INCOTERMS 2020

Agenda
• What the ICC is?
• INCOTERMS – what does it mean?
• How to use the INCOTERMS?
• Main features of INCOTERMS rules
• Rules for any mode(s) of transport
• Rules for sea and inland waterway transport
 What the ICC is?

• The International Chamber of Commerce (ICC)

• the largest, most representative business
organization in the world
• a world network of national committees keeps the
ICC International Secretariat in Paris
 One of the first initiatives of the International
Chamber of Commerce (ICC) to facilitate
international trade was to explore the understanding
of trade terms in the 1920s and to publish the firts
results of their study in 1923:
• 6 common trade terms, used by 13 different countries
 THE RULE
• the course of action that you should take in order to do
something – GUIDELINE
• the way of behaving or taking part in something –
CONVENTION
• is right

• acceptable

• most people agree with it

 INCOTERMS
what does it mean?

• International Commercial Terms

• a series of pre-defined commercial terms published
by the International Chamber of Commerce (ICC)
• widely used in international commercial transactions
 INCOTERMS
what does it mean?
• a set of three-letters trade terms reflecting bussiness
–to-bussines practice in contracts for the sale of goods
• the Incoterms rules describe mainly:
– the tasks
– costs and
– risks involved in the delivery of goods from sellers to buyers
 The history of INCOTERMS
• 1921 – the Incoterms rules began development with the
forming of the idea by the International Chamber of
Commerce

• 1928 – second published study with interpretation of trade

terms used in more than 30 countries

• 1936 – the first set of the Incoterms rules was published

• the first set remained in use for almost 20 years
 The history of INCOTERMS

• 1953 – the second publication

• additional amendments and expansions followed in 1967,
1976, 1980, 1990, 2000 and 2010

• January 1, 2020 – the ninth and current version

of the Incoterms rules – Incoterms 2020
 How to use the INCOTERMS?
• if we want the Incoterms 2020 to apply to our contract of sale, we
have to make it clear in the contract, through such words:

„CIF Hamburg, Incoterms 2020”

• the chosen Incoterms rule can work only, if the parties of contract
name a place or port and specify this place or port as precisley as
possible:

„FCA 38 Cours Albert1er, Paris, France Incoterms 2020”

 How to chose the appropriate
INCOTERMS rule?

The chosen Incoterms rule has to be appropriate:

• to the goods
• to the means of their transport
• to whether the parties intend to put additional obligations, such as
obligation to organize carriage or insurance, on the seller or on the buyer
How to use the INCOTERMS?

Remember that Incoterms rules

dont give you
a complete contract of sale!
 INCOTERMS rules do say!

• which party to the sales contract has the obligation

to make carriage or insurance arrangements
• when the seller delivers the goods to the buyer
• which costs each party is responsible for
 INCOTERMS rules say nothing about!

• the price to be paid and the method of the payment

• transfer of ownership of the goods
• consequences of a breach of contract
 Main features of INCOTERMS rules

11 Incoterms rules are presented in two classes:

1. rules for any modes of transport

2. rules for sea and inland waterway transport

 Main features of INCOTERMS rules

• Guidance Notes
• before each Incoterms rule you will find a Guidance Note
• Guidance Notes explain the fundamentals of each Incoterms
rule:
– when it should be used,

– when risk passes,

– how costs are allocated between seller and buyer

 Variants of INCOTERMS rules

• sometimes the parties want to alter an Incoterms rule

• Incoterms 2020 rules don’t prohibit such alteration

• there are dangers in so doing

• in order to avoid any unwelcome surprises, the parties

of contract would need to make the indended effect of
such alterations extremely clear in their contract
 Terms used in the INCOTERMS 2010

• the seller’s obligations and the buyer’s obligations

can be carried out:
– personally by the seller or by the buyer, or
– sometimes through intermediaries such as carriers, freight
forwarders or
– other persons nominated by the seller or the buyer for a
specific purpose
 Terms used in the INCOTERMS 2010

