Incoterms are internationally recognised and standardised trade terms that govern the transfer of risk and liability between buyers and sellers. They are used in approximately 90% of all international sales contracts. Incoterms are revised once every 10 years to keep in line with developments in international trade. The next version is due to be published in September 2019 and take effect on 1 January 2020.
A common incoterm used in sales contracts of e-commerce operators is DDP (Delivered Duty Paid), as it ensures the smoothest possible customer experience. Customers will know exactly what they need to pay, and usually not have their item held by Customs pending payment of duties and taxes or issuance of licenses. For the seller, it increases commercial certainty and the ability to price post-importation costs with some accuracy.
However, the DDP term assigns maximum responsibility to the seller, including requirements for the application for any import approvals and licenses, import clearance and payment of any applicable duties and taxes in the country where the buyer is based. It requires the seller to comply with legislation in countries where it may have no presence, and therefore possibly rely on third party logistics providers for compliance and efficiency.
One of the anticipated changes is the disappearance of this DDP term. The commercial difficulty and sometime regulatory impossibility of applying a DDP term in practice has triggered the ICC to abolish it. Early indications are that the DDP term may be replaced with two new incoterms in 2020: