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New Incoterms® 2020 rules: what purchasers and sellers of ferroalloys and metals should know

For metal procurement and sales professionals engaged in international trading of ferroalloys and other raw materials, it is essential to have a clear understanding of the specific responsibilities and risks under the Incoterms® rules. To help you navigate through the new rules that came into effect on 1st January 2020, this article will provide an overview of the most important changes

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The 7 main differences between Incoterms® 2010 and Incoterms® 2020:

  1. The term ´DAT´ has been replaced by ´DPU´

  2. Differences in insurance coverage between CIF and CIP

  3. FCA and on-board Bills of Lading

  4. More emphasis on transport security requirements

  5. Provisions for ´DIY Sellers´ to arrange their own transport

  6. Allocation of costs are more clearly defined

  7. Improved definition of handling of customs formalities and clearance

1. DAT (Delivered at Terminal) was changed to DPU (Delivery at Place Unloaded)

Obligations and functions under both terms have remained the same while the acronym was changed. The word ´Terminal´ was removed to avoid confusion, and replaced with the word ´Place´ to name any location, whether it is covered within the terms or not. DPU means that the goods cannot solely be unloaded at a transport terminal or infrastructure (port, airport, dock or others) but can be unloaded from the means of transport at any other place in the destination country which has facilities for unloading of goods (for example a factory or a warehouse).

2. Differences in insurance coverage between CIF and CIP

Under CIF and CIP, the seller has the obligation to contract transport insurance for the buyer. Carriage and Insurance Paid (CIP) requires insurance which complies with the Institute Cargo Clause A, whereas CIF requires insurance under Clause C. Under CIP rules in the Incoterms® 2020, the seller is under the obligation to take out insurance under contract transport insurance in favour of the buyer with extensive coverage, corresponding to Clause A of the Institute Cargo Clauses. However, the parties may agree to take out insurance which offers reduced coverage (Clause C of the Institute Cargo Clauses)
You may ask, why this is so? This is because Clause A covers a more comprehensive and higher level of insurance (e.g. for the manufactured goods), whereas a lower level of coverage from Clause C would most likely apply to the commodities world. Therefore, CIF is generally used with bulk goods (waterways only) and CIP (multimodal) is often used for manufactured goods.

3. FCA option of Bill of Lading (BL) with an on-board notation

FCA has been changed to allow the parties to agree for the buyer to direct the carrier to issue the on-board bill of lading to the seller. According to FCA, ´The buyer must contract or arrange at its own cost for the carriage of the goods´.

The FCA term now has an extra provision which states that, if the parties have so agreed, the buyer must instruct the carrier (shipping company or its agent) to issue to the seller, at the buyers´ cost and risk, a transport document stating that the goods have been loaded (B/L - Bill of Lading with an on-board notation).

The seller is obliged to tender the bill of lading to the buyer. When this option is used, the seller does not take on the obligation to the buyer to the terms of contract of carriage.

4. More emphasis on transport security requirements

Incoterms® 2020 puts more emphasis on liabilities with regards to security-related obligations in each rule (e.g. mandatory screening of containers). Cargo security is addressed more precisely under two circumstances: transport from the country of origin to that of the destination and customs clearance formalities and procedures (export, transit, and import).

Throughout the transportation of the goods, the security liability is undertaken by the party who executes the carriage of goods contract: Seller (CPT, CFR, CIP, CIF, DAP, DPU, and DDP) or buyer (EXW, FCA, FAS, and FOB).

As far as customs clearance is concerned, the security liability lies with the party which must undertake the clearance.

5. Provisions for ´DIY Sellers´ to arrange their own transport

Incoterms® 2010 rules assumed that goods carried from the seller to the buyer were carried via a third party. The Incoterms® 2020 rules recognise so-called ´do-it-yourself (DIY) sellers´ who may use their own transport to deliver the goods rather than relying on 3rd party transport.

Under this term it is now clearly stated that sellers can make a contract for carriage or simply arrange for the necessary transportation on their own accord.

