INCOTERMS 2020

Incoterms 2020 is eleven unified rules that are applied in world trade and fix the rights and obligations of the parties to a foreign trade agreement regarding the delivery of products from the seller to the buyer.

The rules are foreign trade terms abbreviated in the first three letters reflecting the current commercial practice in the world.

The first edition was published in 1936, then it was changed and revised in 1953, 1967, 1976. Since 1980 Incoterms has been periodically revised every ten years and was updated in 1990, 2000, 2010 and 2020 respectively.

Incoterms 2020 came into force on January 1, 2020; however the use of old editions is also possible at the present time. That is why, when mentioning the terms of delivery, it is necessary to indicate the edition of the Rules with an indication of a specific year.

Incoterms rules do not replace a foreign trade contract but only make it possible to significantly reduce and simplify it. The unified conditions do not regulate the transfer of ownership of the consignment, do not indicate the unit cost or payment methods. They only record the distribution between the parties to the purchase and sale of liabilities and financial expenses, such as: payment for transportation, unloading of a consignment, customs clearance, payment of taxes and duties, insurance, as well as transfer of risks in case of loss and possible damage to products.

In the new rules of Incoterms big changes were expected in comparison with previous versions (exclusion of some terms, unification by mode of transport, etc.), but these expectations were not met.

Not a single term has been removed or added in the new edition. Only one delivery basis changed its name: DAT was renamed to DPU. At the same time the renaming is rather technical in nature. As in the previous version some terms apply only to sea (river) transportation and have not become universal.

One of the most common delivery bases (FCA) has changed, now its application allows the parties to the transaction to agree that the buyer can instruct the carrier to issue a sea bill of lading with an onboard record to the seller. This will allow the latter to fulfill the terms of the letter of credit in a short time.

Also the innovations affected the CIP conditions, the amount of the insured amount increased and must exceed 110 percent of the value of the insured consignment.

The new edition also clarifies the customs clearance of products at the border and introduces a new concept of "transport safety".

Both the seller and the buyer in the new version of the Rules are allowed to use their own transport for transportation, and not to enter into a contract with a third party transferring this service to outsourcing.

In Incoterms 2020 there are 4 groups of basic conditions for the supply of products (E, F, C and D). They are divided according to the distribution of responsibilities between the parties to a foreign trade transaction.