InCoterms 2020

We would like to bring you up to speed with the InCoterms 2020. The most significant change relates to the term FCA (Free Carrier). It now allows the buyer to instruct the carrier to issue a Bill of Lading with an onboard notation to the seller. By doing so, it satisfies the terms and conditions of a Letter of Credit.

Previously, many exporters preferred to use FOB (Free on Board) to arrange payment under a Letter of Credit. Nonetheless, FCA was more suitable for the shipment of containerised goods. It was due to the extra delivery cost differential between FCA and FOB.

The most obvious change is the introduction of DPU (Delivered at Place Unloaded) to replace DAT (Delivered at Terminal). Previously, the word ‘Terminal’ was confusing, and DPU broadly covers all delivery options.

The term CIP (Carriage and Insurance Paid) changes the insurance coverage requirements. The seller, under Institute Cargo Clause A, must purchase a higher level of insurance. The insurance could amount to 110 percent of the invoice value, which is more appropriate for manufactured goods.

The CIF (Cost Insurance & Freight) is for commodity shipments. The Institute Cargo Clause C specifies the insurance requirements (unchanged).

Additionally, FCA (Free Carrier), DAP (Delivered at Place), DPU (Delivered at Place Unloaded) and DDP (Delivered Duty Paid) now take account of buyers and sellers arranging their own transport rather than using a third party.

Expense allocation between buyer and seller are now listed more precisely to help avoid confusion. In the 2010 Incoterms, costs sometimes became a big issue. Carriers could change their pricing structure by adding back-charges. As a consequence, sellers faced additional terminal handling expenses.