Incoterms 2020

Incoterms 2020: Today commercial trading and transition load between countries have been increased greatly due to technological improvement, transport equipment modernity and external transit and therefore the whole world has turned to a global village.

Today, due to the advancement of technology, the world has become a global village, the development of means of transportation and foreign transit, the volume of sales and trade exchanges between countries has increased greatly.

Along with global trading complexity and good exposition load, Sellers and suppliers in an international scale need commercial contracts for a safe trade and avoiding arguments.

With the complexity of global trade, and the increasing volume of sales of goods, buyers and sellers internationally need trade agreements for safe sales to prevent disputes.

Incoterms definition

Incoterms is compromised from three individual words as follows:

International Commercial Terms

Which means international commercial terminology.

Incoterm rules facilitates international trading.

International commercial office provided incoterm rules as a standard contract regulation, which was appreciated by sellers over the world.

Incoterm rules include 11 terms, which are shown in 3 character abbreviates that explain costs, duties and cautions from disposition to transfer stage the products from the Seller to Buyer.

The rules of Incoterms include 11 three-letter acronyms that describe costs, duties, and risks from the point of sale to the delivery of goods from seller to buyer.

Incoterm rules benefits

Determines responsibilities, costs, risks and cautions between Seller and Buyer standardly.

Determines transfer port or location, transport equipment and Seller-Buyer commitments in relation to the insurance.

Facilitates the interpretation of the commercial contract between Seller and Buyer.

Benefits of Incoterms Rules

Defines responsibilities, costs, risks and risks between seller and buyer as standard.

The place or port of delivery specifies the means of transport of the goods, the obligations of the buyer and the seller to the insurer.

Facilitates the interpretation of the commercial contract between the seller and the buyer according to the Incoterms used.

All transport related rules

• EX Works: EXW
• Free CArrier: FCA
• Carriage Paid To: CPT
• Delivered At Place: DAP
• Delivered At Place Unloaded: DPU
• Delivered Duty Paid: DDP

Sea transport related rules

• Free On Board: FOB
• Free Alongside Ship: FAC
• Cost Insurance and Freight: CIF
• Cost and FReight: CFR

(INCOTERMS 2020)

Incoterm rules 2020	Full term	Description	Location of risk transfer	Loading from seller location	Loading in origin	Carrier of choice and carry out the conclusion of the contract	International transport cost	Export clearance	Discharge in destination	Import clearance
EXW	Ex-works	Delivery at the seller’s designated location	Minimum seller determination	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
FOB	Free On Board	Transfer on board in origin determined port	Origin port, on board	Seller	Seller	Buyer	Buyer	Seller	Buyer	Buyer
CIF	Cost Insurance & Freight	Cost, and insurance cost paid to destination port	Origin port, on board	Seller	Seller	Seller	Seller	Seller	None	Buyer
CFR	Cost & Freight	Costs and rent to destination port determined	Origin port, on board	Seller	Seller	Seller	Seller	Seller	None	Buyer
FCA	Free Carrier	Transfer to transport man in determined origin location	Location determined in origin	Seller	Seller and Buyer	Buyer	Buyer	Seller	Buyer	Buyer
CPT	Carriage Paid To	Carriage paid to determined destination location	Location determined in origin	Seller	Seller	Seller	Seller	Seller	None	Buyer
CIP	Carriage & Insurance Paid To	Carriage paid to determined destination location	Location determined in origin	Seller	Seller	Buyer	Seller	Seller	None	Buyer
FAS	Free Alongside Ship	Transfer beside the ship in origin port	Origin port beside the ship (on Board)	Seller	Buyer	Buyer	Buyer	Seller	Buyer	Buyer
DAP	Delivered At Place	Delivered in determined place in destination	Determined  location at the destination	Seller	Seller	Seller	Seller	Seller	Buyer	Buyer
DDP	Delivered Duty Paid	Delivered Goods in determined location after export clearance	Determined location after clearance of import custom	Seller	Seller	Seller	Seller	Seller	Seller and Buyer	Seller
DPU	Deliver At Place Unloaded	Discharge products in determined location	Determined location after unloaded (Discharge)	Seller	Seller	Seller	Seller	Seller	Buyer	Buyer

 

