New edition Incoterms® 2020 entered into force on January 1, 2020, the terms of delivery of Incoterms established by the International Chamber of Commerce regulate the basic obligations of the buyer and seller and are adapted to the modern practice of world trade. The new edition of Incoterms has become more convenient and makes it easier for users to choose a rule that is suitable for a specific situation.
In this article we will describe how to use the rules correctly. INCOTERMS 2020 and explain the fundamental principles underlying them, as well as find out how best to incorporate them into foreign economic contract.
We describe the fundamental principles of the rules, the main roles and responsibilities of the seller and the buyer, the rules of delivery, the distribution of risks and the relationship between the rules and the export-import contract of sale. We will figure out how to choose the most correct term for the contract of sale and highlight the main changes in Incoterms 2020 compared to Incoterms 2010.
WHAT THE INCOTERMS 2020 RULES DO
Incoterms 2020 explains the contents of eleven commonly accepted terms for trade terms, EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DPU, DAP, DDP, reflecting the business practice of sales contracts and describe the responsibilities of who and what does in the relationship between the seller and the buyer, who organizes the transportation or insurance of the goods, who draws up the documents for the shipment of the goods and the export or import license. When risk passes from the seller to the buyer, in other words, when the seller is deemed to have fulfilled his obligations to supply the goods. Which party is responsible for which costs, such as shipping, packing, loading or unloading, inspection, or security related costs.
Incoterms rules cover these areas in the form of a set of articles, in the form of A1 / B1. Clauses A represent the seller's responsibilities, B clauses are the buyer's responsibilities.
WHAT THE INCOTERMS RULES DO NOT DO 2020
Incoterms rules themselves are not a contract of sale and therefore do not replace it. They are designed to reflect trading practices for any, not just one specific type of product.
Incoterms rules do NOT govern:
contract status (whether it is a contract of sale);
legal remedies that can be used in violation of the contract of sale;
the main consequences of the delay and other violations in the performance of contractual obligations;
consequences of sanctions;
introduction of tariffs;
ban on export or import;
force majeure or difficulties;
intellectual property rights;
the method, place or right applicable in the resolution of a dispute in case of breach of contract.
transfer of ownership / title / ownership of the goods sold.
These are the points on which the parties should provide specific conditions (provisions) in their contract of sale.
The Incoterms 2020 rules are not in themselves a sales contract; they become part of such a contract when they are included in an existing contract. Incoterms 2020 rules also do not determine the law applicable to the contract. It is possible to apply legal regimes to an agreement, both international, for example, the UN Convention on Contracts for the International Sale of Goods (CISG), as well as domestic binding laws, for example, on health, safety, and environmental protection.
HOW IT IS BETTER TO INCLUDE INCOTERMS 2020 RULES IN THE AGREEMENT
If the parties wish to apply the rules of Incoterms 2020 to their contract, it must be explicitly stated in the contract as follows: "[chosen term Incoterms] [named port, place or point] Incoterms 2020 (Incoterms 2020)", for example, CIF Shanghai Incoterms 2020.
Failure to indicate year rules may create intractable problems. The parties, judge or arbitrator should be able to determine which version of the Incoterms rules is applicable. Even more important is the indication of the named place after the chosen term Incoterms. In all Incoterms terms, with the exception of group C terms, the named place means the place where the goods should be “delivered”, that is, where the risk passes from the seller to the buyer. In terms of group D, the named place means the place of delivery, as well as the destination, and the seller must arrange transportation to this point. In terms of group C, the named place indicates the destination to which the seller is obliged to arrange and pay for the carriage of goods, but which, however, is not the place or port of delivery.
Uncertainty regarding the port of shipment for sale on conditions FOB both parties raise doubts as to where the buyer is obliged to provide the seller with a vessel for loading and transporting the goods and where the seller is obliged to deliver the goods on board the vessel so that the risk passes from the seller to the buyer. Like the contract on the terms of CPT with an unclear indication of the named destination, it raises doubts on both sides about the point to which the seller is obliged to conclude a contract of carriage and pay for the transportation of goods.