6. Allocation of costs are more clearly defined

Costs were a significant issue in the Incoterms® 2010. As carriers often changed their pricing structure to deal with add-ons, sellers were often surprised by terminal handling back-charges. To further reduce sources of dispute, all costs are now listed in the "Allocation of Costs" sections for each term, aiming to clearly state the costs to each party. The guiding principle is that the seller is responsible for costs up to the point of delivery and the buyer for costs beyond that.

7. Improved definition of handling of customs formalities and clearance

The Incoterms® 2020 defines more clearly which party (seller or buyer) is responsible for handling customs formalities and clearance. Also, a reference to the release of goods in transit is included for the first time here.

The applicable rule is that the liability is assigned to whoever assumes the risk of transport to the place of delivery. Therefore, under the terms, EXW, FCA, FAS, FOB, CPT, CFR, CIP and CIP where the risk of transport is transferred at origin (country of the seller), the liability for the customs transit clearance is assumed by the buyer. While on the contrary, under the terms DAP, DPU and DDP, the risk is passed on at the destination (country of the buyer), and the seller bears the liability.

This change may be important in those cases where the goods must pass through countries with complex customs handling procedures before arriving at the customs of the importing country.

Implications for users negotiating deals on Metalshub

Buyers and sellers of ferroalloys are in a good position to take advantage of the added clarity provided by the updated rules and the ease of transactions via our digital B2B platform. Users of Metalshub should pay extra attention to the new definitions, refer to all available reference material to fully understand the risks and obligations associated with their trading activity under the Incoterms® rules.

We have 3 tips for how to apply the Incoterms® rules when buying and selling on Metalshub:

  1. Choose the right Incoterms® that apply to your trading deal

  2. Pay attention to the precise specification of the place or port

  3. Clearly state the Incoterms® in the contract, as well as in the Letter of Credit (LC), and all invoices of the related trading transactions. On the Metalshub platform, the standard terms and conditions will be updated with the 2020 rules shortly.

It is important to note that, despite the "effective" date of the 1st January 2020, Incoterms® 2010 may still be applied. There is no obligation to only abide by the Incoterms® 2020 as yet. Despite the effective date, trading parties that have not clarified which Incoterms® version their contracts refer to may have the 2010 rules apply to their circumstances. It is estimated that the 2020 rules might take 1 up to 2 years to be fully adopted worldwide.

Incoterms® 2020 considered the rapid growth of the economies worldwide and placed increased attention to security for the transportation of goods, flexibility for insurance coverage, and finally a more user-friendly implementation of the rules.

The foundations of the Incoterms® have remained largely unchanged with only slight modifications for the 2020 rules. These offer crucial improvements for buyers and sellers, but the actual impact will not be known until they are widely incorporated in actual import-export transactions.

The rules are updated every 10 years by the International Chamber of Commerce (ICC), the Incoterms® 2020 rules define the individual responsibilities of buyers and sellers with regards to the delivery of goods under common sales contracts. They are the authoritative set of regulations for defining how costs and risks are allocated to each party in international trading transactions.


*Disclaimer: This article merely provides an outline of our interpretation of the changes to the Incoterms® 2020 rules. Readers are advised to refer to the official outline of . For a complete understanding of Incoterms® rules, readers must contact their . Metalshub does not assume any responsibility for the accuracy of the statements in this article and does not accept responsibility for any legal risk, damages or financial losses arising out of their trading activities or use of information in this article, or information published by the ICC. Application of the appropriate Incoterms® for your trading activities and the use of information in this article is at the readers´ own risk.

, using the trading contracts on our digital platform. If you have any questions or comment with regards to this article, please get in contact with us: info@metals-hub.com


About Metalshub

Metalshub is one of the pioneers of digital transformation in the metals industry. The software start-up was founded in 2016 in Düsseldorf by Dr. Sebastian Kreft and Dr. Frank Jackel with the mission to connect companies in the industry with a digital platform. Digital supply chains can help reduce costs and CO2 emissions. More than 1,200 companies are already using Metalshub, including more than 300 steel mills and foundries that have digitised their purchasing processes with Metalshub. Since the launch of the platform in 2017, more than 1 billion USD in trading volume was concluded through Metalshub.

Digitalise your metals procurement and sales process now. Find out how the Metalshub Marketplace is able to help you reach new customers and find new suppliers. and be part of the 1100 companies that are already on board.

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