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Incoterms® 2020: The Terms They Are A-Changin’

On January 1, 2020, certain substantive changes to the international shipping terms known as Incoterms® went into effect.

Incoterms® Defined

Incoterms® are a set of standard trade abbreviations that are published by the International Chamber of Commerce (“ICC”) and commonly used in international commercial contracts. They describe the obligations and allocations of risk and cost between seller and buyer, particularly as it relates to the delivery of product. 

The ICC first published a set of standard trading terms in 1936 and has been periodically updating them.  In recent history, those revised editions have been published every ten years. The most recent edition, Incoterms® 2020, which updated Incoterms® 2010, went into effect on January 1, 2020.

According to the ICC, the “Incoterms® 2020 rules take account of the increased attention to security in the movement of goods, the need for flexibility in insurance coverage depending on the nature of goods and transport, and the call by banks for an on-board bill of lading in certain financed sales under the FCA [Free Carrier] rule.”  Incoterms® 2020, International Chamber of Commerce (ICC), Foreword ¶3. 

Key Changes in Incoterms® 2020

In addition to improved explanations and presentation, including additional Explanatory Notes and a reordering of terms to emphasize delivery and risk, Incoterms® 2020 incorporates the following key substantive changes from Incoterms® 2010:

How To Use Incoterms® 2020

Incoterms® are not rule of law, but are an agreed set of principles created by the ICC.  As such, to be used, the parties must agree to them in the contract for the sale of products between the parties.  The ICC advises that, for clarity, parties should refer explicitly to Incoterms® 2020 (e.g., refer to the specific year of publication) when drafting contract provisions.  

What Incoterms® Do Not Cover

While Incoterms® are a helpful and widely-used convention for shipping and delivery, Incoterms® are not a substitute for a contract governing the sale of products, as the Incoterms® do not cover the specifications of the product sold, the payment terms and price, the remedies for breach, the imposition of tariffs, export controls issues, force majeure, or intellectual property rights, among other things.  As such, it is important that the parties enter into a contract to clearly set forth the governing terms of the sale of the product, including, but not limited to, the Incoterms® upon which the product will be delivered. 

© 2020 Foley & Lardner LLP

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About this Author

Kathleen Wegrzyn Commercial Transaction Lawyer Foley
Attorney

Kathleen (Kate) Wegrzyn (pronounced "Way Grin") (formerly Noble) is a senior counsel and business lawyer with Foley & Lardner LLP and is a member of the firm’s Commercial Transactions & Business Counseling and Distribution & Franchise Practices and the Food & Beverage Industry Team.

Ms. Wegrzyn’s areas of focus include counseling businesses on general corporate and commercial matters, including commercial contracts, dealer arrangements, licensing issues, supply chain contracts, marketing and promotion agreements, and logistics...

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