INCOTERMS 2020 – revision of commercial terms

The Incoterms (International Commercial Terms) define the rights and duties of buyers and sellers in international trade.

They serve as general terms and conditions whose inclusion in the contract requires an express agreement between the parties. The international commercial terms of the ICC (International Chamber of Commerce) were last revised in 2010. Publication of the Incoterms which are to take effect on 1 January 2020 has been announced for 10 September 2019 and is eagerly awaited. The terms have been revised in order to account for changes in shipping and commercial practices.

In terms of the content of the new terms, it will be interesting to see if the predictions made in the literature and commentaries will prove correct: One possible change which has been mentioned is dividing the FCA (Free Carrier)Incoterms into terms for land and sea routes. FCA means that the seller delivers the goods to the buyer at the seller's premises or another designated location.

Both FAS (Free Alongside Ship) and EXW (Ex works) may be abolished. The latter clause in particular, in which the seller delivers the goods by making them available for pick-up by the buyer at the seller's premises, is considered to be controversial since it minimizes the seller's liability.

It is also presumed that a complete reinterpretation is to be expected for DDP (Delivery Duty Paid). Consideration is also being given to the introduction of a new CNI (Cost and Insurance) Incoterm, which will fill the gap between FCA, in which insurance costs are not borne by the seller, as exporter, and CFR (Costs and Freight)/CIF(Cost, Insurance and Freight), in which freight is included.

Under CNI, the risk that the goods will be lost at the port of shipment will pass to the buyer. It is also to be expected that the results of the analysis of transport security, transport insurance and the relationship between Incoterms and international supply contracts will also find their way into the new Incoterms.

In general, the changes are expected to result in much simpler and clearer rules, which are to find expression in graphs and tables.

How all this will affect the duties of the parties and liability questions, and how much weight can be attached to previous statements, will be seen shortly. We'll keep you informed!

[October 2019]