Name: Introduction to Incoterms® August 2020
Uploaded: 2022-04-17
Duration: 18 min 47 s
Description: Introduction to Incoterms ® August 2020. Insert presentation title via Header & Footer.

Introduction to Incoterms ® August 2020. Insert presentation title via Header & Footer. 

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Introduction to Incoterms ®   August 2020

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[Audio] By the end of this session, you will: be able to explain why Incoterms have been created, and their recognition in international trade; know how the Incoterms are categorised, named, and defined; be able to articulate the points of cost & risk transfer from Seller to Buyer for each term. 

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By the end of this session, you will: be able to explain why Incoterms have been created, and their recognition in international trade; know how the Incoterms are categorised, named, and defined; be able to articulate the points of cost & risk transfer from Seller to Buyer for each term

.. Background of Incoterms Incoterms Overview The Four Categories of Incoterms Group E Group F Group C Group D Incoterms in Detail: Obligations of Buyer & Seller. 

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Background of Incoterms Incoterms Overview The Four Categories of Incoterms Group E Group F Group C Group D Incoterms in Detail: Obligations of Buyer & Seller

[Audio] Background of Incoterms. .. Background of Incoterms Incoterms Overview The Four Categories of Incoterms Group E Group F Group C Group D Incoterms in Detail: Obligations of Buyer & Seller. 

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[Audio] 1) Among the challenges in conducting export sales is agreeing on the details for transporting goods across borders. 2) A typical export will move through four storage facilities; the domestic carrier's facility, the export terminal, the import terminal and the buyer's receiving dock… 3) …and change hands at least five times; the shipper, the domestic ground carrier, the international carrier, the ground carrier in the import nation and finally the buyer. 4) Either the seller or the buyer needs to make arrangements for transport and import customs clearance. The two parties must also agree on which has responsibility for the goods in case the shipment is damaged, lost or stolen.For centuries these issues were handled by tradition and standard practice, which often varied from nation to nation. Disputes would arise when ever there were differences in the understanding of the obligations. The International Chamber of Commerce ( ICC) has addressed the difficulty by establishing a common set of rules that apply to all international sales. The first set of rules, called " Incoterms 1936" short for international commercial terms, was published in 1936. The standard has been updated eight times since then, the current standard is called Incoterms 2020. The United Nations Commission on International Trade Law recognises Incoterms 2020. This makes the it a worldwide standard and legally binding in contracts for parties conducting international trade.. 

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Among the challenges in conducting export sales is agreeing on the details for transporting goods across borders.

A typical export will move through four storage facilities; the domestic carrier’s facility, the export terminal, the import terminal and the buyer’s receiving dock…

…and change hands at least five times; the shipper, the domestic ground carrier, the international carrier, the ground carrier in the import nation and finally the buyer.

Either the seller or the buyer needs to make arrangements for transport and import customs clearance. The two parties must also agree on which has responsibility for the goods in case the shipment is damaged, lost or stolen.

For centuries these issues were handled by tradition and standard practice, which often varied from nation to nation. Disputes would arise when ever there were differences in the understanding of the obligations. The International Chamber of Commerce (ICC) has addressed the difficulty by establishing a common set of rules that apply to all international sales. The first set of rules, called “Incoterms 1936” short for international commercial terms, was published in 1936. The standard has been updated eight times since then, the current standard is called Incoterms 2020. The United Nations Commission on International Trade Law recognises Incoterms 2020. This makes the it a worldwide standard and legally binding in contracts for parties conducting international trade.

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Background of Incoterms ®. .. Terms of Sale?. Among the challenges in conducting export sales is agreeing on the details for transporting goods across borders.. 

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THE FOLLOWING SLIDES ARE HIDDEN FOR PRINTING TO PDF FORMAT & TO SAVE PAGES. IF USING THIS MATERIAL IN PPT FORMAT, HIDE SLIDE 5, AND USE SLIDES 6-10 INSTEAD (AND DELETE THIS TEXT BOX).

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For centuries these issues were handled by tradition and standard practice, which often varied from nation to nation. Disputes would arise when ever there were differences in the understanding of the obligations. The International Chamber of Commerce (ICC) has addressed the difficulty by establishing a common set of rules that apply to all international sales. The first set of rules, called “Incoterms 1936” short for international commercial terms, was published in 1936. The standard has been updated eight times since then, the current standard is called Incoterms 2020. The United Nations Commission on International Trade Law recognises Incoterms 2020. This makes it a worldwide standard and legally binding in contracts for parties conducting international trade.

[Audio] Incoterms Overview. Contents. .. Background of Incoterms Incoterms Overview The Four Categories of Incoterms Group E Group F Group C Group D Incoterms in Detail: Obligations of Buyer & Seller. 

