G loba l Tr a d e P l a t f o r m ™

Corporate Presentation

INCOTERMS
What are Incoterms?
• An incoterm represents a universal term that defines a transaction
between importer and exporter, so that both parties understand the
tasks, costs, risks and responsibilities, as well as the logistics and
transportation management from the exit of the product to the reception
by the importing country.

• Most of the parties to a contract are unaware of the different trading

practices in their respective countries. This can give rise to
misunderstandings, disputes and litigation, with all the waste of time and
money that this entails. To remedy these problems, the International
Chamber of Commerce first published in 1936 a set of international rules
for the interpretation of trade terms. These rules were known as
“Incoterms 1936”.

• It is important for buyer and seller to pre-define the responsibilities and

obligations for transport of the goods Incoterms tell the parties what to
do with respect to carriage of the goods from buyer to seller, and export
& import clearance. They also explain the division of costs and risks
between the parties (who would bear which cost).
 SCOPE OF INCOTERMS
• As has always been underlined by ICC, Incoterms deal only with the relation between sellers and buyers under the
contract of sale, and, moreover, only do so in some very distinct respects.

• While it is essential for exporters and importers to consider the very practical relationship between the various
contracts needed to perform an international sales transaction – where not only the contract of sale is required, but
also contracts of carriage, insurance and financing – Incoterms relate to only one of these contracts, namely the
contract of sale.

• Nevertheless, the parties’ agreement to use a particular Incoterm would necessarily have implications for the other.
Contracts. To mention a few examples, a seller having agreed to a CFR- or CIF-contract cannot perform such a contract
by any other mode of transport than carriage by sea, since under these terms he must present a bill of lading or other
maritime document to the buyer which is simply not possible if other modes of transport are used.

• Second, Incoterms deal with several identified obligations imposed on the parties – such as the seller’s obligation to
place the goods at the disposal of the buyer or hand them over for carriage or deliver them at destination- and with the
distribution of risk between the parties in these cases.
 Revision of INCOTERMS

• The International Chamber of Commerce (ICC) has recently

1936 1953
released the updated Incoterms 2020, which came into effect
1967 on January 1, 2020. These revised trade terms are vital for
businesses engaged in international trade, as they define the
responsibilities of buyers and sellers, and help to avoid disputes
1976 and misunderstandings.

• While the fundamental explanations of Incoterms 2020 remain

ICC first Published the same, there have been some significant updates and
Incoterms in 1980 changes, the most noteworthy of which is the introduction of a
1936. They revise new term called DPU (Delivered at Place Unloaded), which
these terms every replaces the old term DAT (Delivered at Terminal).
10 years
• In the previous version of Incoterms, i.e., Incoterms 2010, both
1990 CIF and CIP required insurance coverage under Institute Cargo
Clause C. However, under the new Incoterms 2020, CIP now
requires insurance coverage that complies with Institute Cargo
2000 Clause A.
2020 2010
 INCOTERMS 2020- Changes & Implementation

• In New Incoterm DPU Replaces DAT - To eliminate the confusion that arose in the past, the Incoterm DAT (Delivered
at Terminal) has been replaced with the new term DPU (Delivered at Place Unloaded) in the latest Incoterms 2020.
The previous term required delivery at a terminal, but the word "terminal" caused confusion. The new DPU term
covers any place, whether covered or not, and is intended to provide greater clarity and flexibility in defining the
place of delivery.

• Understanding the Differences in Insurance Coverage Levels between CIF and CIP -Out of all the Incoterms, only CIF
and CIP obligate the seller to procure insurance in the buyer's name. In Incoterms 2010, both CIF and CIP required
insurance coverage under Institute Cargo Clause C. However, with the new Incoterms 2020, CIP necessitates
insurance coverage that aligns with Institute Cargo Clause A, which provides a more comprehensive level of
insurance suitable for manufactured goods, whereas Clause C would typically apply to commodities.
• CIF remains the same, it requires ‘Institute Cargo Clause C’ insurance cover – Number of listed risks,
subject to itemized exclusions.
• CIP now requires an upgraded ‘Institute Cargo Clause A’ insurance cover – All risk, subject to itemized
exclusions.
• Overview of Updated Costs and Listings-The previous version of Incoterms, i.e., Incoterms 2010, led to cost-related
issues for some parties. Carriers were changing their pricing, which resulted in new terminal handling charges being
charged to sellers. To address this, Incoterms 2020 has introduced more detailed information about costs, which are
now listed under the A9/B9 sections of the rule. This update clearly outlines which party is responsible for each cost,
making it easier for parties to understand and manage their expenses.
 INCOTERMS 2020- Changes & Implementation

