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New Incoterms from 1 January

[ November 29, 2019   //   ]

Freight forwarder the Woodland Group is reminding its customers that the
International Chamber of Commerce’s new version of Incoterms comes into
effect on 1 January.
As well as an enhanced layout and more detailed explanatory notes to
make the terms easier to understand and leave less room for error, FCA
(Free Carrier – named place of delivery) has been amended slightly to
allow the seller to require the buyer to procure an on-board bill of
lading.
Historically, a seller of a containerised shipment under FOB (Freight on
Board) terms lost control of the goods on their arrival at the export
container port but still remained liable until the container was loaded
onto the ship. This exposed the seller to potential cost and risk.
Incoterm FCA now answers this problem and allows the parties to agree
for the buyer to direct the carrier to issue the onboard bill of lading
to the seller.
Both CIF (Cost Insurance Freight) and CIP (Carriage and Insurance Paid
to) require the seller to provide a basic level of insurance for the
buyer equivalent to Clause C (Institute of Cargo Clauses).
However, these two terms usually apply to different classes of goods
which call for different levels of insurance coverage.
In Incoterms 2020, the ICC has sought to clarify this distinction.
Accordingly, CIF now keeps the same insurance requirements (i.e. Clause
C) but CIP has increased the level of insurance required to Clause A
(Institute of Cargo Clauses).
DAT (Delivered At Terminal) will be replaced by DPU (Delivered at Place
Unloaded) primarily to eliminate confusion between DAT and DAP
(Delivered at Place) in terms of where and how delivery takes place.
DPU is now the only Incoterm where the seller has the responsibilities
and costs of unloading at final destination.
Import Customs clearance and related costs, however, remain the buyer’s
responsibility.
The ICC has also expanded security-related requirements in Incoterms
2020 with provisions to allocate responsibility for these between seller
and buyer.
While Incoterms 2020 come into force on 1 January they could be used
immediately as long as this is clearly indicated in the contract.
Parties to a contract are not legally bound to switch over to the new
Incoterms as long as this is stipulated in any contract so they could
continue using Incoterms 2010 for example.

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