Incoterms, short for “international commercial terms”, are shorthand for the allocation of cargo transportation costs and risks of loss between parties to an international sales transactions.
At the outset, it must be pointed out what Incoterms are NOT – they do not set prices, quality standards for quantities of sale between. They do not provide for the transfer of title. And with the exception of two Incoterms, the remaining nine do not cover which party is responsible for obtaining cargo insurance for the shipment. Incoterms do, however, indicate which party to the transaction must obtain and pay for cargo carriage.
Incoterms are currently used in 140 countries with 31 languages. Their use by the parties to an international transaction is purely voluntary; we know of no country that mandates their use.
Incoterms are revised every ten years to reflect changes in international transactions. Thus, you had Incoterms 2010 and now 2020, currently in effect. Some decennial changes are major (2010 resulted in the elimination of four Incoterms and the addition of two new terms). Incoterms 2020, on the other hand, resulted in the following three major amendments, which would seem to have a relatively minimal overall impact:
Incoterm DAT is now converted to DPU (Delivered at Place Unloaded) to reflect the modern need for flexibility and efficiency in an unloading place. DPU gives the parties a wider range of choice in determining the place for unloading in the importer’s country.
Also, the minimum mandatory insurance coverage that must be purchased when using CIP has been raised to 110 percent of the value of the cargo at issue; the same increase does not apply to Incoterm CIF.
Third and finally, 2020 Incoterms expressly requires specific, new and additional security responsibilities related to goods, cash, and documents under individual trade terms.
Robin W. Grover
