A Change of Terms

Incoterms 2020

Amongst the noise of Brexit, well-publicised trade disputes and sanctions some routine issues that smooth trade can be overlooked.

A potential case in point is the imminent launch of Incoterms® 2020 by the International Chamber of Commerce (ICC).

In common with previous announcements, the launch will be accompanied by a series of workshops to update users on the new terms – these will start from September and October of this year.  The new terms come into effect from the 1st January 2020.  Trade & Export Online material will be updated accordingly.

Incoterms are explained in the Incoterms module on Trade & Export Online.  They are a set of rules that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts.  They are not a contract in themselves, but provide clarity within those contracts.

First published in 1936, Incoterms are periodically updated by the ICC to reflect evolving trading practice and iron out issues that arisen in previous versions.  This will be the case for 2020 in relation to the current 2010 version.

The current speculation is that changes will include:

  • Removal of FAS (Free Alongside Ship), a little used term.
  • The separation of FCA (Free Carrier) into separate terms that cover land and maritime delivery.
  • A tidy up of terms FOB (Free On Board) and CIP (Carriage And Insurance Paid To) to reflect usage with containers.
  • The division of DDP (Delivered Duty Paid) into two separate terms reflecting the point of delivery.

However this is no substitute for reviewing the terms carefully when they are published!  Once the terms are available it is an opportunity for each trading business to review current terms and practice against the new terms.  The purpose, of course, would be to ensure as a minimum the clearest terms are used.  However, at a more strategic level, it is an opportunity to consider which terms are optimal in the light of any changes in the business and its relationships that have occurred since Incoterms 2010 were launched.

About the author

David Millett is a coach and trainer who works regularly for RWA. He has a long experience in trade issues with a background in banking, where he was Head Of Trade Product Management for the Royal Bank of Scotland, before becoming Head of Business Development for UK Export Finance’s short-term business. David is a Fellow of the Institute of Export and former Council Member for the International Chamber of Commerce UK and the British Exporters Association.

Get RWA Insight In Your Inbox

Regular business news and commentary delivered direct to your inbox each week. Sign up here