Q: I have heard there will be a new Incoterms 2020® published soon, what are the expected changes?
A: New Incoterms 2020® will be launched on 15th October 2019 for implementation 1st January 2020. The changes are likely to include the following:
Elimination of DDP Incoterm, as this generates some problems due to the fact that the customs duties in the importing country are paid by the Seller, as the Seller acts as importer. Two new Incoterms may be created, being:
- DTP (Delivered at Terminal Paid) when the goods are delivered to a terminal in the country of the buyer, and the seller assumes the payment of customs duties.
- DPP (Delivered at Place Paid) when the goods are delivered at any place other than a transport terminal (for example, at the buyer’s warehouse), and the seller assumes the payment of the customs duties.
It is possible EXW may be eliminated, the justification being this (like DDP) is suitable for domestic operations, rather than international movements. In the case of EXW the problem being where countries prevent buyers acting as exporter (similarly with DDP, the problem being where countries prevent sellers acting as importer)
Elimination of FAS Incoterm, the justification being this is little used (only for the minority commodity traders) and does not contribute almost anything to FCA.
FCA is the most used Incoterm as it is very versatile and allows the delivery of goods in different places in country of shipment (e.g. seller’s address, land transport terminal, port, airport etc). It may be two new FCA Incoterms are created, one being for terrestrial delivery and another for maritime delivery.
A new Incoterm CNI (Cost and Insurance) is expected. The idea being to cover a gap between FCA and CPT/CIP, being akin to FCA-with-insurance. There are currently only two Incoterms that define which party is responsible for obtaining insurance (CIF and CIP), this would create a third such Incoterm. The new CNI would include the cost of international insurance (unlike FCA) but would not include freight (unlike CPT/CIP).
Other issues have been analysed in the issue of new Incoterms, including transportation security, regulations on transportation insurance, the relationship between the incoterms and the international sale contract.
Within Incoterms® 2010 the use of FCA and CIP for container movements by sea was encouraged (being the carrier’s empty container was delivered to the Seller’s premises for stuffing, hence delivery into the hands of the carrier occurred prior to goods being loaded on board the vessel (the latter being the delivery for FOB).
However, this suggestion has not been adequately taken up by the traders/agents/banks etc. With so many movements of goods occurring within containers, it is possible that FOB and CIF can be used again for container shipping in the next Incoterms® 2020 (as was the case in Incoterms® 2000 and 1990)
To find out more join us on our Incoterms Training Course