Incoterms 2020

An overview of the most important changes in the Incoterms 2020 version

The new Incoterms 2020 became effective from January 1st 2020. The terms will replace Incoterms 2010 and is an optimization made in order to avoid pitfalls from the changes in trade practices and regulations. The 2020 terms are very much alike the previous version but with slight, yet important, adaptions. It is essential to acquaint oneself with the changes and what they mean.

Refer to our visual illustration below of the new Incoterms 2020.

What are Incoterms for?

Incoterms were provided by the International Chamber of Commerce (ICC) and the first version was revealed in 1936. In short, the terms are generally accepted rules in the purchase agreement for international trade. Hence, the Incoterms 2020 can be used as a guideline for identifying the responsibilities of buyers and sellers for the delivery of cargo – applicable for both local and international trade. Further, the Incoterms aid in calculating when and how the risk of cargoes passes from the seller to the buyer. Incoterms applies only when buyer and seller have agreed.

Commercial players are by Incoterms enabled to minimize trade disputes and litigations whilst clearly outlining responsibilities and charges in both the buyer and the seller’s best interest.

The Incoterms 2020 visualized

What has been changed?

The most essential changes from the 2010 version to the new 2020 version are listed below:

• DAT is changed into DPU
• FCA can be combined with on-board bill of lading
• CIP assumes “all risk” goods insurance, i.e. ICC A terms. (CIF still requires ICC C terms only)
• The seller or buyer can handle the transport himself/herself (as opposed to having an outside carrier do it)
• Greater clarification of the distribution of costs between the seller and the buyer, e.g. for security, screening of containers, etc.