INCOTERMS 2020
Incoterms 2020 is issued by International Chamber of Commerce (ICC) in 2020. Since 1936, International Chamber of Commerce (ICC) has issued a set of three-letter trade terms for sale and purchase contracts. These terms, called “Incoterms”, clarify the obligations between buyers and sellers
Incoterms consists of 11 three-letter terms, which can be divided into the following groups:
Group C terms: The seller arranges and pays the freight to a designated location, which indicates the destination of the goods
Incoterms consist of 11 three-letter terms, which can be divided into the following groups:
Group C terms of Incoterms 2020:
The seller arranges and pays the freight to the designated location, which specifies the destination of the goods
CIP
“Freight and insurance paid to (…designated destination)” means that the seller delivers the goods to its designated carrier, but the seller must also pay the freight for the goods to the destination, that is, the buyer bears the cost after the seller delivers All risks and additional costs. However, according to CIP terminology, the seller must also provide insurance against the risk of loss or damage to the buyer’s goods in transit.
CPT
“Freight to (…designated place)” means that the seller delivers the goods to its designated carrier, but the seller must also pay the freight for the goods to the destination. That is, the buyer bears all risks and other costs after delivery.
CIF
“Cost, insurance and freight” means that the seller completes the delivery when the goods pass the ship’s rail at the port of shipment.
CFR
“Cost and freight (…designated port of destination)” means that the seller completes the delivery when the goods pass the ship’s rail at the port of shipment, and the seller must pay the freight and expenses required to transport the goods to the designated port of destination. However, the risk of loss or damage to the goods after delivery, as well as any additional costs due to various events, is transferred from the seller to the buyer.
Group D terms of Incoterms 2020
The seller arranges and pays the freight to a designated location, which indicates the destination and place of delivery of the goods
DEQ
“Delivery at the port of destination” means that the seller delivers the goods to the buyer at the designated port of destination for disposal, and completes delivery without going through import customs clearance procedures. The seller shall bear all risks and expenses of transporting the goods to the designated port of destination and unloading to the dock.
DES
“Delivery on board at the port of destination (…designated port of destination)” means that at the designated port of destination, the goods are handed over to the buyer for disposal on the ship, but the seller completes the delivery without going through the import customs clearance procedures. The seller must bear all risks and expenses before the goods are shipped to the designated port of destination for unloading. If the parties want the seller to bear the risks and costs of unloading, the DEQ term should be used.
DDP
“Delivery after duty (…designated destination)” means that the seller completes the import customs clearance procedures at the designated destination, and delivers the goods that have not been unloaded on the delivery vehicle to the buyer to complete the delivery. The seller must bear all risks and costs of transporting the goods to the designated destination, including any “taxes” that should be paid at the destination when customs formalities are required (including the responsibilities and risks of customs formalities, and the payment of handling fees, Duties, taxes and other fees).
DDU
“Delivery under duty (…designated destination)” means that the seller delivers the goods to the buyer at the designated destination for disposal without going through the import formalities or unloading the goods from the delivery vehicle. goods. The seller shall bear all risks and costs of transporting the goods to the designated destination, excluding any “taxes and fees” (including the responsibilities and risks of going through the customs formalities, and paying Handling fees, duties, taxes and other fees). The buyer must bear this “tax and fee” and the costs and risks caused by the failure to timely import the goods and customs clearance procedures.
DAF
“Delivery at the border (…designated place)” means that when the seller delivers the goods that have not been unloaded on the conveyance that is still on delivery at the designated place and specific delivery point at the border before the border of the country’s customs At the disposal of the buyer, the delivery is completed when the export customs clearance procedures have been completed but the import customs clearance procedures have not been completed. The term “border” can be used for any border, including the border of the exporting country. Therefore, it is extremely important to accurately define the borders referred to by designated locations and specific delivery points
Group F terms of Incoterms 2020
:
usually paid by the seller and arranged for transportation
FOB
“Delivery on board (…designated port of shipment)” means that when the goods cross the ship’s rail at the designated port of shipment, the seller completes the delivery. This means that the buyer must bear all risks of loss or damage to the goods from that point on. The FOB term requires the seller to go through customs clearance procedures for the export of goods.
FAS
“Delivery aside the ship (…designated port of shipment)” means that the seller delivers the goods to the side of the ship at the designated port of shipment, that is, the delivery is completed. The buyer must bear all risks of loss or damage to the goods since then.
FCA
“Cargo delivery carrier (…designated place)” means that the seller only needs to deliver the goods to the carrier designated by the buyer at the designated place and complete export customs clearance procedures to complete the delivery. It should be noted that the choice of delivery location will have an impact on the obligations of loading and unloading at that location. If the seller delivers the goods at its location, the seller shall be responsible for loading, and if the seller delivers at any other location, the seller is not responsible for unloading the goods.
EXW (Factory Delivery):
The seller delivers to the buyer at the seller’s factory
EXW
“Ex-factory delivery (…designated place)” means that when the seller delivers the goods to the buyer at its location or other designated locations (such as a workshop, factory or warehouse), the delivery is completed and the seller does not go through the export customs clearance procedures Or load the goods on any means of transportation.
General Rules for the Explanation of Incoterms 2020
In September 2019, the International Chamber of Commerce released the latest version: “General Rules for the Interpretation of International Trade Terms 2020” (referred to as “Incoterms 2020).
Since the 2010 edition, the changes made to the “General Rules for the Interpretation of International Trade Terms 2020” are mainly declarative and clarifying. Substantive changes include:
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Regarding the changes to FCA (Free Carrier) terms.
In container trade, the seller delivers the goods to the buyer in the legal sense before the goods are loaded on the ship, so it may not be possible (at the time of delivery) to receive from the carrier the bill of lading required for payment under the terms of the letter of credit . Incoterm 2020’s FCA term now includes an option where the buyer can agree to instruct the carrier to issue a bill of lading to the seller. According to the CIP (Carriage and Insurance Fee Pay To) clause, the seller must now arrange a higher level of cargo insurance.
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According to Incoterms 2010, CIP sellers must purchase cargo insurance under the London Association Cargo Clause (C), which only covers a limited number of risks.
According to Incoterms 2020, CIP sellers must purchase the London Institute of Goods Clause (a), which is an “all risks” policy with exclusions.
Many terms have been modified to allow the seller or the buyer, depending on the specific circumstances, to transport by themselves.
All trade terms now clearly specify the attribution of security-related obligations. Trade terms are usually not included in transportation contracts, but are applied to many basic sales contracts that support international trade.
It is wise for buyers and sellers to clarify which version of the general rules for the interpretation of international trade terms (such as “Incoterms 2020”).
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