The Incoterms 2020® Rules explain a set of 3-letter trading terms reflecting business-to-business practice in contracts for the sale of goods.
The Incoterms® Rules describe:
(3) Responsibility for Costs – between the seller & buyer in the delivery of the goods
The Incoterms® 2020 Rules are not in themselves and no substitute for the contract of sale although they may be quoted in that contract of sale.
To be quoted correctly Incoterms® must have the following structure – term / named port, place or point / Incoterms 2020 (e.g. CIP Shanghai Incoterms 2020)
Rules for Any Mode of Transport
EXW – Ex Works –
FCA – Free Carrier – now has (2) options for the seller
CPT – Carriage Paid To
CIP – Carriage & Insurance Paid To
DAP – Delivered At Place
DPU – Delivered at Place Unloaded
DDP – Delivered Duty Paid
Rules for Sea & Inland Waterway Transport
FAS – Free Alongside Ship
FOB – Free On Board
CFR – Cost and Freight
CIF – Cost Insurance and Freight
Somewhat misleadingly & despite common usage by traders historically the latter group of terms are inappropriate for containerised cargo &/or if the goods are handed over to the carrier or container terminal before being alongside or on-board the vessel.
In that case then consider alternative terms (eg FAS = FCA ; FOB = FCA ; CFR = CPT ; CIF = CIP)
What are the Incoterms 2020® changes?
- Incoterms® 2020 provides for demonstrated market need in relation to bills of lading (BL) with an on-board notation and the Free Carrier (FCA) Incoterms® rule.
- Incoterms® 2020 aligns different levels of insurance coverage in Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP).
- Incoterms® 2020 includes arrangements for carriage with own means of transport in FCA, Delivered at Place (DAP), Delivered at Place Unloaded (DPU), and Delivered Duty Paid (DDP).
- There is a change in the three-letter name for Delivered at Terminal (DAT) to DPU.
- Incoterms® 2020 includes security-related requirements within carriage obligations and costs.
Contact the friendly team at BCR for further information.
Author: Michael Cook BCR Customs & Trade Compliance Consultant