To avoid such situations, it is best to geographically accurately indicate the name of the port, place or point in the chosen term Incoterms. When a specific term Incoterms is included in the sales contract, there is no need to use the trademark symbol. For trademark and copyright policies, click on the link.
DELIVERY, RISK AND EXPENDITURE IN INCOTERMS 2020 RULES
Named place or port after a three-letter term, for example CIP Vladivostok or CIF The find is crucial for working with the rules of Incoterms 2020. Depending on the chosen term, Incoterms 2020, such a place denotes the place or port where the goods are considered to be “delivered” by the seller to the buyer, the place of “delivery”, or the place or port to which the seller is obliged organize the transportation of goods, that is, the destination, or in terms of group D - both.
In point A2, for all Incotems 2020 terms, the place or port of “delivery” is defined, it is decisive in terms of both risk and expense. According to the terms EXW и FCA (at the seller’s premises), this place or port is closest to the seller, and according to the terms DAP, DPU and DDP - closest to the buyer. The place or port of delivery indicates the place where the risk passes from the seller to the buyer in accordance with paragraph A3. It is at this place or port that the seller provides the goods, as provided for in paragraph A1, after which the buyer cannot demand compensation from the seller for losses or damage to the goods that occurred after the specified paragraph.
Place or port of delivery under clause A2 also means a key point in clause A9, which provides for the distribution of costs between the seller and the buyer. In general, the costs to the delivery point are borne by the seller, and after this point - by the buyer.
Limitations and intermediate positions: four traditional groups of terms Incoterms
Until 2010, the editors of Incoterms combined the terms into four groups: E, F, C and D, with groups E and D at the extreme poles in terms of the point of delivery, and groups F and C between them. Since 2010, Incoterms has grouped terms based on the type of transport used, the former system remains useful for understanding the point of delivery. So, the delivery point for EXW represents the agreed point for the buyer to receive the goods, regardless of the destination to which the buyer will carry the goods. On the contrary, by DAP, DPU and DDP point of delivery also means the destination to which the seller or his carrier must transport the goods. At EXW, risk transfer takes place before the start of transportation, while according to the terms of group D, at the final stage of transportation. Also by EXW, and in the same way FCA (at the seller’s premises), the seller fulfills his obligation to deliver the goods regardless of whether the goods actually arrived at their destination. In the second case, the seller fulfills his obligation to deliver the goods only if the goods really arrived at the destination.
EXW и DDP these are two terms that are at the opposite ends of the Incoterms rules. However, in international contracts, parties must consider alternative terms. For example, by EXW the seller is only obligated to make the goods available to the buyer. This can cause problems for both the seller and the buyer regarding loading and export clearing of goods. The seller should be advised to sell on conditions FCA. Similarly, for DDP the seller bears obligations to the buyer that can only be fulfilled in the buyer's country, for example, import customs clearance. It may be physically or legally very difficult for the seller to fulfill such duties in the buyer's country, therefore, under such circumstances, the seller should be advised to consider selling the goods on DAP or DPU.
Between the two extreme groups E and D there are three terms of the group F (FCA, FAS и FOB) and the four terms of group C (CPT, CIP. CFR и CIF) For all seven terms of groups F and C, the place of delivery is on the seller’s side for the expected transportation, therefore, sales under these terms of Incoterms are often referred to as “shipment” sales.
For example, the delivery took place:
when the goods are placed on board the vessel at the port of shipment CFR, CIF и FOB; or
by transferring goods to the carrier via CPT and CIP; or
by loading it onto a vehicle provided by the buyer, or by making it available to the buyer’s carrier at FCA.
According to the terms of groups F and C, the risk passes to the seller on the main transportation, as a result of which the seller is considered to have fulfilled his obligation to deliver the goods, regardless of whether the goods actually arrived at their destination. This feature, consisting in the fact that when deliveries are made on “shipment terms”, delivery takes place on the seller’s side at the initial stage of transportation is common to the terms of groups F and C, regardless of whether they are Incoterms marine terms or the terms intended for any (any) means of transport.
