Incoterms 2020 Updates: What Businesses Need to Know
At Shipping Containers of Manchester, we provide more than just containers; we help businesses navigate international trade effectively. With the launch of Incoterms 2020 on January 1, 2020, it’s crucial to understand the updates that affect freight, logistics, and contractual obligations worldwide.
What’s New in Incoterms® 2020
The International Chamber of Commerce (ICC) introduced changes to simplify shipping responsibilities and reflect modern logistics practices. Key updates include:
- FCA (Free Carrier): Greater flexibility now allows delivery at the seller’s premises or another agreed location, including freight forwarder terminals. This benefits both air freight and maritime shipments.
- DPU (Delivered at Place Unloaded): Replaces DAT (Delivered at Terminal), broadening delivery points to include any site, such as construction or factory locations.
- CIP vs CIF Insurance: CIP (Carriage and Insurance Paid To) now requires comprehensive insurance, while CIF (Cost, Insurance, Freight) requires only minimal coverage. Choosing correctly is vital for high-value or fragile cargo.
- Own Transport Clarification: Sellers and buyers may now use their own vehicles under EXW, FCA, FAS, FOB, DPU, and DDP, recognising the rise in direct logistics solutions.
Key Recommendations for Using Incoterms® 2020
To ensure compliance and reduce risks, businesses should note these recommendations:
- Maritime Terms: Use FAS, FOB, CFR, and CIF exclusively for bulk or breakbulk cargo, not for containerised goods.
- EXW (Ex Works): Limit to domestic deals where possible, as it complicates customs processes in international trade.
- Understand Risk Transfers: Each rule shifts liability at different points. Misunderstanding this could lead to financial loss for your business.
How Manchester Businesses Should Prepare
With Incoterms® 2020 in force, here’s how companies in Greater Manchester can stay ahead:
- Audit Contracts: Review your current trade agreements to ensure they accurately reflect the Incoterms 2020.
- Seek Expert Guidance: Consult with freight forwarders, logistics experts, or our team for guidance on correct term usage.
- Update Documentation: Amend sales and purchase contracts to ensure all terms are transparent and compliant.
By adopting the correct terms, you’ll achieve smoother shipping operations, minimise disputes, and protect your business from unnecessary risks.
Need Containers for Your Next International Shipment?
Choosing the right Incoterms is only half the journey; having the correct container matters just as much. Whether you need a 20ft shipping container, a 40ft high cube container, or customised units, Shipping Containers of Manchester provides solutions that meet international standards and ensure your cargo reaches its destination safely.
Get expert advice on containers and logistics support for your next shipment. Call us on 0330 0130 636 or request a free container quote today.
Frequently Asked Questions on Incoterms® 2020
What are Incoterms?
Incoterms are internationally recognised rules published by the ICC that define the responsibilities of buyers and sellers in global trade contracts.
What is the main change in Incoterms® 2020?
The most significant change was the replacement of DAT (Delivered At Terminal) with DPU (Delivered at Place Unloaded), which expanded delivery options beyond ports and terminals.
Should I use EXW (Ex Works) for international shipping?
It’s not recommended, as EXW creates challenges for customs clearance. It’s more suitable for domestic trade.
Why is CIP insurance different from CIF?
CIP requires full insurance coverage for higher-value goods, whereas CIF only requires minimal coverage. This ensures different levels of protection depending on your cargo.
Do Incoterms cover the ownership of goods?
No, Incoterms define risk and responsibility, not ownership or transfer of title. The terms of your sales contract determine ownership.