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[Audio] What are Incoterms®?A set of 11 trade terms used in contracts for the sale and purchase of goods; Incoterms® are not law, yet the commercial contract in which they are used can be legally binding; They describe the obligations, costs, and transfer of risk; General rules of thumb:
The party responsible for arranging transportation, and payment of transportation charges is in control of the cargo;
The more responsibility the party has, the more control they have, and the more risks they bear ( customs, licencing, freight, other formalities).. 

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A set of 11 trade terms used in contracts for the sale and purchase of goods; Incoterms ® are not law, yet the commercial contract in which they are used can be legally binding; They describe the obligations, costs, and transfer of risk; General rules of thumb: The party respon sible for arranging transportation, and payment of transportation charges is in control of the cargo; The more responsibility the party has, the more control they have,  and the more risks they bear (customs, licencing, freight, other formalities).

[Audio] Incoterms® do not…Automatically apply. They must be specified; Determine ownership, transfer of title or ownership of goods; Determine payment terms between seller and buyer; Protect parties from their own risk or loss, nor cover the goods before or after delivery. This is what insurance is for.. 

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Automatically apply. They must be specified; Determine ownership, transfer of title or ownership of goods; Determine payment terms between seller and buyer; Protect parties from their own risk or loss, nor cover the goods before or after delivery. This is what insurance is for.

[Audio] What's changed since Incoterms® 2010? The Incoterm DAT (Delivered at Terminal) is replaced by DPU (Delivered at Place Unloaded). Although this may appear to be merely a name change as the obligations and responsibilities remain the same, the new DPU term covers delivery to any agreed place including, but not limited to, delivery at terminal. There are new insurance requirements under Incoterms CIF and CIP. In shipping, under the Incoterm FCA the buyer can ask the shipping company or their agent to issue a Bill of Lading to the seller with the notation "on board".. 

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What’s changed since Incoterms ®  2010?

The Incoterm  DAT  (Delivered at Terminal) is replaced by  DPU  (Delivered at Place Unloaded). Although this may appear to be merely a name change as the obligations and responsibilities remain the same, the new DPU term covers delivery to  any   agreed place including, but not limited to, delivery at terminal. There are new insurance requirements under Incoterms  CIF  and  CIP . In shipping, under the Incoterm  FCA  the buyer can ask the shipping company or their agent to issue a Bill of Lading to the seller with the notation “on board”.

[Audio] Incoterms® OverviewResponsibility Matrix – Obligations of Importer ( Buyer) and Exporter ( Seller). 

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Incoterms ® Overview Responsibility Matrix – Obligations of Importer (Buyer) and Exporter (Seller)

“E” Departure “F” Main Carriage Unpaid “C” Main Carriage Paid “D” Arrival Service EXW FCA FAS FOB CFR CIF CPT CIP DAP DPU DDP Ex-Works (Place) Free Carrier (Place) Free Alongside Ship (Port) Free on Board (Port) Cost of Goods & Freight (Port) Cost Insurance & Freight (Port) Carriage Paid To (Place) Carriage & Insurance Paid To (Place) Delivered At Place (Place) Delivered At Place Unloaded (Place) Delivered Duty Paid (Place) OBLIGATIONS & CHARGES Export Packaging Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading Charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Delivery to Export Port / Place Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Export Duty, Taxes & Customs Clearance Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Origin Terminal Charges Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading on Carriage Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Ocean/Air Freight Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Import Port Terminal Charges Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Delivery to Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller Unloading at Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Import Duty, Taxes & Customs Clearance Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller

[Audio] The Four Categories of Incoterms
Group E
Group F
Group C
Group D. 

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[Audio] Incoterms® - The Four CategoriesThe groups are arranged in order by which party has the most obligations for the goods being moved.. 

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Incoterms ® - The Four Categories The groups are arranged in order by which party has the most obligations for the goods being moved.

[Audio] Starting with the single term in Group E, referred to as EXW for Exit Works, the seller is only responsible for preparing the goods for international shipment & making the correct paperwork, and goods available for pick up for export by the buyer.. 

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Starting with the single term in Group E, referred to as EXW for Exit Works, the seller is only responsible for preparing the goods for international shipment & making the correct paperwork, and goods available for pick up for export by the buyer.

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[Audio] There are three terms in Group F that adds the additional obligation of ground transport to the export terminal to the seller's responsibilities. Once delivered to the export terminal (typically a port or an airport) obligations shifts to the buyer.. 

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There are three terms in Group F that adds the additional obligation of ground transport to the export terminal to the seller’s responsibilities. Once delivered to the export terminal (typically a port or an airport) obligations shifts to the buyer.