The terms of groups F and C, differ in relation to who - the seller or buyer - enters into an agreement or arranges for the transportation of goods outside the place or port of delivery. In terms of group F, this is organized by the buyer, unless otherwise agreed by the parties. In terms of group C, such an obligation is assigned to the seller.
Given that the seller, under any term of group C, enters into a contract of carriage or arranges for the carriage of goods after delivery, the parties need to know the destination to which carriage should be arranged, and this place is added to the name of the term Incoterms, for example "CIF Dalian port "or"CIP Shanghai. "Whatever the named destination, it is not and never will be the place of delivery. The risk passes upon shipment or when the goods are transferred at the place of delivery, but the contract of carriage must be concluded by the seller to the named destination. Therefore, according to group terms With the place of delivery and destination are never the same place.
RULES INCOTERMS AND CARRIER
According to the terms of groups F and C, the fact of placing the goods, for example, on board the vessel or the fact of its transfer or being made available to the carrier determines the moment when the goods are delivered by the seller to the buyer. Therefore, this moment is the moment when the risk passes from the seller to the buyer. Given these two important consequences, it is necessary to identify who the carrier is in the presence of more than one carrier, each of which provides a separate transport leg, for example, road, rail, air or sea transportation. Naturally, if the seller chooses a safer option for concluding a contract of carriage with one carrier, which is responsible for the entire chain of carriage under the so-called “through” contract of carriage, there are no problems. But in the absence of an “end-to-end” contract of carriage, goods can be transferred CIP or CPT) to the carrier or railway company for further transfer to the sea carrier. A similar situation can arise with exclusively sea transportation, when, for example, the goods are first transferred to the river or feeder sea carrier for subsequent transfer to the ocean carrier.
In such situations, the question arises, at what point does the seller deliver the goods to the buyer - when does he transfer the goods to the first, second or third carrier? Before answering this question, you must give a preliminary comment. Although in most cases the carrier is an independent third party involved under the contract of carriage either by the seller or the buyer (depending on whether the parties choose term C or F), situations may arise where such an independent third party is not involved at all, since the seller or buyer transport the goods sold. Most likely, this happens in terms of the group D (DAP, DPU and DDP), when the seller can use his own transport to transport the goods to the buyer at the destination.
Therefore, in Incoterms 2020, the seller, according to the terms of group D, is entrusted with either the conclusion of a contract of carriage or the organization of carriage, in other words, with his own means of transport.
The question is at what point does the seller deliver the goods to the buyer - when does he transfer the goods to the first, second or third carrier? This is not just a matter of transportation, it is an important issue of sale and purchase. It does not lie with which carrier the seller or the buyer of goods damaged during carriage can make a claim from the contract of carriage. The sale and purchase issue is as follows: if more than one carrier is involved in the carriage of goods from the seller to the buyer, at which point in the chain of transportation does the transfer of goods mean the moment of delivery and the transfer of risk from the seller to the buyer? This question needs to be answered clearly as the relationship between the multiple carriers involved and the relationship between the seller and / or the buyer with these multiple carriers can be complex and dependent on the terms of the individual contracts of carriage. So, for example, in any of such chains of carriage contracts, one carrier, for example, one that actually implements an automobile transport leverage, may well act as a seller's agent when concluding a carriage contract with a sea carrier.
Incoterms 2020 rules give a clear answer to this question if the parties have entered into an agreement on the terms FCA. According to FCA The relevant carrier is the carrier nominated by the buyer, to whom the seller transfers the goods at the place or at the point agreed in the contract of sale. Therefore, even if the seller engages the carrier to deliver the goods to the agreed point of delivery, the risk passes not at the place and not during the transfer of the goods to the carrier attracted by the seller, but at the place and during the delivery of the goods to the carrier involved by the buyer. Therefore, when selling on the terms FCA It is extremely important to indicate the name of the place or point of delivery as accurately as possible. A similar situation may arise under the conditions FOBif the seller hires a feeder vessel or barge to deliver the goods to the vessel hired by the buyer. Incoterms 2020 provides for a similar approach; delivery is considered completed when the goods are placed on board the buyer’s carrier.