INCOTERMS 2020

1- Ex-works (EXW): Delivery of goods at work or a specified location by seller

• The seller has no obligation to the buyer to load the goods and customs procedures.
• This rule of Incoterms can be used for any attack method.
• In this rule, the exact point of the place of delivery must be specified.
• The buyer is responsible for costs and risks during the delivery of the goods from the agreed point at the place of delivery.
• In this rule, the seller is only required to prepare the documents that the buyer needs to export the goods from the place of origin.
• After delivery of the goods at the designated place, the risk is transferred from the seller to the buyer.Free on board

2- (FOB): Delivery of goods on the Board with the name of the port of loading

• This rule only applies to shipping by sea or inland waterways.
• The seller puts an end to his risk when he delivers the goods on the deck of the ship, at the port and at the point specified by the buyer.
• After delivery of the goods in the field of ship, the responsibility and risks of loss of goods are the responsibility of the buyer.
• In this rule, Incoterms, if necessary, the responsibility and steps of exporting goods, obtaining licenses, issuing certificates and customs formalities are the responsibility of the seller.
• The seller has no obligation regarding the clearance of goods for import, payment of import duties, transit of goods from the third country, through which the goods pass and customs formalities for the import of goods.

3- Cost, insurance & freight (CIF): Cost, insurance and Freight to destination Port

• This rule only applies to shipping by sea or inland waterway.
• When the seller delivers the goods to the port of origin or supplies the goods that he has previously delivered in the same way.
• The seller is responsible for the risk of loss of goods until the goods are transferred to the deck of the ship.
• If the seller incurs costs in connection with the unloading of the goods at the designated point in the port of destination under the contract of carriage, he has no right to demand the cost from the buyer.
• The seller is required to provide minimum insurance in order to cover the buyer’s liability for the risk of loss or damage to the goods during shipment.
• According to this rule, the seller is responsible for clearance for the export of goods.
• All customs and clearance costs at the port of destination are the responsibility of the buyer.
• The seller must conclude a contract for the transportation of goods from the port of origin to the port of destination, with the shipping company.

4- Cost & Freight (CFR): Prices of goods and freight to the destination port

The seller delivers the goods on the deck of the ship or supplies the goods that have already been delivered in the same way.

When the goods are placed on the deck of the ship of port of origin, the risk of loss or damage to the goods is transferred to the buyer.

• If the seller incurs a cost of unloading at the specified point in the port of destination under his contract of carriage, he is not permitted to claim such cost from the buyer.
• The seller has no obligation to clear the goods and pay customs duties for the import of goods.
• This rule is only used for transportation by sea or inland waterways.
• The seller must take the steps of exporting goods and transit.
• The seller must conclude a contract with the shipping company to transport the goods to the port of destination, pay the necessary fare and fee.
• The seller has no obligation to insure the buyer.

5- Free Carrier (FCA): Delivery of goods to the carrier at the designated place

• The seller delivers the goods to the carrier or any person designated by the buyer at the designated location.
• If the delivery is in the seller’s warehouse, the seller is responsible for loading. If the delivery place is in a place other than the seller’s warehouse, the seller is not responsible for loading.
• The seller, if necessary, must provide the necessary certificates and evidence for the export of goods.
• When the seller delivers the goods to the buyer at the designated place, the risk of damage to the goods is transferred to the buyer.
• The seller has no obligation to import goods and pay customs duties.
• The seller has no obligation to enter into a contract of carriage with the buyer.
• The seller has no obligation to conclude an insurance contract with the buyer.

 

6- Carriage paid to (CPT): Paid freight to the destination

• The seller delivers the goods to the carrier or another person of his choice at the agreed location.
• The seller must enter into a contract with the shipping company and pay the necessary fees.
• The seller has no obligation to insure the goods.
• This method can be used for any attack method.
• The seller must provide all the necessary documents and certificates for the export of goods.
• The seller has no obligation to import, clear goods, pay customs duties and taxes on importing goods in the destination country.
• The seller is not allowed to demand these costs from the buyer according to the contract of carriage and transportation that he has arranged with the shipping company.
• The exact place where the seller must deliver the goods to the shipping company must be specified because at that location the risk is transferred to the buyer after the goods are delivered to the shipping company.
• The place or point of delivery of the goods at the destination must be specified, because the seller must pay all shipping costs according to the place specified in the intended destination and adjust his contract of carriage there.
• When the seller delivers the goods to the shipping company, the risk and responsibility of the seller must be terminated and the seller bears no responsibility for the risk of damage to the goods.

