There has been much speculation about the disappearance of the international commerce terms (Incoterms®) EXW and DDP, due to the entry into force of the 2020 version, recently published by the International Chamber of Commerce (ICC).
The EXW and DDP extremes have raised controversy over the amount of risks transmitted between the seller and the buyer and, because of the impotence for some of them, to act as an exporter and/or importer in some territories. We regret to report that this controversy will continue over time, at least, until the next update. Although the latest updates have been made every ten years, nothing prevents the ICC from modifying them according to the international commercial context and the behavior of the variables that make up the flow in the sale of goods.
The 2020 version, which will enter into force on January 1, 2020, welcomes -if only from a semantic point of view- the term DPU (Delivered at Place Unloaded). The term DPU content in version 2020 is the DAT version 2010, whose creation responds to the need to clarify the difference between DAP and DAT: while in DAP the seller delivered the goods when those were placed at the disposal of the buyer on the arriving means of transport for unloading, in DAT the seller agreed to deliver the goods once unloaded from the arriving means of transport into a “terminal”. In both cases, the procedures and formalities of import customs clearance were carried out by the buyer in the import country.
DPU, reaffirms the obligation of the seller to deliver the goods in the agreed place - not only in terminals - and once it has been unloaded.
Without deepening the operation of each of the eleven terms that make up the Incoterms® we consider it necessary to remember that, these terms - initially designed for international trade and, currently, also used in domestic trade transactions- deal with the obligations, risks and costs between selling and buying companies.
It is important to clarify that, when these eleven terms refer to “deliveries”, they are referring to the transfer of the risks, costs and obligations related to goods and defined within each term, they do not refer to the legal transmission of their ownership. The latter -and commonly confused- transfer of the property must be regulated by the sale contract signed by and between the parties.
It is also important to mention that, the term agreed by the seller and buyer, included within legal and commercial documents, must be followed by the place designated for delivery and the version of the Incoterms® negotiated, for example, FCA Madrid Incoterms® 2020, in order to facilitate arbitration in any dispute that may arise between the parties.
The entry into force of the new terms is not an obstacle to continue using the previous version (2010), provided that this is expressly established in the commercial documentation (Incoterms® 2010), although from Salinas & Partners we advise that the terms used in the transaction of sale are those that are in force at the time of the formalization of the same.
How can we assist you?
From Salinas & Partners we recommend the review and update of the legal instruments that regulate the exchange of goods between seller and buyer, notwithstanding the replacement of the term DPU in those DATs, and the inclusion of the new version (Incoterms® 2020) to the rest of terms expressed in the corresponding documentation.
With more than 30 years of experience in indirect taxation and, above all, in foreign trade, we are at your disposal for any questions or comments that may arise.