• Increased Security Requirements, Allocations and Costs-In today's world, security requirements are becoming more
stringent, and the Incoterms 2020 rules have been updated to provide more information on security allocations and
associated costs. The updated rules have added security allocations to A4/A7 for each Incoterm® rule, and the costs
have been included in A9/B9

• Use of Buyer’s and Seller’s Own Transport -The previous version of Incoterms, i.e., Incoterms 2010, assumed that all
transportation of goods would be carried out by a third-party transport provider. However, the updated Incoterms
2020 now consider that some buyers and sellers are using their own means of transport, such as trucks or planes, for
delivery. The new rules allow for the provision of the buyer or seller's own means of transport, which recognizes this
change in practice.
• Under FCA rule in the new Incoterms 2020 allows for the buyer to use their own means of transport.
• The DAP, DPU, and DDP rules allow the seller to use their own means of transport.

• FCA, FOB and the Bill of Lading Process -The previous Incoterms 2010 needed some changes to promote the use of
the FCA Incoterm among exporters of containerized goods. Despite FCA being the appropriate Incoterm for most
parties, many continued to use FOB because they preferred the contract to be under a Letter of Credit. Even
experienced sellers preferred FOB for this reason.
 The Structure of INCOTERMS

E F C

In 1990, for ease of understanding, Continuing with the “C”-terms

the terms were grouped in four
basically different categories;
namely starting with the term
whereby the seller only makes the
goods available to the buyer at the
seller’s own premises (the “E”-term
Ex works);
Followed by the second group
where the seller must contract for
whereby the seller is called upon to
carriage, but without assuming the
deliver the goods to a carrier
risk of loss of or damage to the
Appointed by the buyer (the “F”-
goods or additional costs due to
terms FCA, FAS and FOB);
events occurring after shipment and
dispatch (CFR,CIF, CPT and CIP); and,

Finally, the “D”-terms whereby the seller has to bear all costs and risks needed to bring the
goods to the place of destination (DAP,DPU and DDP). The following chart sets out this
classification of the trade terms
SUMMARY OF INCOTERMS
EXW – Ex Works
• Seller has the minimum obligation
• Seller must keep cargo ready at his factory or agreed place
• Buyer is responsible to carry out all task related to import and export clearance
• Carriage and insurance is to be arranged by the buyer
FCA – Free Carrier
• Seller must arrange the first carrier (truck, ship, aeroplane, railways)
• Seller is responsible for arranging delivery to carrier or named destination (terminal or transport hub, freight
forwarders warehouse etc) by the buyer
• Seller is responsible for export clearance
• The buyer assumes all the cost and risk after the goods are delivered at the name place
CPT-Carriage Paid To
• Seller is responsible for the freight and shipping of the goods until they arrive at the terminal or warehouse in
the country of the buyer
• Seller is not responsible for providing insurance of the goods when they are shipped
• Seller is also responsible for clearing the goods for export at the port or terminal
CIP – Carriage and Insurance Paid
• Seller is responsible to pay for the first carriage and insurance to the named place
• Seller is not responsible after the goods have been onboarded on vessel
• Buyer is responsible for additional insurance required during the carriage of goods
DPU-Delivered at Place Unloaded "At named place unloaded"
•Seller pays for carriage to the terminal, except for costs related to import clearance
•He assumes all risks up to the point where that goods are unloaded at the terminal
•Used with any transportation mode
DAP – Delivered At Place (named place of destination)
• Seller pays for carriage to the named place, except for costs related to import clearance
• Assumes all risks prior to the point that the goods are ready for unloading by the buyer.
DDP-Delivered Duty Paid
• Seller has the maximum obligation.
• Seller is unable to directly or indirectly to obtain the import license.
• Seller also will bear all costs & risks of carrying out customs formalities
• Payment of duties, taxes & customs fees.
FAS – Free Alongside Ship
• Seller delivers the goods alongside the vessel named at port
• Seller is responsible for the first carrier (ship, truck, sea, air)
• Seller is responsible for the export clearance
• Buyer is responsible for getting the goods/cargo loaded to the vessel/carrier and cost involved thereafter.
FOB – Free On Board
• Seller delivers the goods
• Seller is responsible for loading the goods on the vessel
• Seller is responsible for the export clearance
• Risk is transferred to the buyer after the goods are loaded on the vessel and bears all the cost thereafter.
CFR – Cost and Freight
• Seller pays the cost and freight necessary to bring the goods to named destination port Seller is responsible for
the custom clearance
• Buyer is responsible for any risk or additional costs arising due to events occurring after delivery
CIF-Cost Insurance Freight
• Seller pays the cost and freight necessary to bring the goods to named destination port
• Seller is responsible for the custom clearance
• Seller pays for marine insurance for carriage of goods to the named destination port
• Buyer is responsible for any risk or additional costs arising due to events occurring after delivery
G l o b a l Tr a d e P l a t f o r m ™

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