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[Audio] The four terms in the C Group requires the seller to add international carriage to the list of obligations. So the seller must now arrange and pay for transport by ship, plane or ground transport across borders. In addition, two of the C Group terms also obligate the seller to arrange insurance on behalf of the buyer.. 

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The four terms in the C Group requires the seller to add international carriage to the list of obligations. So the seller must now arrange and pay for transport by ship, plane or ground transport across borders. In addition, two of the C Group terms also obligate the seller to arrange insurance on behalf of the buyer.

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[Audio] The D Group of terms requires the seller to take on most of the transport obligations. These three different terms vary from simply paying to land the goods in the receiving terminal abroad, to taking care of all cost and obligations of getting the goods to the buyer's receiving dock overseas (including paying for customs).. 

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The D Group of terms requires the seller to take on most of the transport obligations. These three different terms vary from simply paying to land the goods in the receiving terminal abroad, to taking care of all cost and obligations of getting the goods to the buyer’s receiving dock overseas (including paying for customs).

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[Audio] Incoterms in Detail: Obligations of Buyer & Seller. 

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[Audio] The Incoterm Ex-Works ( EXW) means the seller minimises their risk by making the goods available at their own premises. The buyer loads the goods then arranges and pays for transport, customs clearance and insurance. OBLIGATIONS OF THE BUYER
The buyer must arrange and pay for the transport having taken delivery of the goods. The buyer is responsible for the goods, and anything that happens to them having taken delivery of them. EXW means that the buyer carries all the risk and bears the entire cost for the movement of the goods once they are made available at the seller's premises. OBLIGATIONS OF THE SELLER
Under this Incoterm, if you are selling goods, you are responsible for making the goods available to your buyer from your premises or an appointed place (such as a factory or depot). Once you have made the goods available you are no longer responsible for them.. 

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Incoterms ® in Detail – Obligations of Buyer and Seller The groups are arranged in order by which party has the most obligations for the goods being moved.

The Incoterm Ex-Works (EXW) means the seller minimises their risk by making the goods available at their own premises. The buyer loads the goods then arranges and pays for transport, customs clearance and insurance.

Sellers and buyers can add words and terms to the EXW Incoterm. For example, "EXW-loaded" is sometimes added to the contract wording if the seller is to load the goods. However, if you choose to add words or clauses to your contract, you must make clear in writing who carries out or pays for the extra work and who bears the risk.

The buyer must arrange and pay for the transport having taken delivery of the goods. The buyer is responsible for the goods, and anything that happens to them having taken delivery of them. EXW means that the buyer carries all the risk and bears the entire cost for the movement of the goods once they are made available at the seller's premises.

Under this Incoterm, if you are selling goods, you are responsible for making the goods available to your buyer from your premises or an appointed place (such as a factory or depot). Once you have made the goods available you are no longer responsible for them.

Because the responsibility for moving goods is entirely up to the buyer, EXW can be used for  all types of transport .

[Audio] All three Incoterms beginning with " F" - Free Carrier ( FCA), Free Alongside Ship ( FAS) and Free On Board ( FOB) - mean that the seller is responsible for arranging and paying for delivering the goods to a carrier. The buyer pays for the main carriage onward from that point. OBLIGATIONS OF THE SELLER
The seller delivers the goods to an agreed place and bears the costs & risks up to the point of delivery at the agreed place, including the cost of export clearance. The seller is responsible for inland transport and export customs clearance unless the designated place is the seller's premises ( FCA warehouse), in which case the goods are delivered there and loaded onto the means of transport arranged by the buyer at the buyer's expense. OBLIGATIONS OF THE BUYER
The buyer must arrange and pay for the transport having taken delivery of the goods. The buyer is responsible for the goods, and anything that happens to them having taken delivery of them. " Delivery" is accomplished at the predetermined port or destination point and the buyer is responsible for insurance.. 

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All three Incoterms beginning with "F" - Free Carrier (FCA), Free Alongside Ship (FAS) and Free On Board (FOB) - mean that the seller is responsible for arranging and paying for delivering the goods to a carrier. The buyer pays for the main carriage onward from that point.

New for FCA in Incoterms 2020 is that in shipping the buyer can ask their carrier to issue a Bill of Lading to the seller specifying “on board” as proof of delivery of the goods, thus facilitating the use of documentary credits. The credit is afforded to the seller by bank guarantee although they are not party to the contract of carriage

The seller delivers the goods to an agreed place and bears the costs & risks up to the point of delivery at the agreed place, including the cost of export clearance. The seller is responsible for inland transport and export customs clearance unless the designated place is the seller’s premises (FCA warehouse), in which case the goods are delivered there and loaded onto the means of transport arranged by the buyer at the buyer’s expense.

