The importance of Incoterms 2020 in the international transport of goods

One of the fundamental aspects in the international transport of goods is that of the Incoterms. The short form of the term International Commercial Terms, is a concept created by the Chamber of Commerce to facilitate international commerce.

Choosing and defining the Incoterms in each operation is fundamental to establish the business conditions, since through them, it is regulated who is in charge of assuming the costs and which is the responsibility of each one of the parties during the different stages of the international transport of goods.

Since January 1, 2020, imports and exports are regulated by the new Incoterms 2020, leaving behind some of the old terms and introducing some updates. It is important to know the main changes and news about the new Incoterms 2020® compared to Incoterms® 2010. 

These are some of the key changes:

  • DAT – Delivered at Terminal – Delivered at Terminal (agreed upon place of delivery) is now called Delivered at Place Unloaded (DPU). Merchandise delivered and unloaded at an agreed place.
  • The Incoterm® DAP rule, in which delivery occurs before unloading, now appears before the DPU.
  • FCA – Free Carrier now permits Bills of Loading (agreed place of delivery) to be issued after loading of the goods. When goods are sold under FCA conditions for transport by sea, the selling or buying companies can request a bill of loading with the mention “on board”. The carrier, under its contract of carriage, may be obliged and entitled to issue a Bill of Loading on board only when the goods are actually on board.
  • CIF – Cost, Insurance and Freight (+arranged place of delivery) and CIP – Carrier and Insurance Paid To (+arranged place of delivery): These terms establish new agreements at the level of different minimum insurance coverages for the goods, although the level of insurance remains negotiable between the buyer and the seller.
  • To consider the “house” BL valid, it must be indicated in the document that it is governed by UCP 600 (rules that regulate) documentary credits, because it is the only one that admits the “house” mode.
  • It is always necessary to indicate in the sales contract the Incoterms that are used, in this case the Incoterms 2020 since if it is not specified the Incoterms of the year 2010 or even those of the year 2000 may be applied.Finally, we share 4 tips that will help you use Incoterms properly:

    1. Make sure the term used is appropriate for your chosen medium.2. Check very carefully the rate agreed on the commercial invoice of the shipment.

    3. Confirm in writing that both parties understand the obligations indicated in the international sales contract.

    4. Periodically check the terms used, their rights and obligations. 

     

    In this way, you will simplify your work all over the world, and if you have any doubts, don’t forget that at Webtrans, we are here to help you.

     

    Sources:
    Incoterms and international transport
    Types of Incoterms 2020 PDF
    Insurance contracting in the CIF and CIP rules of INCOTERMS 2020
    How to choose the best Incoterm for your international sale
    Incoterms 2020: What are they? Classification and Types

 

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