This is how the new version of these working standards will change with the SAP platforms
The International Chamber of Commerce (ICC) has confirmed that a new version of the Incoterms® is coming into force on 1st January 2020. This could cause concern regarding the preparation of the SAP system due to the fact that there have been no changes since 2010; it could give the impression that the changes are going to be quite big. The good news is that it’s not such a big deal, but certain aspects must be taken into account, which we will break down in this entry.
What are the Incoterms®?
- The Incoterms® are not laws, but rather a series of standardised conditions that are internationally recognised and accepted by both the buyer and the seller.
- The Incoterms® are defined using a 3-letter code. The first one establishes the category (direct delivery on exit, indirect delivery with or without the main transport payment or direct delivery at the arrival point).
- They deal with four critical elements in the purchasing process:
1. Goods delivery point
2. Where the risk is conveyed
3. Who does the customs procedures
4. How are the expenses distributed
And what is changing with the Incoterms® 2020?
- Change from DAT to DPU: from “Delivery and unload at terminal” to “Delivery and unload at agreed place”, so that the limitation of the delivery place being a terminal disappears. The DPU is the only case where the seller is required to unload the goods at the destination.
- Possibility of issuing a Bill of Lading after loading the goods.
- Allocation of costs between the buyer and seller expressed with greater precision and in a more extensive way.
- Different levels of insurance at CIF and CIP: new agreements are established with different minimal goods insurance coverage, although the level of insurance is still negotiable between the buyer and the seller.
- Clarification of who bears the VGM costs.
How does it affect SAP?
It’s not mandatory to use this version of the Incoterms®; it is possible to continue working with the 2010 version. For this reason, it will be necessary to indicate which Incoterms® version is being referred to for each purchase/sale.
Not only do we have to take into account the changes that the are involved in the classic fields for purchase/sale orders for imports and exports, but we have to include some considerations regarding the transport management (SAP TM) module, which has been more relevant in S/4HANA as it is replacing the LE-TRA function.
With regard to the purchasing (MM) and sales (SD) modules:
- In terms of settings, a new Incoterm DPU will have to be created, according to the recommendations that SAP has already launched in this regard.
- On each purchase or sale order, it will be necessary to indicate which Incoterms® version is being referred to. This could cause changes in the forms where the Incoterms® appear, like the order confirmations or the offers, so that the agreed conditions are in writing on the documentation sent to the client or provider.
- Equally, it may be necessary to update the price conditions to calculate the amounts such as the statistical value for Intrastat, amongst others, if the Incoterm is taken into account for that.
With regard to the transport management (TM) module:
- In terms of settings, it will be necessary to create the DPU incoterm (only if it hasn’t been created at SD/MM previously).
- Prepare the locations to be taken into account as delivery points.
- Define which is the paying party at each stage of the transport for the new incoterm.
Therefore, the main change that could involve a lot of work is precisely the coexistence of this new version of the Incoterms®, with regard to settings and adjustments to forms. In operational terms in S/4HANA, the user will find the possibility of using the 2010 or 2020 version depending on what has been agreed between the parties, but the usual functionality will not be modified.