Incoterms 2020 (International Commercial Terms 2020)

Incoterms 2020 (International Commercial Terms 2020) is a set of 11 international trade terms established by the International Chamber of Commerce (ICC) to define the responsibilities, obligations, and costs related to transportation, insurance, and customs in international business transactions. These terms are primarily used to reduce ambiguity and disputes in international contracts. The 2020 version of Incoterms came into effect on January 1, 2020, and remains valid until a new version is released.

1. EXW (Ex Works)

• Description: The seller delivers the goods at their premises or another specified location. From that point onward, all responsibilities, costs, and risks fall on the buyer.
• Responsibilities:
  • Seller: Delivery of goods at the specified location.
  • Buyer: Transportation costs, customs, insurance, and any other expenses.

2. FCA (Free Carrier)

• Description: The seller delivers the goods to a carrier at their premises or another specified place. From that point onward, the costs and risks fall on the buyer.
• Responsibilities:
  • Seller: Delivery of goods to the carrier.
  • Buyer: Transportation costs, customs, insurance, and any other expenses.

3. FAS (Free Alongside Ship)

• Description: The seller delivers the goods alongside the ship at the port of departure. From that point onward, the risks and costs fall on the buyer.
• Responsibilities:
  • Seller: Delivery of goods alongside the ship.
  • Buyer: Transportation costs, customs, insurance, and any other expenses.

4. FOB (Free On Board)

• Description: The seller delivers the goods onboard the ship at the port of departure. From that point onward, the risks and costs fall on the buyer.
• Responsibilities:
  • Seller: Delivery of goods on board the ship.
  • Buyer: Transportation costs, customs, insurance, and any other expenses.

5. CFR (Cost and Freight)

• Description: The seller pays the costs for transportation to the port of destination, but the risks pass to the buyer as soon as the goods are loaded onto the ship.
• Responsibilities:
  • Seller: Transportation costs to the destination port.
  • Buyer: Risks from the moment the goods are loaded, customs, insurance, and other costs.

6. CIF (Cost, Insurance and Freight)

• Description: Similar to CFR, but the seller is responsible for purchasing insurance for the goods during transportation.
• Responsibilities:
  • Seller: Transportation and insurance costs to the destination port.
  • Buyer: Risks from the moment the goods are loaded, customs, and other expenses.

7. CPT (Carriage Paid To)

• Description: The seller pays for transportation to a specified destination, but the risks pass to the buyer once the goods are handed over to the carrier.
• Responsibilities:
  • Seller: Transportation costs to the destination.
  • Buyer: Risks and other expenses.

8. CIP (Carriage and Insurance Paid To)

• Description: Similar to CPT, but the seller must also provide insurance for the goods during transit.
• Responsibilities:
  • Seller: Transportation and insurance costs to the destination.
  • Buyer: Risks and customs expenses.

9. DPU (Delivered at Place Unloaded)

• Description: This term replaces DAT (Delivered at Terminal). The seller is responsible for transportation and unloading the goods at the destination. From that point onward, the risks are the buyer’s responsibility.
• Responsibilities:
  • Seller: Transportation, costs, and unloading of goods at the destination.
  • Buyer: Customs and other expenses.

10. DAP (Delivered at Place)

• Description: The seller delivers the goods to the specified destination and covers all costs to that point, but the responsibility for customs clearance and related costs lies with the buyer.
• Responsibilities:
  • Seller: Transportation and delivery of goods to the destination.
  • Buyer: Customs and other import expenses.

11. DDP (Delivered Duty Paid)

• Description: The seller assumes full responsibility for all costs and obligations, including transportation, insurance, and customs duties, until the goods reach the final destination.
• Responsibilities:
  • Seller: All costs and responsibilities, including transportation, insurance, customs duties, and other import-related expenses.
  • Buyer: Simply receives the goods.

Key Changes in Incoterms 2020:

1. Renaming of DAT to DPU: The term “Delivered at Terminal” (DAT) has been renamed to “Delivered at Place Unloaded” (DPU). This change means that the destination no longer has to be limited to a terminal; it can be any location where the goods are unloaded.
2. More Detailed Responsibilities: Terms like FCA and CIP now provide more detailed guidance on the responsibilities of both the seller and the buyer concerning the handling of documents and the conditions of delivery.
3. Acknowledgement of Electronic Documents: Incoterms 2020 formally recognizes the use of electronic documents in transportation and delivery, facilitating digital processes.

The 2020 version of Incoterms was designed to improve clarity and reduce ambiguity in international business transactions. These changes help the parties involved better understand their responsibilities and reduce the likelihood of disputes.