According to the rules of group C, the situation is more complicated and in different legal systems may well lead to different results. According to CPT and CIP the corresponding carrier will most likely be recognized as the first carrier to whom the seller transfers the goods in accordance with clause A2 (unless the parties have agreed on a delivery point). The buyer does not know anything about the contractual relationship between the seller and the first or subsequent carrier, or between the first carrier and subsequent carriers. However, the buyer knows that the goods are on the way and that the way begins, as far as the buyer knows, when the goods are transferred by the seller to the first carrier. As a result, the risk passes from seller to buyer at an early stage of transfer to the first carrier. The same situation may arise for CFR и CIFif the seller uses a feeder vessel or barge to deliver the goods to the agreed port of shipment, if any. Some legal systems may offer a similar approach: delivery takes place when the goods are placed on board the vessel at the agreed port of shipment, if any
Such a conclusion, if adopted, may seem too harsh for the buyer. The risk passes from seller to buyer when selling on CPT terms and CIPwhen the goods are transferred to the first carrier. At this stage, the buyer does not know whether the first carrier is responsible for the loss or damage of the goods under the relevant contract of carriage or not. The buyer is not a party to such an agreement, does not have control over it and does not know its terms. Despite this, the buyer will ultimately bear the risk with respect to the goods from the earliest moment of their transfer, possibly without compensation from the first carrier.
Despite the fact that the buyer ultimately bears the risk of loss or damage to the goods at an early stage of the transport chain, however, with this approach, he has a remedy against the seller. According to clause A4, the seller is obliged to conclude a contract for the carriage of goods “from the agreed point of delivery, if any, at the place of delivery to the named place of destination or, if agreed, any point at that place” Even if the risk passes to the buyer at the moment when the goods are transferred to the first carrier in accordance with paragraph. A2 / A3, if such a first carrier is not liable under the contract of carriage for the through transportation of goods to the named destination, the seller, from this point of view, remains responsible to the buyer in accordance with paragraph A4. The main thing is that the seller should conclude a contract of carriage to the destination indicated in the contract of sale.
TERMS AND CONDITIONS OF THE PURCHASE AND SALE AGREEMENT AND ITS RELATIONSHIP WITH OTHER AGREEMENTS
The debate about the role of the carrier in the delivery of goods between the seller and the buyer under the terms of group C and F of the Incoterms rules raises the question, what role do the Incoterms rules play in the contract of carriage or in other contracts that usually accompany the export contract, for example, in an insurance contract or letter of credit? The Incoterms rules are not part of such other contracts, being included in the sales contract, the Incoterms rules govern and apply only to certain aspects of the sales contract, however, it cannot be argued that the Incoterms rules do not affect other contracts. Goods are exported and imported through a whole chain of contracts, that is, in an ideal world, one contract should be coordinated with another. For example, a sales contract requires the submission of a transport document issued by the carrier to the seller / consignor in accordance with the contract of carriage, and against which the seller / shipper/ beneficiary can receive payment by letter of credit. With the coordination of all three treaties, everything is going well, but if it is not so, then problems arise.
What is indicated in Incoterms, for example, in relation to transportation or transport documents in clauses A4 / B4 and A6 / B6 or in relation to insurance coverage A5 / B5, is not obligatory for the carrier, insurer or for any bank involved. So, the carrier is only obliged to issue a transport document, as required by the contract of carriage concluded with the other party, but he is not obliged to draw up a transport document in accordance with the rules of Incoterms. Similarly, the insurer is obliged to issue a policy in accordance with the level and conditions agreed upon with the party acquiring the insurance policy, and not a policy that complies with the rules of Incoterms. And of course, the bank will only consider documentary requirements contained in the letter of credit, if any, and not the requirements of the contract of sale.
