International trade is a complex process that requires a clear understanding of the rights and obligations of all participants. To simplify it and reduce risks, the International Chamber of Commerce (ICC) has developed Incoterms rules for the interpretation of trade terms. In 2020, an updated version came into force, which made significant changes to the regulation of cross-border supplies.
History and purpose Incoterms
First published in 1936, these rules are regularly updated to reflect the evolution of global commerce. Their main goal is to ensure a uniform interpretation of common terms in sales contracts, preventing misunderstandings between counterparties regarding their obligations, risks and costs.
Key innovations Incoterms 2020
- Transformation of DAT into DPU Replacing the term DAT (Delivered at Terminal) with DPU (Delivered at Place Unloaded) expands the range of possible delivery points. Now the cargo can be transferred and unloaded at any agreed location, not limited to terminals.
- Strengthening insurance coverage in CIP The terms of CIP (Carriage and Insurance Paid To) now provide for more reliable coverage. Instead of minimum insurance, a policy is required under the terms "A" of the Institute of London Insurers.
- Emphasis on transportation safety For the first time, transportation safety requirements are explicitly included. The parties' responsibilities for compliance with these standards and related costs are clearly defined.
- Using their own transport Now the seller has the right to arrange delivery on their own within the terms of FCA, DAP, DPU and DDP, and the buyer can use their own fleet when working under FCA. This provision reflects current trends in optimizing logistics processes and allows companies to manage supply chains more effectively.
- FCA modifications for maritime transport have added an option that allows the buyer to instruct the carrier to issue an on-board bill of lading to the seller.
Impact on international transportation
- Increased flexibility in the choice of delivery conditions.
- A clear allocation of responsibility for security.
- Improving the protection of goods, especially valuable or vulnerable ones.
- Compliance with modern logistics practices.
- Optimization of document flow, especially when working with letters of credit.
Practical recommendations
- Careful choice of the term, taking into account the specifics of the business.
- Professional development of the staff.
- Revision of existing contracts.
- Consultations with experts in difficult cases.
- Consideration of industry specifics when choosing delivery terms.
Incoterms 2020 marks an important stage in the development of international trade. The updated rules reflect current trends, pay more attention to security issues and provide additional flexibility to foreign trade participants. Their competent application can optimize the process of cross-border deliveries, reduce risks and increase the efficiency of operations.
However, it is important to remember that Incoterms are only part of the purchase and sale contract and do not replace the need for detailed coordination of all aspects of the transaction. Nevertheless, the correct use of these rules can be the key to the successful implementation of international transportation and the development of the company's foreign economic activity.
