Incoterms 2020
Incoterms are international rules adopted by participants in foreign trade activity to delimit responsibility between buyer and seller for the risks associated with cargo delivery. There are 11 rules in total, each designated by three capital letters that explain the delivery terms. The rules first appeared in 1936 and have since been regularly republished in line with changes in logistics processes and commercial practice. A new edition, Incoterms 2020, has been in force since 1 January 2020, but this does not cancel the effect of the rules of previous editions.
There are 11 delivery terms in Incoterms 2020, divided into 4 groups:
Group E (pickup): EXW;
Group F (carriage paid by the buyer): FCA, FAS, FOB;
Group C (carriage paid by the seller): CPT, CIP, CFR, CIF;
Group D (delivery): DAP, DPU, DDP.
List of Incoterms 2020 delivery terms
EXW - the buyer collects the goods from the seller at the place of manufacture. The buyer independently performs all the necessary actions related to customs clearance.
FCA - the seller must arrange customs clearance of the goods and load them onto the transport provided by the buyer. The buyer must, through the carrier, issue the seller with a document confirming shipment of the goods for VAT refund purposes.
FAS - the seller must deliver the goods to the quay and place them alongside the specified vessel. The buyer takes receipt of the goods and arranges their loading.
FOB - the seller goes through customs clearance procedures for the cargo and places it on board the vessel, after which responsibility passes to the buyer.
CFR - the seller arranges customs clearance of the cargo, places it on board the vessel and delivers it to the port of destination. Once the cargo has been placed on board, responsibility passes to the buyer. The buyer arranges cargo insurance.
CIF - as with CFR, the seller handles customs clearance, loading, and carriage of the cargo. The difference from CFR is that the cargo is insured by the seller.
CPT - the seller arranges customs clearance, loading, and carriage of the cargo. Once the cargo has been loaded onto the carrier's transport, responsibility passes to the buyer, although delivery is paid for by the seller. The seller is not obliged to conclude an insurance contract.
CIP - the seller handles customs clearance of the cargo, loading, carriage, and unloading, after which responsibility passes to the buyer. The cargo is insured by the seller.
DPU (formerly DAT) - the seller arranges customs clearance of the cargo, transports it, and unloads it at the terminal, after which responsibility for the cargo passes to the buyer. Cargo insurance is not among the seller's obligations.
DAP - the seller arranges customs clearance of the cargo, transports it, and makes it available to the buyer for unloading, after which responsibility for the cargo passes to the buyer. Cargo insurance is not among the seller's obligations.
DDP - the seller must arrange customs clearance of the cargo and deliver it to the place specified by the buyer, unload it, and complete import customs clearance. Cargo insurance is not among the seller's obligations.
Main differences between Incoterms 2020 and Incoterms 2010
The DAT term has been renamed DPU to avoid confusion with the similar-sounding DAP (delivery without unloading) and to avoid limiting the place of delivery to terminals only.
The FCA term makes it possible to require the carrier to issue the seller a bill of lading with an "on board" notation - previously this condition was not always observed.
The CIF term, as before, provides a minimum level of insurance cover, but the cover may be increased.
The CIP term requires the maximum level of insurance cover to be provided, although there is an option to reduce it.