Incoterms 2020 in force: loading, unloading and insurance on strapping component orders

A carton of wire buckles weighs little next to a container of finished goods, but the delivery term on its purchase order settles the same questions: who books the freight, who loads and unloads, who insures the goods and where the risk passes. Since 1 January 2020 the International Chamber of Commerce’s Incoterms 2020 rules have been the current edition. The ICC announced in June 2019 that the edition would come into effect on that date, and EY’s alert of October 2019 records that it was published on 10 September 2019.

By late January 2020 the first orders written under the new edition are reaching receiving docks. The useful questions are now practical ones. Does each order’s term match the way the goods physically move? Who has a forklift at each end, whose truck turns up, and who would claim if a pallet of seals arrived damaged?

Orders that straddle the changeover

Orders placed in the last months of 2019 are still being delivered, and some were written under the 2010 edition. Bennett Jones notes that parties can keep using Incoterms 2010 or an earlier edition if the contract clearly says so, and that a contract made from 1 January 2020 which quotes a rule without naming an edition is likely to be read as using the 2020 rules.

Three checks follow. First, compare the quotation, order confirmation and commercial invoice for each delivery: all three should name the same rule, named place and edition. Second, audit templates and standing orders: any that still say DAT need DPU if the 2020 edition is meant, and any that say only “Incoterms” need an edition. Third, look at framework agreements. A supply agreement that refers to Incoterms 2010 may still govern call-off orders made under it in 2020, so either keep the 2010 edition consistently for that agreement or amend it, rather than letting individual call-offs drift between editions.

Who loads, and who unloads?

Steel buckles, clips and seals usually travel on pallets that need a forklift or pallet truck at each end. The delivery term should make it obvious who provides that equipment and the people to use it.

Under DPU (Delivered at Place Unloaded), which replaced DAT in the 2020 edition, the destination can be any agreed place rather than only a terminal. Bennett Jones points out that DPU is the only Incoterms rule that requires the seller to unload at the destination, and suggests DAP where unloading should not fall on the seller. For a delivery to a warehouse with its own forklift and staff, DAP is often the natural fit. DPU makes sense only if the seller can genuinely unload at your dock, with suitable equipment and access.

The 2020 edition also recognises, as EY’s summary notes, that a buyer or seller may carry the goods with its own vehicle under FCA, DAP, DPU and DDP. That suits a regional supplier that delivers by its own truck, or a buyer that collects cartons with its own van.

How the goods move	Rule often considered	Points to settle
Buyer’s forwarder or own vehicle collects at the supplier	FCA with the full collection address	Who loads the vehicle, collection hours, export clearance
Supplier delivers by its own truck; buyer’s team unloads	DAP with the full delivery address	Unloading equipment and dock access at the receiving site
Supplier delivers and unloads at the buyer’s site	DPU with the full delivery address	Whether the seller can unload there, and with what equipment
Supplier arranges main carriage and insurance	CIP, or CIF for sea freight	Insurance clauses, insured value and who would claim
Payment by letter of credit on an FCA sale	FCA with the on-board bill of lading option	The option written into the contract before shipment

Insurance: compare like with like

The 2020 edition sets different default insurance levels for CIP and CIF, as EY’s alert points out. Bennett Jones explains that under Incoterms 2010 both rules required only minimum Clause (C) cover, and that the 2020 edition raises the CIP requirement to Institute Cargo Clauses (A), which is more comprehensive and more expensive. The parties can agree a different level, but the default matters when a quotation simply says “CIP”.

For a component buyer this has two practical effects. A CIP offer may now carry broader cover than a CPT offer for the same goods, so compare the two on the same insurance basis rather than on price alone. And if your company already insures inbound goods under its own cargo policy, ask your insurer or broker whether the seller’s cover adds anything; if it does not, agree a different level in the contract instead of paying for the same risk twice.

Letters of credit and FCA

Where payment is by documentary credit, the bank may require an on-board bill of lading. Under the revised FCA rule, the parties can agree that the buyer will instruct its carrier to issue one, which Bennett Jones notes can help the seller obtain payment. The option only works if it is agreed in the contract, so raise it when the quotation is being prepared, not after the goods have been handed to the carrier.

Questions to settle before ordering

Add these to the request for quotation and keep the answers with the order:

• Which rule and edition is quoted, and what is the exact named place?
• Who loads at origin and who unloads at destination, and with what equipment?
• Whose vehicle moves the goods on each leg?
• Who arranges and pays for export and import clearance?
• If insurance is included, which clauses, insured value and beneficiary apply?
• Which transport document is needed for payment, and who obtains it?
• Are freight surcharges included, and until what date is the quotation valid?
• How are security-related costs shown? The 2020 edition, as ICC’s launch announcement notes, places security requirements within the carriage obligations and costs.

Keep the term with the specification

The delivery term sits alongside the payment terms and the product specification; it replaces neither. A purchase order that identifies the component, nominal strap width, wire diameter or sheet thickness, finish and quantity unit, and then adds the rule, named place and edition, gives purchasing, logistics and receiving one shared reference. Our RFQ checklist covers the product side, and the international procurement guide covers freight and documents.

When you ask YAKU to quote galvanized wire buckles, sheet metal clips or steel strapping seals, state the Incoterms rule, edition and named place you want quoted, and who will load and unload, through the enquiry page.