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Mahin Mazumder 
Mahin Mazumder
International Freight Forwarder
Published Nov 21, 2022
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In 2019, the International Chamber of Commerce (ICC) published an updated set of the international commercial terms: Incoterms. The most recent set of Incoterms are known as Incoterms 2020.
Incoterms help to make international trading easier by providing standard terms that are uniformly recognised across the world. These trade terms are frequently used in domestic and international trade contracts.
It’s important to note that, while the Incoterms 2020 have been published, parties can continue to use previous revisions of the Incoterms, as long as they are decided upon in their agreements.
1. Bills of lading: FOB (free on board) should not normally be used for container shipments. This is because a seller usually loses control of the container once the container arrives at the port of export before the container is loaded. However, FOB means the seller takes all the risk and cost of the export, port terminal handling charges and loading costs/risks. Sellers should then use FCA (Free Carrier). However, many sellers still use FOB because the letter of credit from the bank often requires an onboard bill of lading for the seller to get paid. As under FOB the seller is responsible for loading, they have a higher chance of getting an onboard bill of lading. Therefore, to try and help people to use FCA, FCA has changed to allow the buyer and seller to agree that the seller will get an onboard bill of lading.
2. Insurance under CIF (carriage insurance and freight) and CIP (carriage and insurance paid to): The Incoterms® rule, CIP means that the seller is only responsible for delivery of the goods to the carrier but pays for the carriage and insurance of the goods to the named destination. CIF is the same, except that it can only be used for maritime transport (delivery is onto a ship and the destination needs to be a port). In Incoterms® 2020, CIF keeps the same insurance requirements as in Incoterms® 2010, but CIP has increased the level of insurance required to be obtained by the seller. This is due to the fact that CIF is more often used with bulk commodity trades, and CIP is more often used for manufactured goods, and manufactured goods tend to require a higher level of insurance. Although CIF and CIP require the seller to obtain insurance, it is recommended that parties consider whether additional insurance coverage is required to reflect the potential risk of damage to the goods during transport. If you use CIF or CIP, you need to review to see if that is still the correct approach.
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3. DAT (delivered at terminal) has changed to DPU (delivered at place unloaded): In Incoterms® 2010, DAT means the goods are delivered once unloaded at the named terminal. As DAT limits the place of delivery to a terminal, in Incoterms® 2020, the reference to terminal has been removed to make it more general. DPU means delivered at place unloaded (which can now be used for all modes of transportation). There is no other change. If you use DAT Incoterms® 2010, then change over to DPU Incoterms® 2020.
4. Security Requirements: In recent years, transport security requirements have become more prevalent in international trade, and Incoterms® 2020 reflects such a change by detailing security requirements for each Incoterms® rule. For example, CPT (carriage paid to) includes a specific requirement that the seller must comply with any security-related requirements for transport to the destination. These security requirements bring cost and risk delay if not fulfilled by the parties.
#freight#incoterms2020
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