INCOTERMS® 2020

          What are Incoterms®?

              Incoterms® (International Commercial Terms) are the standardised international rights and obligations for seller and buyer when international transport is involved. These standard sets of global trading terms and conditions are created and published by the International Chamber of Commerce to help traders, lawyers, shippers and insurance company's when goods are bought, sold and transported.  Incoterms® are essential when trading in the modern world.

The eleven rules are divided into two groups. The first seven rules apply to all modes of transport, while the last four rules apply to sea and inland waterway transport only.

The rules for any transport mode you use include:

• Ex Works (EXW)
• Free Carrier (FCA)
• Carriage Paid to (CPT)
• Carriage and Insurance paid to (CIP)
• Delivered At Place (DAP)
• Delivered at Place Unloaded (DPU) ^NEW
• Delivered Duty Paid (DDP)

The rules for sea and inland waterway transport only include:

• Free Alongside Ship (FAS)
• Free On Board (FOB)
• Cost and Freight (CFR)
• Cost Insurance and Freight (CIF)

             1.     EXW – Ex Works

The seller delivers the goods to the buyer

• when it places the goods at the disposal of the buyer at a named place (like a factory or warehouse), and
• that named place may or may not be the seller’s premises.

For delivery to occur, the seller does not need to load the goods on any collection vehicle, nor does it need to clear the goods for export, where such clearance is applicable.

Risk transfers from seller to buyer when the goods are placed (not loaded) at the buyer’s disposal. 

             2.     FCA – Free Carrier

The seller delivers the goods to the buyer in one or other two ways.

• First, when the named place is the seller’s premises, the goods are delivered 

                      - when they are loaded on the means of transport arranged by the buyer.

• Second, when the named place is another place, the goods are delivered

                      - when, having been loaded on the seller’s means of transport,

                      - they reach the named other place and

                      - are ready for unloading from that seller’s means of transport and

                      - at the disposal of the carrier or another person nominated by the buyer.

Whichever of the two is chosen as the place of delivery, that place identifies where risk transfers to the buyer and the time from which costs are for the buyer’s account.

The seller is responsible for export clearance, while the buyer assumes all risks and costs after the goods have been delivered to the named place.

             3.     CPT – Carriage Paid To

The seller delivers the goods – and transfer the risk – to the buyer

• by handing them over the carrier 
• contracted by the seller
• or by procuring the goods so delivered.
• The seller may do so by giving the carrier physical possession of the goods in the manner and the place appropriate to the means of transport used.

Risk transfers from seller to buyer when the goods are delivered to the buyer by handing them over to the carrier.

             4.     CIP – Carriage and Insurance Paid To

The seller delivers the goods – and transfers the risk – to the buyer

• by handing them over to the carrier
• contracted by the seller
• or by procuring the goods so delivered.
• The seller may do so by giving the carrier physical possession of the goods in the manner and the place appropriate to the means of transport used.

The seller must also contract for insurance cover against the buyer’s risk of loss or damage of the goods from the point of delivery to at least the point of destination. Risk transfers from seller to buyer when the goods are delivered to the buyer by handing them over to the carrier.

             5.     DAP – Delivered at Place

The seller delivers the goods - and transfers risk – to the buyer

• 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 or
• at the agreed point within that place, if any such point is agreed.

The seller bears all risks involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterms rule, therefore, delivery and arrival at destination are the same. Risk transfers from seller to buyer when goods are transferred to the point of delivery/destination.

             6.     DPU – Delivered at Place Unloaded

The seller delivers the goods – and transfers risk – to the buyer

• when the goods
• once unloaded from the arriving means of transport,
• are placed at the disposal of the buyer
• at a named place of destination or
• at the agreed point within that place, if any such point is agreed.

The seller bears all risks involved in bringing the goods to and unloading them at the named place of destination. In this Incoterms rule, therefore, the delivery and arrival at destination are the same. DPU is the only Incoterms rule that requires the seller to unload goods at destination. 

Risk transfers from seller to buyer when goods are transferred and unloaded to the point of delivery/destination.

             7.     DDP – Delivered Duty Paid

The seller delivers the goods to the buyer

• 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 or at the agreed point within that place, if any such point is agreed.

The seller bears all risks involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterms rule, therefore, delivery and arrival at destination are the same.

Risk transfers from the seller to buyer when goods are transferred and unloaded to the point of delivery/destination (including costs for custom clearance).

             8.     FAS – Free Alongside Ship

The seller delivers the goods to the buyer

• when the goods are placed alongside the ship (e.g. on a quay or a barge)
• nominated by the buyer
• at the named port of shipment
• or when the seller procures goods already so delivered.

The risk of loss or damage to the goods transfers when the goods are alongside the ship, and the buyer bears all costs from the moment onwards.

            9.     FOB – Free On Board

The seller delivers the goods to the buyer

• 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 or damage to the goods transfers when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

          10.  CFR – Cost and Freight

The seller delivers the goods to the buyer

• on board the vessel
• or procures the goods already so delivered.

The risk of loss of or damage to the goods transfers when the goods are on board the vessel, such that the seller is taken to have performed its obligation to deliver the goods whether or not the goods actually arrive at their destination in sound condition, in the stated quantity or, indeed, at all. In CFR, the seller owes no obligation to the buyer to purchase insurance cover: the buyer would be well-advised therefore to purchase some cover for itself.

         11.  CIF – Cost Insurance and Freight

The seller delivers the goods to the buyer

• on board the vessel
• or procures the goods already so delivered.

The risk of loss of or damage to the goods transfers when the goods are on board the vessel, such that the seller is taken to have performed its obligation to deliver the goods whether or not the goods actually arrive at their destination in sound condition, in the stated quantity or, indeed, at all. The seller must contract for insurance cover against the buyer’s risk of loss of or damage to the goods from port of shipment to at least the port of destination.

                 For more information on the Incoterms® 2020 please visit the website of the International Chamber of Commerce.