Mobile App: The International Chamber of Commerce is aware of the increasingly widespread use of mobile devices. For this reason, it has created an application that allows companies to quickly and easily access Incoterms.
- Increased control in maritime transport: The Incoterms of group F (FCA, FAS, and FOB), corresponding to maritime transport, have increased security for the supplier. From now on, the seller can obtain a bill of lading indicating that the goods have been delivered, allowing greater control and tracking in case of problems.
- Change from DAT to DPU: The Incoterm DAT (Delivered at Terminal) has been replaced by DPU (Delivered at Place Unloaded). This change means that the goods are now delivered to the place agreed upon by both parties.
- Increased security: To improve the safety of goods transportation, the Incoterms have been reinforced with more mandatory controls.
Despite these changes, terms prior to 2020 remain valid, so it is very important to indicate the year of the Incoterm version being signed in the contract.
At Bull Importer, we conduct a personalized study of Incoterms and advise our clients on the one that best suits their case. This way, imports will be safer and more cost-effective.
