International trade dropped dramatically with the impair of COVID-19 in 2020. But since many countries took the protective measure and with massive injections of vaccine, international trade, especially that of our country, is re-starting. International Chamber of Commerce (ICC) released INCOTERMS®2020 on September 10th 2019, which was effective in global since January 1st, 2020. This rule would be repetitively adopted in international trade in the future.

1. The content of Incoterms®2020 rules.

Obligations: the seller’s and buyer’s obligations, eg, who organizes carriage or insurance of the goods or who obtains shipping documents and export or import licenses.

Risk: when and where the risk is transferred from seller to buyer who takes the risk of loss of goods.

Costs: who is responsible for the transport, packaging, loading or unloading costs, and checking or security-related costs.

2. Not the content of Incoterms®2020 rules.

The Incoterms®2020 rules are not a contract of sale-and are therefore not substitute for contract of sale. Two parties are required to establish a contract of sale which includes performance, breach of contract and applicable laws. But the Incoterms®2020 rules can become part of contract when they are incorporated into contract. The seller and buyer usually choose laws of the country of one party as applicable law, or apply the international law like the Convention on the International Sale of Goods (CISG).

The rules do not deal with the following matters (which are required to be agreed in contract): whether there is a contact of sale at all; the time, place, method or currency or payment of the price; the remedy of breach; intellectual property rights; transfer of ownership of the goods sold; the method, venue or laws of dispute resolution in case of breach.

3. The relation between Incoterms®2020 and Incoterms®2010

“New rules replace old rules” does not apply to Incoterms® rules. The seller and buyer are permitted to choose the Incoterms®2020 and Incoterms®2010 according to the fact. However, Incoterms®2020 changes part of Incoterms®2010, eg, DAT(terminal delivery) into DPU(uploading delivery), enlarges the scope of insurance of CIP(cost and insurance paid to) etc, the seller and buyer need to pay attention when choose the rules.

4. How best to incorporate the incoterms rules.

Words such as: “[the chosen Incoterms® rule][named port, place or point] Incoterms® year”

For example,

Incoterms®2020: CIF Shanghai Incoterms®2020, or

Incoterms®2010: DAP No 123, ABC Street, Incoterms®2010

The year is a must of chosen rules, like Incoterms®2020 or Incoterms®2010. Leaving the year out could cause the decision of judge or arbitrator to apply the year according to the content of contract of sale of goods.

More explanations and analysis of each rule in the following articles, please stay with us.