Incoterms 2020

Terms

Overview of Incoterms 2020

Incoterms (International Commercial Terms) are a set of rules established by the International Chamber of Commerce (ICC) that define the responsibilities of sellers and buyers in international trade. The latest version, Incoterms 2020, came into effect on January 1, 2020.

Purpose of Incoterms

The primary purpose of Incoterms is to clearly communicate the costs, risks, and responsibilities associated with the transportation and delivery of goods. They help avoid misunderstandings between sellers and buyers by establishing a common language for international shipping.

Key Changes in Incoterms 2020

• Introduction of DAP (Delivered at Place): This term has replaced the previous DAT (Delivered at Terminal).
• Clarified Security Responsibilities: Enhanced clarity regarding the security responsibilities of both the seller and buyer.
• Guidance on Transport Documents: More detailed information on the use of transport documents has been provided.
• Container Delivery Rules: New rules regarding the delivery of goods in containers have been included.
• Insurance Emphasis for CIF and CIP: Increased emphasis on the importance of insurance for the CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid to) terms.

Incoterms 2020 Categories

1. EXW (Ex Works):

   • Type: Any mode of transport
   • Delivery Point: Seller’s premises
   • Seller’s Responsibilities: Minimal – making goods available at their premises.
   • Buyer’s Responsibilities: All costs and risks from seller’s premises onward.

2. FCA (Free Carrier):

   • Type: Any mode of transport
   • Delivery Point: Agreed place
   • Seller’s Responsibilities: Delivery of goods to the carrier or another person nominated by the buyer.
   • Buyer’s Responsibilities: Cost and risk from the time the goods are delivered to the carrier.

3. CPT (Carriage Paid To):

   • Type: Any mode of transport
   • Delivery Point: Agreed destination
   • Seller’s Responsibilities: Payment of transport to the named destination.
   • Buyer’s Responsibilities: Risk is transferred to the buyer as soon as the goods are handed over to the carrier.

4. CIP (Carriage and Insurance Paid To):

   • Type: Any mode of transport
   • Delivery Point: Agreed destination
   • Seller’s Responsibilities: Payment for transport and insurance to the named destination.
   • Buyer’s Responsibilities: Risk is transferred to the buyer when the goods are handed over to the carrier.

5. DAP (Delivered at Place):

   • Type: Any mode of transport
   • Delivery Point: Named destination
   • Seller’s Responsibilities: All costs and risks up to the point of delivery at the named destination.
   • Buyer’s Responsibilities: Unloading costs and any import duties or taxes.

6. DPU (Delivered at Place Unloaded):

   • Type: Any mode of transport
   • Delivery Point: Named destination (unloaded)
   • Seller’s Responsibilities: Delivery of goods unloaded at the named place.
   • Buyer’s Responsibilities: All risks and costs after unloading at the destination.

7. DDP (Delivered Duty Paid):

   • Type: Any mode of transport
   • Delivery Point: Named destination
   • Seller’s Responsibilities: All costs, risks, and obligations until goods are delivered at the destination, including customs duties.
   • Buyer’s Responsibilities: Minimal, primarily taking delivery.

8. FAS (Free Alongside Ship):

   • Type: Sea and inland waterway transport
   • Delivery Point: Port of shipment
   • Seller’s Responsibilities: Delivery of goods alongside the vessel at the port.
   • Buyer’s Responsibilities: All risks and costs from that point onward.

9. FOB (Free on Board):

   • Type: Sea and inland waterway transport
   • Delivery Point: Onboard the vessel
   • Seller’s Responsibilities: Delivery of goods onboard the vessel.
   • Buyer’s Responsibilities: All risks and costs once the goods are on board.

10. CFR (Cost and Freight):

    • Type: Sea and inland waterway transport
    • Delivery Point: Port of destination
    • Seller’s Responsibilities: Cost of freight to the destination.
    • Buyer’s Responsibilities: Risk transfers to the buyer once the goods are on board the vessel.

11. CIF (Cost, Insurance and Freight):

    • Type: Sea and inland waterway transport
    • Delivery Point: Port of destination
    • Seller’s Responsibilities: Cost, insurance, and freight to the destination.
    • Buyer’s Responsibilities: Risk transfers to the buyer once the goods are on board.

Conclusion

Understanding Incoterms 2020 is crucial for businesses engaged in international trade. They help in defining clear terms for shipping, reducing risks, and improving communication between buyers and sellers.