Division of Incoterms

Incoterms 2020 are divided into four groups (C, D, E, F). The rules are classified
according to the fees, risk, responsibility for formalities, as well as issues related
to import and export.
C Group
In group C (Main Carriage Paid), the seller concludes a transport contract with
the forwarder and takes the costs. In this case, the seller is responsible for
conducting export clearance. The risk is transferred at the time of posting the
goods to the buyer. All matters arising after loading costs related to transporting,
and other events, are the buyer’s responsibility. Group C includes the following
Incoterms rules: CFR, CIF, CPT, and CIP.

D Group
Group D (Arrival) assumes that the seller is obliged to deliver the goods to a
specific place or the port of destination. This group includes such Incoterms as
DAP, DPU, and DDP.

E Group
In group E (Departure), the seller makes the goods available to the buyer at the
delivery point indicated by the seller. The seller is not obliged either to customs
or export clearance and does not bear the risk and costs of loading. In group E,
there is only Incoterms EXW.

F Group
Group F (Main Carriage Unpaid) obliges the seller to perform export customs
clearance. The seller does not pay transport and insurance costs. FCA, FAS, and
FOB belong to this group.

Incoterms 2020 – what will change?

One of the major changes is deleting the DAT rule and replacing it with a DPU.

At first, consideration was also given to removing the EXW rule, but eventually, it
remained in Incoterms 2020. The EXW rule gives the most rights to the importer,
with the least involvement of the seller.

Another important proposal for change concerns the FCA rule. Incoterms 2020
provides a market need for waybills (BLs) marked on board when applying the
FCA (Free Carrier) rule.

FCA rules
FCA is the most common Incoterms rule (approx. 40% of international
commercial operations). It is a very versatile rule that allows the delivery of goods
to various places (eg address, terminal, port, airport, etc.), which are mostly
located in the buyer’s country.
The Committee decided that the FCA rule will provide for two possible places of
delivery.

A first variant is a place belonging to the seller (e.g., his warehouse, factory,
yard). Delivery is considered complete when the goods are physically transferred
(after loading) to the care of a courier or other person designated by the buyer.

However, the second option applies to the place indicated in the contract, which
does not belong to the seller (e.g., seaport, terminal). In this situation, the
delivery is considered to have been made after the goods have been handed
over to the carrier, on the means of transport sent by the seller. It should be
noted that unloading goods from the means of transport is not the responsibility
of the seller.

Incoterms – CIF, and CIP

Incoterms 2020 aligns different levels of insurance coverage in Cost Insurance
and Freight (CIF rules) and Carriage and Insurance Paid To (CIP).

Carriage with own means of transport – FCA, DAP, DPU, DDP

Incoterms 2020 includes arrangements for carriage with own means of
transportation in FCA, Delivery at Place (DAP), Delivery at Place Unloaded
(DPU), and Delivered Duty Paid (DDP).

Incoterms 2020 – discussions

It may seem that changes to existing Incoterms are not much, but Incoterms
2020 may be easier to understand than Incoterms 2010. The commission wanted
to avoid situations where Incoterms are misinterpreted and misused, which is
often associated with costly consequences.

The significant differences between Incoterms 2010 and Incoterms 2020 include
primarily:

 Bill of lading in the FCA Incoterms rule;

 Cost-sharing issue;
 Organization of transport by the seller’s or the buyer’s means of transport,
applying the FCA, DAP, DPU, or DDP rules;
 Change of Incoterms DAT to Incoterms DPU;
 Including safety requirements in the obligation and transport costs;
 Addition of explanatory notes for Incoterms users.