• CARRIER – the party with whom carriage is contracted

• CUSTOMS FORMALITIES – may include documentary,

security, information or physical inspection obligations
• DELIVERY – this concept is used to indicate where the
risk of loss of or damage to the goods passes from the
seller to the buyer
 Terms used in the INCOTERMS 2010

• DELIVERY DOCUMENT – a document used to prove that the

delivery has occured: a transport document or corresponding
electronic record
• PACKAGING:

– the packaging of the goods to comply with any

requirements under the contract of sale
– the packaging of the goods so that they are fit for
transportation
 Rules
for any mode(s) of transport

• EXW • DAP
• FCA • DPU
• CPT • DDP
• CIP
 EXW

Ex Works (named place of delivery)

• the seller delivers, when it places the goods at the
disposal of the buyer at the seller’s premises or at
another named place (works, factory, warehouse..)
• represents the minimum obligation for the seller
 EXW

the seller’s obligations

• to provide the goods and the commercial invoice in confirmity
with the contract of sale
• to deliver the goods by placing them at the disposal of the buyer
at the agreed point, at the named place of delivery, not loaded on
any collecting vehicle, on the agreed date
• no obligation to make a contract of carriage and a contract of
insurance
 EXW

the seller’s obligations

• to bear the risks of loss of or damage to the goods until they have been
delivered to the agreed point

• to pay all costs relating to the goods until they have been delivered

• at its own expense, to package the goods

• to provide the buyer , at the buyer’s request, risk and expense,

assistance in obtaining any export licence, other official authorization
necessary for the export of the goods
 EXW

the buyer’s obligations

• to pay the price of the goods as provided in the contract of
sale
• to take the delivery of the goods if it has been complied
with the contract of sale
• to pay all costs relating to the goods from the time they
have been delivered
 EXW

the buyer’s obligations

• to obtain any export and import licences and other official
authorization and carry out all customs formalities for the export
of the goods
• to pay all duties, taxes and other charges, costs of carrying out
customs formalities payable upon export
• to bear all risks of loss of or damage to the goods from the time
they have been delivered
 FCA

Free Carrier (named place of delivery)

• the seller hands over the goods, cleared for export, into the
disposal of the first carrier (named by the buyer) at the
named place
• the seller pays for carriage to the named point of delivery
• risk passes when the goods are handed over to the first
carrier
 FCA

the seller’s obligations

• to delivere the goods to the carrier or another person
nominated by the buyer at the agreed point and at the
agreed date
• to obtain, at its own risk and costs, any export licence
and other official authorization and carry out all customs
formalities necessary for the export of goods
 FCA

the seller’s obligations

• no obligation to make contract of carriage

• no obligation to make a contract of insurance

• to bear all risks of loss of or damage to the goods until they

have been delivered to the first carrier nominated by the buyer
• to pay all costs relating to the goods until they have been
delivered
 FCA

the buyer’s obligations

• to pay the price of the goods
• to obtain, at its own risk and costs, any import
licence and other official authorization and carry out
all customs formalities necessary for the import of
goods and for their transport through any country
 FCA

the buyer’s obligations

• to contract at its own expense for the carriage of the
goods from the named place of delivery
• to bear all risks of loss of or damage to the goods from
the time they have been delivered
• to pay all costs relating to the goods from the time they
have been delivered
 CPT

Carriage Paid To

(named place of destination)

• the seller pays for carriage

• risk transfers to buyer upon handing goods over to the

first carrier and NOT when the goods reach the place of
destination
 CPT

the seller’s obligations

• to contract, on its expense, for the carriage of the goods
from the agreed point of delivery to the named place of
destination
• no obligation to make a contract of insurance
• to deliver the goods by handing them over to the
contracted carrier
 CPT

the seller’s obligations

• to bear all risks of loss of or damage to the goods until they
have been delivered to the first carrier
• to pay all costs relating to the goods until they have been
delivered
• to pay the freight, including costs of loading the goods and
any charges for unloading at the place of destination, costs of
customs formalities necessary for export
 CPT

the buyer’s obligations

• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the first
carrier
 CIP

Carriage and Insurance Paid To

(named place of destination)

