New 2020 Incoterms in Effect as of Jan. 1

The first rules were published in 1936 by the International Chamber of Commerce. “Different practices and legal interpretations between traders around the world necessitated a common set of rules and guidelines,” explains ICC. Adhering to the rules helps minimize trade disputes and litigation due to misunderstandings.

The Incoterms do not include trade terms that are specific for national domestic trade, such as LTL (less than truckload shipping) used in the United States. “Unlike national trade policies, Incoterms rules are universal, providing clarity and predictability to business,” says ICC.

There are two groups of Incoterms: those that apply to any mode of transportation and those that apply to inland and waterway transport only. In the 2010 Incoterms they are listed as:

Group 1. Any mode of transport

• EXW – Ex Works
• FCA – Free Carrier
• CPT – Carriage Paid To
• CIP – Carriage and Insurance Paid To
• DAT – Delivered at Terminal
• DAP – Delivered at Place
• DDP – Delivered Duty Paid

Group 2. Sea and inland waterway transport only

• FAS – Free Alongside Ship
• FOB – Free on Board
• CFR – Cost and Freight
• CIF – Cost, Insurance, and Freight

The terms are also used for eCommerce in BWB (Business to Business) and B2C (Business to Consumer) agreements.

Some of the terms have changed in the 2020 rules. For example, DAT (Delivered at Terminal) will be replaced by DPU (Delivery at Place Unloaded). Other changes include modifications to definitions, clarification of cost obligations for buyers and sellers, and new security requirements.

The International Trade Commission provides guidance on international trade at export.gov. The 2020 Incoterms are available at the International Chamber of Commerce.

The American Institute for International Trade will offer a free webinar on the Incoterm changes to members on Jan. 21. Information and registration is available at aiis.org.