RGCI-Incoterms 2020 What Are They and Whats NewThe International Chamber of Commerce (ICC) has published the new Incoterms 2020, rules that define the responsibilities of buyers and sellers for the delivery of tangible goods in international trade. The terms also identify when the risk/responsibility for those goods transfer from the seller to the buyer. The new terms took effect on January 1, 2020, and can replace the last version, which is Incoterms 2010.

Incoterms—The Fine Print

Key points to remember is that Incoterms are voluntary, they are not law, and they don't replace a sales contract. Your international sales contracts should reference the Incoterms to define who is responsible for what in the transaction. Also, Incoterms reflect current trade practices, instead of creating them. And Incoterms by themselves do not address the legal Title Transfer of the cargo, a topic that should also be covered by your international sales contract.

Incoterms 2020

Any Mode Terms: EXW, FCA, CPT, CIP, DPU, DAP, DDP

Ocean/Inland Waterway Terms: FAS, FOB, CFR, CIF

Which Incoterms Should Be Used for Container Shipments

Contrary to standard norms in international trade, the Incoterms 2020 version makes it very clear that traditional terms such as FAS, FOB, CFR, and CIF are not meant to be used for container shipments, when typical transfer of the container happens at the terminal instead of on board the vessel. The recommended terms for full container shipments are FCA (instead of FOB), CPT, or CIP (instead of CFR and CIF respectively). FAS, FOB, CFR, and CIF are to be used for break bulk, lose type cargo that is not shipped in containers.

DAT Becomes DPU

Incoterms 2010 Delivered at Terminal (DAT) was changed to Delivered at Place Unloaded (DPU) in the new 2020 version. This new DPU term allows the buyer and seller to handle the delivery of goods somewhere other than a terminal. This term is often used for consolidated containers with multiple consignees and is the only term that assigns the seller with the task of unloading the goods at the destination.

FCA and On-Board Bills of Lading

Under FCA, the seller is responsible for either making the goods available at its own door or dock, or at a named place. In either case, the seller is responsible for loading the goods onto the buyer's means of transport.

The problems ensued when the seller was responsible for loading the goods on a truck hired by the buyer, and not directly on the international carrier. If a Letter of Credit is being used as the payment method, banks often require the seller to present an on-board Bill of Lading before they can get paid. And an international carrier won't typically provide a seller, who did not present the goods directly to them, with such a Bill of Lading. Under the new Incoterms 2020 rules, the buyer can now instruct its carrier to issue an on-board Bill of Lading to the seller so that the seller may satisfy the terms of a Letter of Credit.

Different Levels of Insurance Coverage

Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP) are the only two Incoterms that require the seller to purchase insurance for the transaction. Incoterms 2010 specified that under both terms, the seller was only required to obtain the minimum level of insurance coverage.

In Incoterms 2020, under CIP, the seller is now required to purchase a higher level of insurance coverage—at least 110% of the value of the goods as detailed in Clause A of the Institute Cargo Clauses, while the insurance requirement has not changed for CIF.

Redstone Government Consulting—Your Source for Information on International Trade Requirements

If you have additional questions about this or any other new rules which affect your organization’s international business practices, reach out to the experts at Redstone Government Consulting. Our team offers training and consulting packages to help you manage your company’s contracts, understand recent changes to regulations, and even offer strategic planning services.

 

Fill out the form below if you are interested in more information and training opportunities related to incoterms

Written by Carolyn Quinn Turner

Carolyn Quinn Turner Carolyn assists Redstone Government Consulting, Inc. in the area of International Trade and Import/Export Compliance, specifically the International Traffic in Arms Regulations (ITAR) the Export Administration Regulations (EAR). Carolyn assists a wide variety of contractors with compliance in international trade and ITAR/EAR regulations as well as implementing policies and procedures that assist companies in those areas. Professional Experience Starting in 2002, Carolyn was an International Research Analyst at the Alabama International Trade Center. While here, she conducted country and market analyses and translated trade documents. She then worked at Page & Jones, Inc., handling freight coordination for the NVO imports and exports, gathered freight rates for all customers, both import and export, and acted as the NVO controller by handling training, coordinating shipping rates, and record keeping. Starting in 2008, Carolyn held the position of International Trade Specialist at the Alabama International Trade Center. She assisted small and medium sized companies with international trade, expanded company’s sales via international opportunities, problem solved wide ranging international topics such as ITAR and EAR, classification, regulations, contracts, finance options, risk mitigation, and more. She also conducted country/market analyses for international market research, provided international business training and presented educational industry seminars and oversaw research staff on international trade projects and assignments. During the period of 2011-2016, Carolyn was also an Adjunct Professor at the University of Alabama, developing and teaching online International Business classes. In addition to her international experience, Carolyn has studied in Spain, Chile, and Cuba and has work experience in trade missions in Thailand, Norway, Sweden, and Chile. She can read, write, and speak Spanish proficiently. Certifications In 2005, Carolyn became a Licensed US Customs Broker during her time with Page & Jones, Inc., and focused on HTS and Schedule B Classification as well as Entry Filing. In 2009, Carolyn earned the NASBITE Certified Global Business Professional Certification. She has training on these topics: Incoterms, International Distributor Agreements, How to Prepare for an Import & Export Audit, ITAR and EAR, NAFTA, and other FTA’s, Developing an Import/Export Compliance Program, Import and Export Documentation, Customs Brokers License Training Course with Logistics Training Systems, Hazardous Materials, SBA and EXIM Trade Financing, Trade Promotion Coordination Committee (TPCC) Training, SBIR Grants, International Intellectual Property Rights, and global e-commerce. Education Carolyn has earned her Bachelor of Science degree in Commerce and Business Administration from the University of Alabama in Tuscaloosa. She has also earned her Masters in Management with a Global Business Concentration from the University of Alabama in Tuscaloosa. Affiliations She has been a board member of the Japan America Society of Alabama since 2009 and a board member of Destination Hoover International since 2018. Carolyn is also a member of the Export Alabama Alliance.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Contracts Administration, Export and Import