Page 41 - Banking Finance June 2021

ARTICLE

comprehensive level of
insurance which is
usually suitable for
manufactured goods,
where Clause C would
likely apply to
commodities.

3. Updation on
Costs:
Disputes on sharing of
costs were quite a
problem due to lack of
clarity on the same with
Incoterms® 2010. In
some cases the carriers
were changing their
pricing so sellers were
often faced with new
Fig 3: Point of Delivery & Transfer of Risk in Incoterms® 2020 back charged terminal
handling charges. Incoterms® 2020 now provides much
responsible for obtaining the necessary clearances from the more detail around costs. This clearly states the allocation
authorities in the buyer's country.
of costs to each party.

Key Changes in Incoterms® 2020 over 4. Increased Security Requirements, Allocations
Incoterms® 2010: and Costs:
The Major part of Incoterms® 2020 has remained the same, In today's world the requirement of security arrangements
with a few key updates and changes. It's essential that all of the goods is always increasing. Taking this into
parties involved in global trade understand these updates consideration, the Incoterms® 2020 rules now provide more
and know the implications of the same: detail around security allocations and necessary costs. For
each Incoterm® rule, the security allocations have been
1. New Incoterms® - DPU Replaces DAT: added and the associated costs have also been added.
The previous Incoterm® DAT (Delivered at Terminal) has now
been replaced by a new term called DPU (Delivered at Place 5. Buyer's and Seller's Own Transport:
Unloaded). In the past, DAT required 'Delivery at Terminal Under Incoterms® 2010 it was assumed that all transport
(unloaded)', however the word "terminal" caused confusion. would be undertaken by a third party transport provider.
Now this term has been modified to DPU (Delivery at Place But Incoterms® 2020 allows for the provision of the buyer
Unloaded) which gives a better clarity. or seller's own means of transport. This recognizes that
some buyers and sellers are using their own methods of
2. Change in level of insurance cover between transport, including trucks or planes to get goods delivered.
CIF and CIP:
CIF and CIP are the only two Incoterms® that require the 6. FCA, FOB and the Bill of Lading Process:
seller to purchase insurance in the buyer's name. Under Updates were made to the previous Incoterms® 2010 in order
Incoterms® 2010 the insurance cover for both CIF and CIP to encourage exporters of containerized goods to use the FCA
was required under Institute Cargo Clause C. Under the new Incoterm®. But, in reality they were still using FOB instead of
Incoterms® 2020, CIP requires insurance cover complying FCA. This is because FOB is still frequently used under Letter of
with Institute Cargo Clause A. Clause A covers a more Credit transactions even by experienced sellers.

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