However, it is in the interest of all parties to the various agreements in the chain to ensure that the conditions of carriage or insurance agreed upon with the carrier or insurer or the conditions of the letter of credit coincide with what is specified in the contract of sale with respect to the accompanying contracts to be concluded, or in relation to documents to be received and presented. This task is not assigned to the carrier, insurer or bank, none of which is a party to the contract of sale and, therefore, a party bound by the rules of Incoterms 2020. Nevertheless, in the interests of the seller and the buyer try to ensure that the various parts of the chain of contracts coincided (and the starting point is the contract of sale), therefore, with the rules of Incoterms 2020, where applicable.
11 TERMS OF INCOTERMS 2020 - MARINE AND INLAND WATER TRANSPORT AND ANY KIND OF TRANSPORT
The main difference introduced in the Incoterms 2010 rules between the terms for any mode or modes of transport (including EXW, FCACPT CIP, DAP, DPU (former DAT) and DDP), and terms for maritime and inland water transport (including FAS, FOB, CFR и CIF) The four so-called “marine” terms Incoterms are intended for use in cases where the seller places the goods on board (or at FAS places along the side) of the vessel in the sea or river port. This is the point at which the seller delivers the goods to the buyer. When these terms are used, the risk of loss or damage to the goods lies with the buyer from that port. The other seven Incoterms for any mode or modes of transport (called "multi-modal") are intended to be used where
the point at which the seller transfers the goods to the carrier or makes them available to the carrier, or
the point at which the carrier transfers the goods to the buyer, or the point at which he delivers it to the buyer, or
both points (a) and (b)
not "on board" (or by FAS - “along the side”) of the ship.
The supply and transfer of risk for each of these seven Incoterms terms depends on which specific term applies. For example, according to CPT, delivery occurs on the seller’s side when the goods are transferred to the carrier with whom the seller has concluded a contract of carriage. On the other hand, by DAP delivery occurs when the goods are placed at the buyer's disposal at a named place or destination. The order of presentation of the rules of Incoterms 2010, as noted above, was mainly preserved in Incoterms 2020. It is important to emphasize the difference between the two groups of Incoterms terms so that the appropriate term is used in the contract of sale depending on the type of transport used.
One of the most common problems when using Incoterms rules is choosing the wrong term for a particular type of contract. What type of carriage contract should a buyer enter into? Does the buyer have a duty to the seller to conclude a contract of carriage, according to which the carrier is obliged to accept the goods at the named land point or at the port closest to this point? For example, a contract of sale on the terms FOB indicating a ground point (such as an airport or warehouse) doesn't make much sense. Equally, it does not make much sense to indicate in the sales contract on the terms CIF named seaport when the buyer expects delivery of goods to a land point in the buyer's country. Should the seller enter into carriage and insurance contracts to the final land-based destination assumed by the parties or to the seaport specified in the sales contract?
Gaps, overlays and unnecessary costs are likely to occur - and all this because the wrong term Incoterms was chosen for a particular contract. What makes the wrong choice “wrong” is the lack of attention to the two most important elements of the Incoterms terms, which are a reflection of each other, namely the port, place or point of delivery and the transfer of risks.
The reason for the incorrect use of the term Incoterms is that the terms Incoterms are often considered solely as an indicator of price: a particular price EXW, FOB or DAP. Abbreviations used in Incoterms terms are undoubtedly convenient abbreviations for the formula used in pricing. However, the terms Incoterms are not only or even primarily a price indicator. They are a list of common obligations that the seller and the buyer bear before each other in accordance with generally recognized forms of the contract of sale, and one of their main tasks is to indicate the port, place or point of delivery where the risk transfer occurs.
