INCOTERMS 2020

The purpose of INCOTERMS

INCOTERMS: a contraction of "INternational COmmercial TERMS", INCOTERMs define the reciprocal obligations of seller and buyer under an international contract of sale and purchase. It specifies the respective responsibilities of the parties, but do not specify the point at which title is transferred. INCOTERMS set out how the associated costs and risks are apportioned.

INCOTERMS 2020: two distinct groups

• The INCOTERMS 2020 are applicable from 1^st January 2020.
• It is an update of the 2010 version and the eleven INCOTERMS have been maintained and are classified into two distinct groups:

Rules associated with all modes of transport: EXW - FCA - CPT - CIP - DAP – DPU - DDP

Rules which apply to maritime transport and inland waterway transport: FAS - FOB - CFR – CIF

2020 Main changes:

• The 2020 version offers two forms of presentation: Apart from the classic presentation, the 2020 version proposes a “horizontal” presentation where each of the 10 rules is presented INCOTERM by INCOTERM, making it possible to better appreciate the differences between each rule.
• The advisory notes which already existed in the 2010 version are now included in the 2020 INCOTERM rules.
• New explanations are also included, for example: “How to choose the INCOTERM rule which is the most appropriate for a given transaction.” Or, “How to structure the sales contract with other contracts such as the transport or insurance contract.”
• INCOTERM DAT (Delivered at Terminal) becomes DPU (Delivered at Place Unloaded): it becomes an agreed destination country INCOTERM place. It’s basically the same INCOTERM but the DPU is said to be unloaded unlike the DAP which is not unloaded. The DPU is also the only INCOTERM among the 11 which is unloaded.
• INCOTERM CIP has been modified: INCOTERM CIP 2010 was limited to taking out a minimum insurance policy. From now on, the insurance coverage must be a comprehensive risk policy.
• INCOTERM CIF alone allows for a minimum insurance policy. Attention! Differential treatment of insurance for CIP and CIF.
• INCOTERM FCA: offers an additional option for the bill of lading: the parties may agree that the seller obtains the bill of lading.

APPLICABLE TO ALL TRANSPORT MODES 

1. EXW: The seller has fulfilled his obligation to deliver when the goods are made available on his own premises (workshop, factory, warehouse, etc.). The buyer bears all the costs and risks involved in transporting the goods from the seller’s premises to the desired destination. This term represents the minimum obligation for the seller. To be used essentially in national exchanges
2. FCA: The seller has fulfilled his obligation to deliver when he has delivered the goods, cleared for export, to the carrier nominated by the buyer at the named place. The buyer chooses the transport method and carrier. He pays for the main transport. Costs and risks are transferred at the moment the carrier takes charge of the goods. The Bill of Lading option allows the buyer and the seller to agree that the seller can obtain the Bill of Lading.
3. CPT: The seller chooses the transport method and pays the cost of carriage for the goods to the named destination. He also clears the goods for export. The risks transfer from the seller to the buyer at the point where the goods are delivered to the first carrier.
4. CIP: The seller has the same obligations as under CPT, but in addition must provide a comprehensive insurance policy. The seller clears the goods through customs for exportation.
5. DAP: The seller must deliver the goods by placing them at the disposal of the buyer on the means of transport arriving ready to be unloaded at the agreed place, if specified, at the named place of destination on the agreed date or within the agreed time. The seller takes responsibility for the risks related to the transport of the goods to the place of destination.
6. DPU: The seller has fulfilled its obligations when the goods are placed at the disposal of the buyer, unloaded from the means of transport at the agreed place of destination (this place may be a terminal, a warehouse or the buyer’s premises).
7. DDP: Whilst the EXW term represents the minimum obligation for the seller, DDP represents the maximum. The seller is responsible for everything, including import customs clearance and the payment of all applicable duties and taxes. Costs and risks are transferred at the moment of delivery to the buyer. The costs and risks of unloading are borne by the buyer.

APPLICABLE ONLY TO SEA OR INLAND WATERWAY TRANSPORT:

1. FAS: The seller has fulfilled his obligation to deliver when the goods have been placed alongside the vessel nominated by the buyer at the named port of loading. The buyer must bear all the costs and risks of loss or damage the goods could be victim to. The term FAS requires the seller to clear the goods for export.
2. FOB: The seller has fulfilled his obligation to deliver when the goods are on board the vessel nominated by the buyer at the named port of shipment. The seller clears the goods for export. 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.
3. CFR: The seller must choose the vessel and pay the costs and freight necessary to bring the goods to the named port of destination. The export formalities are the responsibility of the seller. The transfer of risk occurs at the moment when the goods are placed on board the vessel.
4. CIF: The seller is bound by the same obligations as for CFR but must also procure minimum marine insurance. The export formalities are the responsibility of the seller. The sea voyage, on the sea or inland waterways transport, are at the risks and perils of the buyer. The transfer of risk of loss of or damage to the goods occurs when the goods are loaded on board the vessel.

 An essential distinction (departure/arrival)

7 Multimodal INCOTERMs and 4 maritime INCOTERMs

Sales at departure are covered by 8 INCOTERMs: On the main transport, the goods are transported at the risk and peril of the buyer.

• Multimodal INCOTERMs– Sale at departure: EXW / FCA / CPT / CIP
• Maritime INCOTERMs – Sale at departure: FAS / FOB / CFR / CIF

Sales at arrival are covered by 3 INCOTERMs: On the main transport, the goods are transported at the risk and peril of the seller.

• Multimodal INCOTERMs - Sale at arrival: DAP / DPU / DDP