INCOTERMS 2020

 

Incoterms® 2020/Incoterms® 2010 modifications applicable from 1st January 2020


– Onboard bill of lading in the FCA Incoterm® rule:  a new option allows the parties to agree that the seller obtains the bill of lading.

– Difference in the level of insurance coverage between CIF and CIP: CIF = minimum insurance coverage, CIP = comprehensive risk insurance coverage.

– Possibility for the seller or the buyer to use their own means of transport under FCA, DPA, DPU and DDP without resorting to a sub-contractor. This introduces the concept of “own account transport”.

DAT (Delivered At Terminal) becomes DPU (Delivered at Place Unloaded: the place of destination can be any place. If this place is not a terminal, the seller must check that the goods are able to be unloaded at this place.

– Additions to the security requirements in transport obligations and the distribution of the resulting costs.

Advice: Don’t forget to indicate which version (2010/2020) is being used, especially at the beginning of this renewal period!

 


 

 

The purpose of Incoterms ®

 

INCOTERMS®: a contraction of "INternational COmmercial TERMS":

– for defining the reciprocal obligations of seller and buyer under an international contract of sale and purchase;

– for specifying the respective responsibilities of the parties, but do not specify the point at which title is transferred;

– for setting out how the associated costs and risks are apportioned;

– are one of the elements required for determining the customs value (cf. Publithèque douanière (in French), “La valeur en douane” (customs value).

 

Incoterms® codification


4 alphanumeric characters as follows:

3 letters referring to the Incoterm® adopted in the contract

1 figure referring to the location of the transport contract:

      • 1: location in France.
      • 2: location in another European Union Member State
      • 3: location outside the European Union


incoterms® 2020: two distinct groups


  • 7 Incoterms® rules associated with all modes of transport: EXW - FCA - CPT - CIP - DAP - DPU - DDP
  • 4 Incoterms® rules which apply to maritime transport and inland waterway transport: FAS - FOB - CFR - CIF

1. APPLICABLE TO ALL TRANSPORT MODES  

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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).
  • 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.

2. Incoterms® rules applicable only to sea or inland waterway transport:

  • 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.

  • 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.

  • 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.

  • 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.

Departure/Arrival: an essential distinction


Sales at departure (SD) = 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 (SA) = 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



 

 

VIDEOS

 

They take into account evolutions in international trade practices, the emergence of questions surrounding security

(post-9/11 attacks) and the adoption of the SAFE Framework of Standards (concerning trade security and facilitation norms).

Discover an expert’s point of view on video

(Source : lemoci.com Michel Abgrall-Levy Consultant and trainer in international Transport and Logistics) : 


 

incoterms-videos

playWhy must the seller favour the DAP?

 

playWhich incoterm should be used, notably with a Credoc?

 

playWhy should the buyer prefer FCA and not FOB?

 

playDoes FCA cover risk to goods?

 

playWhy advise against CIP and CPT?