STATEMENT OF INCOTERMS 2020 TERMS
All ten A / B articles of each Incoterms term are important, but some are more important. Indeed, there have been radical changes in the internal order of presentation of ten articles within each term. In Incoterms 2020, the order of presentation for each term is as follows:
In the Incoterms 2020 rules, after setting out in paragraphs A1 / B1 the main obligations of the parties in relation to the goods and their payment, the Delivery and Transfer of risks are placed in a more prominent place, namely in paragraph A2 and A3, respectively.
After that follow:
auxiliary contracts (A4 / B4 and A5 / B5, transportation and insurance);
transport documents (A6 / B6);
export / import cleaning (A7 / B7);
packing (A8 / B8);
expenses (A9 / B9); and
notifications (A10 / B10).
Getting used to such a change in the order of presentation of paragraphs A / B will take some time. It is hoped that now that delivery and risk have become more visible, it will be easier for merchants to identify differences between the individual Incoterms terms, that is, different points in time and place at which the seller "delivers" the product to the buyer, and the risk that passes to the buyer at this moment and in this place.
For the first time, Incoterms are published both in the traditional format outlining the eleven Incoterms terms, and in the new "horizontal" format outlining ten articles of each Incoterms term under the headings listed above, first with respect to the seller, then with respect to the buyer. So now it’s much easier to see the difference, for example, between the place of delivery FCA and place of delivery DAP; or expense items that are the buyer's responsibility CIF in comparison with the cost items that are assigned to the buyer for CFR.
DIFFERENCES BETWEEN INCOTERMS 2010 AND 2020
The most important initiative of the Incoterms 2020 rules was the focus on improving the presentation format in order to direct users to choose the appropriate Incoterms 2020 term for the sales contract. So:
this Introduction focuses on the correct choice of term;
more clearly clarified the demarcation and the relationship between the contract of sale and related contracts;
Updated Explanations for each term Incoterms; and
Incoterms rules are rewritten to make delivery and risk more visible.
The changes, although they look small, are significant attempts by the ICC to assist the international trading community in the smooth conduct of export-import transactions.
In addition to the general ones, there are more substantive changes in Incoterms 2020 compared to Incoterms 2010. Before considering them, we should mention one important change in trading practice that occurred after 2010 and which, in the opinion of the ICC, should not lead to an adjustment of the rules Incoterms 2020, namely the emergence of Proven Mass gross -VGM. Guidance on checking the gross weight of a container during transportation appeared in 2016. Since this happened after 2010, it is not surprising that there was some pressure in the Incoterms 2020 consultation to clearly indicate who the seller or buyer should perform such duties. But the working group found that the responsibilities and costs associated with VGM are too specific and complex to be explicitly mentioned in Incoterms 2020.
Returning to the changes made to Incoterms 2020 in comparison with Incoterms 2010, the following should be highlighted:
AT - Bill of lading labeled and term FCA Incoterms - open descriptionA - Bill of Lading with Side Mark and term FCA Incoterms - close description
When selling goods on conditions FCA with sea transport, the seller or the buyer (or, more likely, the bank in which the letter of credit is opened) may need a bill of lading with a side note. However, according to FCA delivery is completed before loading the goods on board the vessel. You cannot be completely sure that the seller will be able to receive an on-board bill of lading from the carrier. Such a carrier is bound by obligations under the terms of the contract of carriage and has the right to issue an on-board bill of lading only after the goods are actually on board.
To take this situation into account, paragraphs A6 / B6 FCA Incoterms 2020 now provides an additional option. The buyer and the seller can agree that the buyer instructs his carrier to issue the seller an on-board bill of lading after loading the goods, after which the seller will be required to provide this bill of lading to the buyer, usually through banks. ICC admits that despite such a somewhat unsuccessful combination of on-board bill of lading and delivery on conditions FCAThis takes into account the obvious need of the market. Finally, it should be emphasized that even with this additional option, the seller does not bear any obligations to the buyer regarding the terms of the contract of carriage.
