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Incoterms Guide

WHAT IS

INCOTERMS

  • International Chamber of Commerce (ICC) has launched Incoterms® 2020 that contains the rules for use of the 11 Incoterms® trade terms. It takes into account the latest developments in commercial practice and updates the rules to make them more accessible and easier to use.
  • The new rules are effective on 1 January 2020. As of this date, all sales contracts should make reference to the Incoterms® 2020 rules as the latest version of the Incoterms rules.
  • The eleven rules are organized in a set of three-letter trade terms. Each of the terms describes the tasks, costs, and risks associated with the delivery of goods from the sellers to the buyers.

Differences between

INCOTERMS® 2010 AND 2020:

1
The Incoterms®FCA (Free Carrier) now provides the additional option to make an onboard notation on the Bill of Lading prior loading of the goods on a vessel.
2
The costs now appear centralized in A9/B9 of each Incoterms®
3
CIP now requires at least an insurance with the minimum cover of the Institute Cargo Clause (A) (All risk, subject to itemized exclusions).
4
CIF requires at least an insurance with the minimum cover of the Institute Cargo Clause (C) (Number of listed risks, subject to itemized exclusions).
5
The Incoterms®rules Free Carrier (FCA), Delivered at Place (DAP), Delivered at Place Unloaded (DPU) and Delivered Duty Paid (DDP) now take into account that the goods may be carried without any third-party carrier being engaged, namely by using its own means of transportation.
6
The rule Delivered at Terminal (DAT) has been changed to Delivered at Place Unloaded (DPU) to clarify that the place of destination could be any place and not only a “terminal”.
7
The Incoterms® 2020 now explicitly shifts the responsibility of security-related requirements and ancillary costs to the seller.

INCOTERMS RULES 2020

FOR ANY MODE(S) OF TRANSPORTATION

EX WORKS (EXW)

Seller places goods at the disposal of the buyer at the seller’s premises or another named location. Seller will not contract for the loading of goods, collecting vehicles or clearing goods through customs.

FREE CARRIER (FCA)

Seller delivers the goods to the carrier or named person at the seller’s premises or another named location. Seller is required to clear goods through export only.

CARRIAGE PAID TO (CPT)

Seller delivers the goods to the carrier or named person at an agreed location. The seller contracts to pay the costs of carriage to the destination. Buyer assumes all risks at first transfer of goods. The seller is required to clear goods through export only.

CARRIAGE AND INSURANCE PAID TO (CIP)

Seller delivers the goods to the carrier or named person at an agreed location. The seller contracts to pay for carriage to the agreed location and cost of insurance. The seller is required to clear goods through export only.

DELIVERED AT TERMINAL (DAT)

Seller delivers and unloads goods at a named terminal. The seller assumes all risks associated with delivering and unloading the goods at the terminal. The seller is required to clear goods through export only.

DELIVERED AT PLACE UNLOADED (DAP)

Seller pays for carriage to the named place and assumes all risks prior to the point that goods are ready for unloading by the buyer. The seller is required to clear goods through export only.

DELIVERED DUTY PAID (DDP)

Seller pays for carriage, delivery, and customs clearance at destination. The seller is also responsible for any and all applicable taxes and duties. Seller assumes responsibility only after all goods are cleared and duties and taxes paid.

INCOTERMS RULES

FOR SEA AND INLAND WATERWAY TRANSPORTATION

FREE ALONGSIDE SHIP (FAS)

Seller delivers goods placed alongside a vessel at the named port nominated by the buyer. The seller bears all costs associated with transport until the goods are alongside the vessel, buyer assumes risks from that point forward. The seller is required to clear goods through export only.

FREE ON BOARD (FOB)

Seller delivers and loads the goods on the vessel nominated by the buyer. The seller bears all costs associated with transportation. All risks are assumed by the buyer after the point of delivery and unloading. The seller is required to clear goods through export only.

COST AND FREIGHT (CFR)

Seller delivers the goods on board the vessel. The seller contracts to pay for the cost of freight to move the goods to the port of destination. Risks are passed at the point of delivery on board the vessel. The seller is required to clear goods through export only.

COST INSURANCE AND FREIGHT (CIF)

Seller delivers the goods on board the vessel. The seller contracts for the cost of freight to move the goods to the port of destination. The seller also contracts and pays for the cost of insurance. The seller is required to clear goods through export only.

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