New Incoterms 2020

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Incoterms® rules explain a set of three-letter trade terms reflecting business-to-business practice in contractual sale of goods. Thus describing the obligations, costs and risks in the delivery of goods from sellers to buyers. They exist due to discrepancies in interpretation of commercial trade.

Since the first edition of the rules in 1936, Incoterms have assisted in clearly communicating which entity is responsible for the costs, risks and responsibilities between the buyer and seller.

The Incoterms 2020 come into force on January 1st 2020 and offer some remedy to challenges that suppliers and buyers have faced when negotiating trade terms. If a contract is entered into on or after that date, Incoterms 2020 will apply unless the contract specifies otherwise. However, the new Incoterms could be used immediately as long as this is clearly indicated in the contract.

Below are some of the changes that you will see with the new edition:

A new order of Incoterms highlighting the delivery of goods and transfer of risk from seller to buyer. The place of delivery is the focus point that differentiates between the four families of rules. Multi modal Incoterms are listed first and then the maritime only Incoterms (FAS, FOB, CFR, CIF). This is to encourage the use of Incoterms which can be used for any form of transport.

DAT to DPU – DAT (Delivered at Terminal) means the goods are delivered, once unloaded, at the named terminal. User feedback was that industry needed an Incoterm that allowed delivery anywhere, and not just at a terminal. Delivered at Place Unloaded (DPU) gives reference to any place of destination where the seller unloads the cargo.

FCA: option of Bill of Lading (BL) with on-board notation – has been amended to allow for BL to be issued after loading. The Incoterm FOB is often used for container shipments. Typically a seller of a container shipment loses control of the container on arrival of the container at the port. But even though the seller has lost control, they are still liable until the container is loaded onto the ship. This exposes the seller to cost and risk.

FCA Stipulates two ways of delivery:a) Sellers premises, loaded or b) named place, ready for unloading

Costs allocations are stated more clearly and there are explanatory notes for users which are detailed and easier to interpret.

Parties to a contract are not legally bound to switch over to the new Incoterms as long as this is stipulated in any contract. Otherwise if the year is not stated then the 2020 rule will apply.

Example: FCA Kendon House, Ground Floor,3 Kiepersol Close, Plattekloof, Parow 7500, South Africa Incoterms® 2010

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