Key changes in Incoterms 2020

International Trade Conditions 2020 - referred to as Incoterms 2020, drafted and revised by the International Chamber of Commerce (ICC). In addition to changes in international trade conditions, Incoterms 2020 simplifies rules, eliminating difficult words and phrases. For countries that do not use English as their primary language, it is easy to understand the Incoterm's conditions. So what is the actual Incoterms 2020? This article will help you get the full information related to this problem.

1. Remove EXW, DDP, and FAS:

The reasons why EXW, DDP, and FAS are removed from Incoterms 2020 are as follows:

EXW (Ex-works) is used for companies with little export experience.
DDP (Delivered Duty Paid) is used for goods such as samples or parts usually sent by the courier company to the buyer.
EXW and DDP are mainly used in domestic trade.

Incoterms 2020

In some use cases, EXW and DDP are at odds with the new EU Customs Code.
FAS (Free Alongside Ship) is less applicable in practice because FAS has some similarities with FCA (Free Carrier - Carrier) which is often used when goods are delivered at the port. go to the country of the exporter. With FCA, exporters can fully deliver goods at the port as when using FAS (because the pier is part of a maritime port).
When using FAS, in case of late arrival, the goods delivered to the buyer must wait at the pier for several days. On the contrary, if the ship arrives early, the seller cannot promptly arrange the goods.

2. Split DDP into two new conditions:

In Incoterms 2020, DDP will no longer exist. However, it does not disappear completely but is separated into two new conditions:

DTP (Delivered at Terminal Paid - Delivered at the arrival terminal cleared).
DPP (Delivered at Place Paid - Delivered at destination cleared).

For DDP, the seller must pay customs duties at the destination, regardless of where the goods are delivered. With DTP, the seller is responsible for all costs related to transportation including customs duties when the goods are delivered to the station (seaport, airport, transport center, ...) at the destination. As for DPP, the seller is responsible for all transportation-related costs including customs duties when the goods are delivered to any other location other than the transport station.

3. Expanding FCA conditions:

In Incoterms 2020, FCA will be expanded into two conditions: for road and sea. Currently, about 40% of international trade transactions are made using FCA terms, because FCA is flexible on the place of delivery (be it the address of the seller, warehouse, seaport or airport, ...). In addition, FCA can be applied to all modes of transport, especially suitable for multimodal transport.

Những điểm thay đổi trong Incoterms 2020

4. Change of terms FOB and CIF:

Currently, FOB and CIF are the two most commonly used terms. In Incoterms 2020, the Drafting Committee intends to revise the conditions of FOB and CIF to be used for container cargo.

5. Supplementing CNI provisions:

CNI - Cost and Insurance was created in Incoterms 2020 to fill the gap between FCA and CFR / CIF. CNI does not include international insurance costs incurred by the seller as FCA. And do not include freight like CFR / CIF. CNI will be a condition of “arrival incoterms”, ie risks and responsibilities transferred from seller to buyer at port of departure. This new saving allows the seller to be responsible for ensuring the goods, while the buyer is at risk of shipping.

Những điểm thay đổi trong Incoterms 2020

Other changes in Incoterms 2020

In addition to the above specific changes, Incoterms 2020 will include some of the following:

Traffic security.
Regulations on transportation insurance.
Relationship between Incoterms and International Sales Contract.

Incoterms 2020 will be simplified and more realistic. The main purpose of Incoterms 2020 is to simplify so that Incoterms 2020 will be drafted with simpler terms illustrated by examples to clarify the terms.

The article has been compiled from the following documents: