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The 2020 update focused on clarifying the rules applicable to each incoterm to make them easier for importers/exporters to understand and use. The changes are subtle, but important to get familiar with.
The one material change was to the term DAT—Delivered at Terminal. __DAT has been replaced with DPU__—Delivered at Place Unloaded. This change was made to emphasize that the place of delivery may be any place specified by the parties, not only a terminal. If the delivery is intended to happen in any place other than the terminal, the seller must make sure that the place he/she intends to deliver the goods is able to unload the goods.
Other Changes to Incoterms®
- FCA (Free Carrier): Under this incoterm, parties can now agree that the buyer must instruct the carrier to issue to the seller, at the buyer’s cost and risk, a transport document stating that the goods have been loaded. If this is agreed, the seller is obligated to provide such transaction document to buyer.
- Different levels of insurance coverage in CIF and CIP: Under Incoterms® 2010, CIF and CIP had a standard minimum level of insurance, which was a basic level of insurance. Under Incoterms® 2020, CIF still keeps the same insurance requirements, but CIP has increased the insurance required to a higher level, namely Clause A (Institute of Cargo Clauses). Parties that make use of this incoterm should check if their insurance arrangements are (still) appropriate.
- Arranging for carriage by means of own transport under the FCA, DAP, DPU (former DAT) and DDP rules are now explicitly included; Incoterms® 2010 assumed that a third-party carrier would carry the goods; however, in practice a buyer or seller would also arrange the transport by its own means. This practice has now been reflected in these rules.
- A further (and clearer) allocation of security-related requirements has been included in each Incoterms® rule, and the Incoterms® also set out costs incurred more clearly; parties should verify whether this in line with their arrangements.
- The listing of costs is now more precise. All costs related to the relevant Incoterms® are now listed under A9/B9 “Allocation of Costs,” which intends to decrease disputes about allocation of costs. By providing detailed cost obligations, the aim is to make it clear that seller is responsible for costs that occur up to the point of delivery and buyer is responsible for the costs after that.