In the near future, after nearly 10 years of using and meeting various inadequacies in Incoterms 2010, the International Chamber of Commerce (ICC) unit is drafting and amending a copy of the international delivery conditions Incoterms 2020. Incoterms 2020 will officially issued at the end of 2019 and is effective from January 1, 2020 (the 100-year anniversary of the establishment of ICC).
Changes in Incoterms 2020 include:
1. Removing conditions EXW, DDP and FAS
The omission of these three conditions is explained by experts as follows:
– EXW is only used by companies with limited export experience, DDP is only used for sample or spare parts that are usually sent by courier companies to the buyer’s address; These two conditions are mainly used in domestic trade.
– FAS is rarely used in practice because FAS has similarities with FCA, the limitation of FAS is to deliver along the ship’s side, if the ship is late, the cargo must wait at the pier, and if it arrives early, the buyer’s ship must wait or the seller is forced to change the train in time to arrange the cargo.
2. Separate DDP conditions into 2 other conditions
DDP conditions will disappear and become two new conditions, DTP (Delivered at the destination station) and DPP (Delivered at the destination).
– DTP conditions: The seller is responsible for all transportation related expenses including customs duties when goods are delivered to the station (which can be seaports, airports, transport centers …) at the destination.
– Conditions DPP: The seller is responsible for all transportation related expenses including customs duties when the goods are delivered to any other location other than a transport station, for example, address of the buyer.
3. Deeply exploit FCA conditions
Derived from the advantages of FCA conditions: Flexible on delivery locations and suitable for multimodal transport means this condition can be applied in many different cases. In this new Incoterms rule, FCA will be expanded for road transport and sea transport.
4. Modify the terms FOB and CIF
FOB and CIF are two traditional conditions used in international trade, but most of the changes in previous Incoterms have not been fully conveyed to users. Most international buyers still use FOB and CIF for goods shipped by container instead of using two conditions of FCA and CIP. The draft Incoterms 2020 will modify the terms FOB and CIF that can be used for container cargo such as Incoterms 2000 and earlier editions.
5. Add new terms – CNI
CNI (Cost and Insurance – Cash and Insurance), this provision was created to fill the gap between FCA and CFR / CIF. This new condition allows the seller to be responsible for cargo insurance, while the buyer bears the risk of shipping.
6. Some other changes in Incoterms 2020
Some other content is added:
– Traffic security
– Regulations on transport insurance
– Relationship between Incoterms and international sales contracts
Overall, this update eliminates the existing shortcomings at Incoterms 2010, and will simplify rules, eliminate obscure words to help limit errors in the explanation and application process, including those who do not use English as the primary language.