INCOTERMS 2020
Incoterms are the set of international rules, agreed and revised by the International Chamber of Commerce (ICC), which help us to understand the terms in which a contract for the international sale and purchase of goods has been concluded.
Through the Incoterms we will establish criteria on the distribution of costs and the transfer of risks. Incoterms are part of, and should be considered as a price clause since their term allows us to determine the total cost of the operation.
Through the Incoterm, we will determine:
– Scope of the price of the operation
– When and where the transfer of risks on the goods takes place, from the seller to the buyer.
– The place where the goods are to be delivered
– Documents to be processed by each party and their cost
– Who arranges and pays the insurance of the goods.
The eleven Incoterms 2020 rules are presented in two different groups:
RULES FOR ANY TYPE OF TRANSPORT:
EXW – EX WORKS
FCA – FREE CARRIER
CPT – CARRIAGE PAID TO
CIP – CARRIAGE AND INSURANCE PAID TO
DAP – DELIVERED AT PLACE
DPU – DELIVERED AT PLACE UNLOADED
DDP – DELIVERED DUTY PAID
RULES FOR SEAFREIGHT AND INLAND WATERWAYS:
FAS – FREE ALONGSIDE SHIP
FOB – FREE ON BOARD
CFR – COST AND FREIGHT
CIF – COST, INSURANCE AND FREIGHT
DESCRIPTION:
EXW
Can be used for any type of transport.
The designated place must always be specified: “EXW (place of collection of goods)”.
Under EXW conditions, the selling company fulfils its commitment to deliver the goods and transfers the risks on the goods by making them available to the buying company at its own premises or at another agreed place (factory, warehouse, depot, distribution platform, etc.) without loading them on the vehicle.
FCA
Can be used for any type of transport.
The named place must always be specified: “FCA (place of collection of goods)”.
Under FCA conditions, the seller fulfils its obligations and transfers the risks by delivering the goods to the carrier contracted by the buyer at the designated place in the country of origin.
The FCA rule is multimodal and allows its application to any type of carriage used.
The use of FCA is recommended if the goods travel in a container, either full container (in which case it is not advisable to use the FOB rule), or in part load.
CPT
Can be used for any type of transport.
The named place of destination must always be specified: “CPT (named place of destination)”.
The seller is obliged to organize and assume all the costs of transporting the goods to the agreed place at destination (seaport, inland or air terminal) with the buyer, although the delivery and transfer of risks to the buyer takes place at origin, once the goods have been delivered to the transport company that the seller has hired.
CIP
Can be used for any type of transport.
The designated place must always be specified: CIP (designated place at destination)”.
The seller delivers the goods at the agreed place, assuming the transport costs and an insurance fee that covers the risks of the transportation from where the cargo is delivered to the carrier until the agreed location in destination.
The risks transfer happens at origin once the goods have been delivered to the carriage company that the seller organized
DAP
Can be used for any type of transport.
The designated place must always be specified: “DAP (designated place at destination)”.
Under DAP conditions, the seller fulfils his obligation to deliver and transfers the risks by placing the goods, on the carriage used and without unloading, at the disposal of the buyer at a designated point in the country of destination: port, factory, warehouse, depot, logistics centre, etc… The seller must assume the risks and costs arising from all stages of the shipment to the agreed place of delivery.
DPU
Can be used for any type of transport.
The agreed place of delivery must always be specified: DPU (place of delivery).
The selling company assumes the costs and risks of transport until the goods are delivered at the designated place at destination (seaport or airport terminal, logistics centre, etc.) unloaded from the vehicle used for this transport. From that moment on, the costs and risks belong to the importer.
DDP
Can be used for any type of transport.
The designated place must always be specified: “DDP (designated place at destination)”.
The selling company assumes the costs and risks until the goods, with its custom clearance done and VAT and duty values set, are delivered at the designated place of delivery (importer’s warehouse or other), without unloading them from the truck. After this, the costs and risks belong to the importer.
FAS
Can be used for seafreight shipments.
The FAS rule is preferably used when the cargo is bulk, equipment goods, heavy machinery, or large volumes.
Under FAS conditions, the selling company fulfils its obligations and transfers the risks by delivering the goods alongside the designated shipping vessel on the agreed date.
FOB
Can be used for seafreight shipments.
The boarding port must always be indicated: “FOB (named port or terminal)”.
The seller assumes the costs and risks until the goods, cleared for export, are placed on board of the vessel at seaport. Then all costs and risks (transport and others risks at destination) belong to the importer.
CFR
Can be used for seafreight shipments.
The port at destination must always be indicated: “CFR (named port at destination)”.
The seller assumes the shipping costs until the goods are placed at the port of destination, although the risks transfer to the buyer/importer takes place once the goods are on board of the vessel at origin.
Once the vessel arrives at destination, the buyer takes care of the unloading costs at seaport, unless the seller had included it already under his own transport contract.
CIF
Can be used for seafreight shipments.
The seller assumes the shipping costs until the goods are placed at the port of destination, although the risks transfer to the buyer/importer takes place once the goods are on board of the vessel at origin.
The CIF rule adds the exporter’s obligation to arrange and assume an insurance policy that covers the transport’s risks from the boarding at origin seaport.