• seller pays for carriage and insurance to the named
destination point
• seller contracts for insurance cover against the buyer’s
risk of loss of or damage to the goods during the
carriage
 CIP

• seller is required to obtain insurance only on

minimum cover
• risk passes when the goods are handed over to
the first carrier
 CIP

the seller’s obligations

• to deliver the goods by handing them over to the first carrier

• to contract for the carriage of the goods to the named place

of destination
• to bear all risks of loss of or damage to the goods until they
have been delivered to the first carrier
 CIP

the seller’s obligations

• must obtain at its own expense cargo insurance
• must provide the buyer with the insurance policy or
any other evidence of insurance cover
 CIP

the buyer’s obligations

• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the first
carrier
 DAP

Delivered at Place
(named place of destination)
• seller delivers when the goods are on the arriving means of
transport, ready for unloading at a named place of destination
• seller pays for carriage to the named place, except for costs
related to import clearance,
• seller assumes all risks prior to the point that the goods are
ready for unloading by the buyer
 DAP

the seller’s obligations

• must deliver the goods by placing them at the disposal of the

buyer on the arriving means of transport ready for unloading
at the agreed point, at the named place of destination on the
agreed time
• must contract at its own expense for the carriage of the
goods to the named place of destination
 DAP

the seller’s obligations

• to bear all risks of loss ofor damage to the goods until they
have been delivered to the named place
• to pay costs of customs formalities in export, all duties, taxes,
charges payable upon export and the costs for their transport
through any country
 DAP

the buyer’s obligations

• to pay the price of the goods

• to bear all risks of loss of or damage to the goods from the

time they have been delivered to the place
• to pay all costs of unloading necessary to take delivery of
the goods from the arriving means of transport at the
named place of destination
 DAP

the buyer’s obligations

• to pay costs of customs formalities in import, all duties, taxes,

charges payable upon import of the goods
 DPU

Delivered at Place UNLOADED

(named place of destination)

• seller delivers the goods and transfers risk – to the buyer:
– when the goods

– once unloaded from the arriving means of transport

– are placed at the disposal of the buyer

– at a named place od destination or

– at the agreed point within that place, ifany such point is agreed

• seller pays for carriage to the named place, except for costs related to import clearance,

• seller assumes all risks prior to the point that the goods are unloaded
 DDP

Delivered Duty Paid

(named place of destination)

• seller is responsible for delivering the goods to the named place in
the country of the buyer
• seller pays all costs in bringing the goods to the destination
including import duties and taxes
• DDP places maximum obligations on the seller and minimum
obligations on the buyer
 DDP

the seller’s obligations

• must deliver the goods by placing them at the disposal of the

buyer on the arriving means of transport ready for unloading
at the agreed point, at the named place of destination on the
agreed time
 DDP

the seller’s obligations

• to pay costs of customs formalities in export and import, all

duties, taxes, charges payable upon export and import of the
goods, and the costs for their transport through any country
 DDP

the buyer’s obligations

• to pay the price of the goods

• to bear all risks of loss of or damage to the goods from the time
they have been delivered to the place
• to pay all costs of unloading necessary to take delivery of the
goods from the arriving means of transport at the named place of
destination
 Rules
for sea and inland waterway transport

• FAS
• FOB
• CFR
• CIF
 FAS

Free Alongside Ship

(named port of shipment)

• seller must place the goods alongside the ship at the named port
and clear the goods for export
• suitable only for maritime transport but NOT for multimodal sea
transport in containers
• is typically used for heavy-lift or bulk cargo
 FAS

the seller’s obligations

• to deliver the goods by placing them alongside the ship nominated
by the buyer at the loading point
• to bear all risks of loss of or damage to the goods until they have
been placed alonside the ship
• to pay costs of customs formalities in export, all duties, taxes,
charges payable upon export
 FAS

the buyer’s obligations

• to pay the price of the goods

• must contract at its own expense for the carriage of the

goods from the named port of shipment
• to pay costs of customs formalities in import, all duties,
taxes, charges payable upon import of the goods
 FAS

the buyer’s obligations

• to bear all risks of loss of or damage to the goods from the

time they have been placed alongside the ship nominated by
the buyer at the loading point
 FOB

