L&M Finance Group


The normative regulation of international trade relations is an important area for the development of any country. In order to systematise and unify the rules of international trade, governments of different countries are actively implementing international norms, standards, rules and customs, they are assigned the status of mandatory at the level of legislation. The rules developed by the International Chamber of Commerce under the name of Incotermsare used as a basis for choosing optimal conditions for international supply worldwide. As of today, the latest edition of the Incoterms rules are Incthorems 2010 - international trade terms that represent the conditions for sales contracts in terms of the supply of goods between contractors from different countries, or within the same country.
In the process of applying the Incoterms 2010 rules, it was possible to identify a number of shortcomings, in connection with which active work has been carried out in recent years to develop new Incoterms rules, which are already called Incoterms 2020. The development of new rules began back in 2016 by representatives of different countries, joining forces to jointly work in the committee at the International Chamber of Commerce (ICC). As of today, the wording of the new international trade rules has already been fully approved, and it is expected that the new rules will enter into force from the beginning of 2020.
Among the key changes of Incoterms 2020 in comparison with Incoterms-2010, the following should be noted:
  1. The term DAT (Delivered at Terminal) has been renamed the term DPU (Delivered Named Place Unloaded). Such a change is caused by the need to provide the parties with the opportunity to choose any place for the delivery of goods, and not just a specific terminal. In addition, the old DAT term resembled under the terms the DAP term, according to which delivery was carried out to a specific place and was considered completed without unloading the goods. Now, the term DPU will be a single term that instructs the seller to unload the goods.
  2. The terms of the most common term - FCA (Free Carrier / Free Carrier) - have changed regarding the organisation of shipping. Due to a number of problems when using the FCA term for maritime transport, Incoterms 2020 provided for the possibility to negotiate with the parties and include in the contract the buyer’s obligation to instruct their carrier to issue a bill of lading with an on-board record to the seller.
  3. For the CIP Incoterms 2020 delivery terms, the seller is now obligated to insure the goods against all risks (maximum coverage - at least 110% of the value of the goods).
  4. The new Incoterms 2020 rules also included provisions regarding the regulation of the possibility of transporting goods by own transport.
  5. Incoterms 2020 rules were supplemented by transport safety conditions. According to the last one, the terms of delivery, where applicable, require the seller to comply with any safety rules related to transport to the delivery point, and provide the buyer with any information regarding safety requirements related to transport.
  6. Moreover, the Incoterms 2020 rules will contain an “explanatory note” column for each delivery term, which will state when such a rule needs to be applied, at what point the risks are transferred, how expenses are distributed.
In addition, the International Chamber of Commerce has already launched the development of the new Incoterms 2020 mobile application. According to preliminary information, using the application it will be possible to get a description of each of the 11 Incoterms 2020 rules, namely:
— determine which term or combination of terms is most suitable for each individual Agreement.
— Set up communications from the ICC global network of experts to receive answers on the most important issues of Incoterms rules.
— Learn about relevant specialised trainings that take place around the world.
— Have access to current news reporting.
We remind that the Incoterms rules themselves do not replace the Sales Agreement, but only distribute between the parties to the Agreement a number of responsibilities and financial costs, in particular:
  1. Organisation of transportation of goods.
  2. Organisation of loading and unloading goods from a vehicle.
  3. Customs clearance (export and import).
  4. Payment of taxes and fees.
  5. Necessity and obligations regarding insurance.
  6. Transfer of risks of loss and damage of goods between the parties.
Moreover, the parties to the international contract may continue to use Incoterms 2010 or Incoterms 2000, since Incoterms 2020 are used solely on the initiative of the parties, and the obligation to use them is not fixed in any international acts.