The term Incoterms® comes from English and stands for International Commercial Terms (IN. CO. TERMS). Defined by the International Chamber of Commerce (ICC), Incoterms® are revised every 10 years. This because there is an evolution of international trade practices. These terms reflect the distribution of costs (cost of transport for example) and risks between the parties.
Therefore the Incoterms® define the obligations, costs and risks generated by the selling of a product. The Incoterms® will help the buyer and the seller to define who will bear the costs. They will also make it possible to specify the moment of passing of the risk.
In force on January 1, 2020, the new version, like the previous one, it is composed by 11 Incoterms®, still classified in two groups according to the method of transporting the goods.
The 2020 version added an option allowing parties to meet bank requirements under a documentary credit (or letter of credit).
This new option allows the seller to obtain the delivery of the transport document attesting to the loading on board. It will now be possible to agree with the buyer to issue a bill of lading (or any other transport document) with the words “on board” or “Received for shipment”.
This option was created in order to comply with the legislation of certain exporters who require documentary credit and only recognize classic transport documents (CMR, LTA, bill of lading).
The 2010 version required the seller to have an identical minimum level of coverage for both rules. The Incoterms® CIP rule now imposes an obligation to cover “all risks”, which increases the level of insurance and therefore the cost of the premium to be borne by the seller.
This is the development with the most significant impact in terms of customs valuation.
In the Incoterms® 2010 rules, the only difference between DAT and DAP was that for the DAT, the seller delivered the goods once unloaded from the means of transport arriving at the terminal, while for the DAP, the goods were considered as delivered once made available to the buyer on the means of transport without being unloaded.