Free on Board (named port of shipment)

• seller must load the goods on board the vessel nominated by the
buyer

• cost and risk are passes when the goods are actually on board of
the vessel (this rule is new!) and the buyer bears all costs from
that moment

• the seller must clear the goods for export

 FOB

the seller’s obligations

• to deliver the goods by placing them on board the vessel
nominated by the buyer at the loading point, at the named port
of shipment
• to bear all risks of loss of or damage to the goods until they have
been placed on board
• to pay costs of customs formalities in export, all duties, taxes,
charges payable upon export
 FOB

the buyer’s obligations

• to pay the price of the goods

• must contract at its own expense for the carriage of the
goods from the named port of shipment
• to bear all risks of loss of or damage to the goods from the
time they have been placed on the board
 FOB

the buyer’s obligations

• to pay costs of customs formalities in import, all duties, taxes,

charges payable upon import of the goods
 CFR

Coast and Freight

(named port of destination)

• seller must pay the costs and freight to bring the goods to the port of
destination

• risk is transferred to the buyer once the goods are loaded on the
vessel!!

• maritime transport only and insurance for the goods is NOT

included.
 CFR

the seller’s obligations

• must deliver the goods by placing them on board the vessel

• must contract for the carriage of the goods to the named

port of destination
• to bear all risks of loss of or damage to the goods until they
have been placed on board
 CFR

the seller’s obligations

• to pay costs of customs formalities in export, all duties, taxes,

charges payable upon export
 CFR

the buyer’s obligations

• to pay the price of the goods

• to bear all risks of loss of or damage to the goods from the

time they have been placed on the board
• to pay costs of customs formalities in import, all duties, taxes,
charges payable upon import of the goods
 CIF

Cost Insurance and Freight

(named port of destination)

• the same as CFR except that the seller must in addition
procure and pay for the insurance
• maritime transport only
 How to use the INCOTERMS?

• EXW, FCA, DAT, DAP, DDP, FAS, FOB –

– the named place is the place where delivery takes place
and where risk passes from the seller to the buyer

• CPT, CIP, CFR, CIF –

– the named place differs from the place of delivery. The
named place is the place of destination to which carriage
is paid
What's new in Incoterms 2020?

• the Incoterm DAT (Delivred at Terminal) expands to become

the DPU (Deliverd at Place Unloaded):
– the destination can be any place and not just a terminal
– If the place is not a terminal, the seller must verify that the place
where the goods are to be delivered is a place where he is able to
unload the products.
What's new in Incoterms 2020?

• the new version of Incoterms 2020 provides for an evolution

for the FCA rule with an on-board bill of lading option:
– an option of the FCA in case of payment via bank security:

– the buyer and the seller may agree that the buyer must instruct his
carrier to provide the seller with the bill of lading bearing the mention
of loading after loading the goods
– the seller is then obliged to deposit this bill of lading with his financial
institution for the buyer.
What's new in Incoterms 2020?

• concerning transport insurance, Incoterms 2020 make a

difference in terms of coverage:
– the Incoterm CIP requires all-risk coverage while the CIF requires
minimum coverage (“FAP except” coverage)
– the insurance always covers at least 110% of the invoiced value.
What's new in Incoterms 2020?

• the 2020 version introduces the concept of own-account

transport:
– the seller or buyer can use his own means of transport to transport
the goods without necessarily calling on a transport professional.
What's new in Incoterms 2020?

• one of the main objectives of this revision is to make the rules more
comprehensive in order to facilitate its use:
– the ICC wants to reduce misunderstandings in order to avoid disputes

– the 2020 version now includes detailed instructions for choosing the
Incoterms rule most appropriate for the transaction

– it also provides clear information on the relationship between sales

contracts, transport contracts, insurance and financing.

– the guidance notes already present in the Incoterms 2010 are now
presented as Explanatory Notes to each Incoterms rule.