what are incoterms 2020The 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:

(1)Obligations

(2) Risks

(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)

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.

michael cook bcr australia

Author: Michael Cook BCR Customs & Trade Compliance Consultant

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