Is it still possible to assert that if goods in containers are delivered by the seller to the buyer by transferring them to the carrier before loading onto the ship, then it is recommended that the seller sell on conditions FCAAnd not FOB? The answer to that is yes. However, the difference is that when such a seller needs or desires a bill of lading with a side mark, a new additional option in paragraph A6 / B6 of the term FCA Incoterms 2020 provides for such a document.
B - Expenses where they are listed - open descriptionB - Costs where they are listed - close description
In the new procedure for writing articles in Incoterms 2020, expenses are reflected in paragraphs A9 / B9 of each term. However, in addition to this transfer, there is another change that will immediately become apparent to users. Different expenses, distributed under various articles under the Incoterms rules, are traditionally found in different parts of each term of Incoterms. For example, the costs associated with obtaining a delivery document for FOB 2010, were referred to in paragraph A8, referred to as "Delivery Document", and not in paragraph A6, referred to as "Distribution of Costs". However, in Incoterms 2020, the equivalent of paragraph A6 / B6, namely, paragraph A9 / B9, now lists all the expenses allocated in each specific term of Incoterms. Therefore, point A9 / B9 in Incoterms 2020 is larger than point A6 / B6 in Incoterms 2010.
The goal is to provide users with a single list of expenses so that the seller or buyer has the opportunity to see in one place all the expenses that they will bear under the specific term Incoterms®. Certain expenses are also mentioned in the article to which these expenses relate: for example, expenses associated with obtaining documents on conditions FOBare reflected in paragraph A6 / B6, as well as in paragraph A9 / B9. The idea is that users who are interested in the distribution of expenses specifically for obtaining documents will prefer to refer to a specific article relating to the receipt of delivery documents, and not to a general article listing all expenses.
C - Different levels of insurance coverage by terms CIF и CIP - open descriptionC - Different level of insurance coverage in terms CIF и CIP - close description
In Incoterms 2010 rules, clause A3 as for CIFso for CIP, entrusted the seller with the obligation "to carry out cargo insurance at his own expense, corresponding to at least the minimum coverage, as provided for in paragraph" C "of the Institute's Conditions of Cargo Insurance (LMA / IUA) or other similar conditions." Disclaimer Provisions of the Institute of London Insurers' Cargo Insurance Terms and Conditions provide for the coverage of a number of these risks, subject to certain exceptions. The provisions of clause A of the Institute of London Insurers' Cargo Insurance Terms and Conditions, in contrast, cover “all risks” also subject to separate exceptions. During consultations during the development of Incoterms 2020, the possibility of moving from clause C to clause A was considered, which allows to increase the insurance coverage drawn up by the seller in favor of the buyer. This, of course, may entail additional costs in relation to the insurance premium. The opposite approach, namely the use of clause C, has also found support, especially among those involved in the maritime trade in commodities.
After extensive discussion within the Working Group and beyond, it was decided to provide for a different minimum coverage for the term CIF and for the term CIP Incoterms. In the first case, which is more likely to be used in maritime commodity trading, the status quo has been maintained and the default clause C of the London Insurers Institute's Cargo Insurance Terms is used, although parties can of course agree on a wider coverage. In the second case, namely in relation to the term CIP Incoterms®, the seller is now obligated to provide insurance coverage in accordance with clause A of the London Insurers Institute's Cargo Insurance Conditions clause, although the parties, of course, may also agree to a lower level of coverage.
D - Organization of transportation by own vehicles of the seller or buyer in terms of FCA, DAP, DPU and DDP - open descriptionD - Organization of transportation by own vehicles of the seller or buyer in terms of FCA, DAP, DPU and DDP - close description
Incoterms 2010 provided that, in cases where the goods must be delivered from the seller to the buyer, it is transported by a third-party carrier engaged either by the seller or the buyer for this purpose, depending on the term Incoterms was used.
However, during the discussions during the development of Incoterms 2020, it turned out that there are situations in which, although the goods must be transported from the seller to the buyer, this can be done without the participation of any third-party carrier. So, for example, when using the terms of group D, nothing prevents the seller from arranging transportation without transferring this function to a third party, that is, using their own vehicles. Similarly, when buying at FCA nothing prevents the buyer from using his vehicle in order to pick up the goods and deliver it to their premises.