7- Free Alongside Ship (FAC): Delivery of goods on board the ship with the exact name of the port designated for loading

• This rule is only used for transportation by sea or inland waterways.
• The seller has no obligation to the buyer to conclude a contract of carriage and insurance.
• In this rule, the contract of transportation, insurance and inspection is with the buyer.
• In this rule, the parties (seller and buyer) must specify the exact location of the port to be loaded.
• The seller, if necessary, must prepare certificates, export licenses and perform all customs formalities for the export of goods.
• The seller has no obligation to import goods and pay customs duties for the import of goods.
• When the seller delivers the goods at the port designated for loading on the ship, the responsibility and risk of loss of the goods is transferred from the seller to the buyer.

8- Carriage & insurance paid to (CIP):

• In this rule, the seller is responsible for paying for the shipping and insurance of the goods.
• In this rule, the exact point of origin and destination must be specified because the shipping and insurance costs are the responsibility of the seller.
• Under the CIP rule in Incoterms 2020, the seller must be responsible for purchasing a higher level of insurance coverage (A).
• In this rule, the seller must provide all the necessary documents and certificates for the export of goods.
• The seller has no obligation to clear the goods for the entry and payment of customs duties.
• This method can be used for any mode of transport; the CIP rule also applies in cases where more than one mode of transport is used.
• When the seller delivers the goods to the shipping company or any person of their choice at the agreed location, the risk of loss and loss of the goods is transferred to the buyer.
• If the seller, in accordance with his contract of carriage, pays the costs related to the unloading of the goods at the designated place in the destination, he has no right to demand such costs from the buyer.

 

9- Delivered at place (DAP): Delivery of goods at the designated place specified in the destination

• In this rule, Incoterms have the same place of delivery and destination.
• The seller has no obligation to conclude an insurance contract.
• The seller must pay the contract for the shipment to the designated place at the destination.
• This rule applies to any mode of transport, also in cases where there is more than one mode of transport, this Incoterms is used.
• The seller provides the goods to the buyer at the designated place at the destination, on the vehicle bringing the goods ready for unloading.
• The seller is responsible for all risks related to damage to the goods and shipping costs to the designated place in the destination.
• The exact point of destination in the contract between the parties must be specified, because after the delivery of goods to the destination, the risk and risk of loss of goods is transferred from the seller to the buyer.
• If the seller, in accordance with his contract of carriage, incurs costs while unloading the goods at the designated place of destination, he has no right to demand these costs from the buyer.

10-Delivered duty paid (DDP): Delivery of goods at the place specified in the destination with clearance and payment of customs duties and taxes

 

• After clearance for the arrival of goods at the designated destination, the seller provides the goods to the buyer on the vehicle bringing the goods ready for unloading.
• The seller must pay all shipping costs and customs duties for the import of goods.
• The seller is responsible for all risks to the goods to the destination.
• In this way, the place of delivery and the destination are the same.
• This rule can be used for any mode of transport, also in cases where more than one mode of transport is used.

can be used.

• The exact place of delivery in this way must be determined because the responsibility and risks of damage to the goods to the specified destination is the responsibility of the seller, and after delivery of goods at the designated destination, the risk is transferred from the seller to the buyer.
• The seller must prepare all the necessary documents and certificates for the export of goods, as well as all the necessary measures and formalities for the import of goods and pay import duties.

11-Delivered at Place Unloaded (DPU):

• The seller delivers the unloaded goods to the buyer at the specified destination.
• This rule applies to any mode of transport, also applies in cases where more than one mode of transport is used.
• The responsibility and risk of sending the goods to the designated destination is the responsibility of the seller and after the delivery of the goods at the designated location, the risk is transferred to the buyer.
• The place of delivery of the goods must be precisely specified, because after the delivery of the goods in the designated place, the risks and risks of damage to the goods are transferred to the buyer.
• The seller must provide all the necessary documents and certificates for the export of goods.
• The seller has no obligation to import goods and pay import duties.