Incoterms 2020
Incoterms are international rules adopted by participants in foreign economic activity to delineate responsibility between the buyer and the seller for the risk associated with the delivery of goods. The sum of 11 rules have been adopted, each of which is designated by three capital letters explaining the conditions of delivery. The rules first appeared in 1936 and have been regularly revised since then due to changes in logistics processes and commercial practices. From January 1, 2020, a new version of the Incoterms rules is in effect, but this does not change the validity of the rules of the previous revisions.
In Incoterms 2020 there are 11 terms explaining conditions of delivery, divided into 4 groups:
- Group E (self pickup): EXW;
- Group F (the buyer pays for the carriage): FCA, FAS, FOB;
- Group C (the seller pays for the carriage): CPT, CIP, CFR, CIF;
- Group D (delivery): DAP, DPU, DDP.
List of delivery conditions in Incoterms 2020
EXW — the seller delivers and then places the goods at the disposal of the buyer at the seller’s premises or at another named place (works, factory, warehouse). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
FCA — the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
FAS — the seller delivers when the goods are placed alongside the vessel (on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
FOB — the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
CFR — the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
CIF — the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF
CPT — the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
CIP — the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
DPU — Delivered at Place Unloaded (previously named Delivered at Terminal — DAT) — the seller is responsible for clearing the goods for export and bears all risks and costs associated with delivering the goods and unloading them at the named port or place of destination. The buyer is responsible for all costs and risks from this point forward, including clearing the goods for import at the named country of destination.
DAP — the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
DDP — the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
The main difference between Incoterms 2020 and Incoterms 2010
The term DAT has been renamed to DPU to avoid confusion with the term DAP — delivery without unloading, and in order not to limit the place of delivery only to terminals.
The FCA term makes it possible to oblige the carrier to provide the seller with the Bill of lading marked «on board» — previously this condition was not strictly complied.
The term CIF, as before, provides a minimum level of insurance, but offers an opportunity to increase insurance coverage.
The term CIP obliges the seller to provide the maximum level of insurance, but it’s reducing is possible.