The rules did not take this possibility into account. Incoterms 2020 takes it into account, directly allowing not only the conclusion of a contract of carriage, but also the simple provision of the necessary carriage.
E - Change abbreviation with DAT on DPU - open descriptionE - Change abbreviation with DAT on DPU - close description
The only difference between DAT и DAP at Incoterms 2010 was that by DAT the seller delivers the goods unloaded from arriving at "terminal"vehicle while DAP the seller delivers when the goods are placed at the disposal of the buyer on a arrived vehicle ready for unloading. It should also be recalled that in the explanation of the term DAT in Incoterms 2010, the word "terminal" is defined in a broad sense and means "any place, closed or not ...".
ICC decided to make two changes to the terms DAT и DAP. Firstly, the order of presentation of these two terms in Incoterms 2020 has been changed, and the term DAPby which delivery takes place before unloading is now placed before the term DAT. Secondly, the name of the term DAT changed to DPU (Delivery to destination unloaded (Delivered At Place)), which emphasizes that the destination can be any place, and not just the "terminal". However, if such a place is not located in the terminal, the seller must make sure that the place where he intends to deliver the goods is the place where he can unload it.
F - Inclusion of safety requirements in liabilities and transportation costs - open descriptionF - Inclusion of safety requirements in liabilities and transportation costs - close description
Recall that regarding the security requirements in Incoterms 2010 there were fairly general guidelines in paragraphs A2 / B2 and A10 / B10 of each term. Incoterms 2010 was the first edition of Incoterms to take effect after security problems became common at the beginning of this century. These issues and the practice of transportation generated by them are now settled. In connection with such transportation requirements, clauses A4 and A7 of each Incoterms term expressly provide for the distribution of security responsibilities. The costs arising from the implementation of such requirements are allotted a more prominent place in the article on expenses, that is, in paragraph A9 / B9.
E - Explanations for users - open descriptionE - Explanations for users - close description
The annotations that appeared in the 2010 version at the beginning of each Incoterms term are now referred to as “Explanations for Users”. They explain the basics of each term Incoterms 2020, for example, when it should be used, when there is a transition of risks and how costs are distributed between the seller and the buyer. Explanations are intended to
(a) help the user clearly and effectively navigate the rules when choosing the term Incoterms suitable for a particular transaction;
(b) provide those who make decisions or advise on disputes or contracts governed by the Incoterms 2020 rules with clarifications on issues that may require interpretation.
CARE FOR CHANGING THE INCOTERMS TERMS
Sometimes parties want to change the term Incoterms. Incoterms 2020 rules do not prohibit such a change, but there is a danger in order to avoid which the parties need to clearly stipulate the expected consequences of such changes in their contract. So, for example, if the distribution of expenses in the contract is changed according to the rules of Incoterms 2020, the parties should clearly indicate whether they intend to change the point at which delivery is carried out and the risk passes to the buyer.
Summing up, it can be seen that the new version of Incoterms 2020 does not contain significant changes, the names of the terms have not changed, with the exception of the term DAT (Delivered at Terminal) from Incoterms 2010, in the new version it was replaced with DPU (Delivered at Place Unloaded) So now we are talking about any destination where goods can be unloaded, and not just about terminals.
Separate rules of the new version introduced additional options regarding the obligations of the parties, the distribution of the insurance load, prescribed the possibility for the parties to use their own transport (without involving a carrier), clarified the full list of costs associated with the use of each of the terms.
Incoterms 2020 rules can be applied from January 1, 2020. In this case, you can continue to use the previous edition of the rules. In this regard, participants in international trade who choose Incoterms to regulate their relations, when indicating the basis of supply, it is recommended to indicate which edition of Incoterms they intend to use. Incoterms 2020 will operate for the next 10 years, until 2030. The next revision of the Incoterms rules is scheduled for 2029.