The buyer must arrange and pay for the transport having taken delivery of the goods. The buyer is responsible for the goods, and anything that happens to them having taken delivery of them. "Delivery" is accomplished at the predetermined port or destination point and the buyer is responsible for insurance.

The FCA Incoterm is suitable for  all types of transport .

[Audio] Like Free Carrier ( FCA), the Incoterm Free Alongside Ship ( FAS) means that the seller is responsible for arranging and paying for delivering goods to a carrier. The seller must get the goods ready for export, but the buyer is responsible for the cost, and risk in loading them. OBLIGATIONS OF THE SELLER
Under the FAS Incoterm, as the seller you must complete all export
documentation, arrange and be responsible for the carriage of goods to bring them alongside a ship at a named port of shipment. The seller is also responsible for clearing goods for export. OBLIGATIONS OF THE BUYER
As the buyer, you are responsible for loading on board, stowage, freight and other costs up to delivery at destination, including import clearance and insurance, if taken out as it is not mandatory. The buyer also bears the risk once the goods are in the loading dock prior to being loaded onto the ship.. 

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In these transactions, the buyer bears all the transportation costs and the risk of loss of goods. FAS requires the shipper/seller to clear goods for export, which is a reversal from past practices. Companies selling on these terms will ordinarily use their freight forwarder to clear the goods for export. FAS is generally used for special goods that have particular loading requirements, and not usually for palletised cargo or containers.

Under the FAS Incoterm, as the seller you must complete all export documentation, arrange and be responsible for the carriage of goods to bring them alongside a ship at a named port of shipment. The seller is also responsible for clearing goods for export.

As the buyer, you are responsible for loading on board, stowage, freight and other costs up to delivery at destination, including import clearance and insurance, if taken out as it is not mandatory. The buyer also bears the risk once the goods are in the loading dock prior to being loaded onto the ship.

The FAS Incoterm is used only for  sea or inland waterway transport .

Like Free Carrier (FCA), the Incoterm Free Alongside Ship (FAS) means that the seller is responsible for arranging and paying for delivering goods to a carrier. The seller must get the goods ready for export, but the buyer is responsible for the cost, and risk in loading them.

[Audio] Free On Board ( FOB) means that the seller is responsible for arranging and paying for delivering goods to a carrier. The seller's risk ends when the goods are delivered to the main carrier. OBLIGATIONS OF THE SELLER
Under the FOB Incoterm, as the seller you are responsible for delivering the goods to a carrier chosen by the buyer. This means that you are responsible for the goods until they pass the rail of the ship at a named port of shipment, after which the buyer assumes costs and risks. The seller arranges all export documentation and has to bring the goods right up to the point of passing over a ship's rail at a named port of shipment. OBLIGATIONS OF THE BUYER
As the buyer, the costs and risks associated with the goods become your responsibility when the goods pass across a ship's rail, and you bear all costs from that moment onwards.. 

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Free On Board (FOB) means that the seller is responsible for arranging and paying for delivering goods to a carrier. The seller's risk ends when the goods are delivered to the main carrier.

If the seller doesn't intend to load the goods, the FCA Incoterm should be used instead of FOB.

Under the FOB Incoterm, as the seller you are responsible for delivering the goods to a carrier chosen by the buyer. This means that you are responsible for the goods until they pass the rail of the ship at a named port of shipment, after which the buyer assumes costs and risks. The seller arranges all export documentation and has to bring the goods right up to the point of passing over a ship's rail at a named port of shipment.

As the buyer, the costs and risks associated with the goods become your responsibility when the goods pass across a ship's rail, and you bear all costs from that moment onwards.

FOB is used only for  sea or inland waterway transport .

[Audio] Cost and Freight ( CFR) means that the seller is responsible for arranging and paying for the main carriage, but the risk of damage or extra costs stays with the buyer. OBLIGATIONS OF THE SELLER
As the seller, you arrange the carriage. You are then responsible for the goods only until they pass a ship's rail in the port of export shipment but must pay the costs for bringing the goods to the port of destination, ie the full journey by water. OBLIGATIONS OF THE BUYER
Under CFR, the buyer becomes responsible for the goods and all associated extra costs and risks once they have been delivered over a ship's rail at the outgoing port.. 

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Cost and Freight (CFR) means that the seller is responsible for arranging and paying for the main carriage, but the risk of damage or extra costs stays with the buyer.

CFR is used only for goods shipped by  sea or inland waterway transport .

Although insurance isn’t mandatory, because the buyer bears the risks the moment the goods are loaded on board, they are usually the ones to take out insurance.

As the seller, you arrange the carriage. You are then responsible for the goods only until they pass a ship's rail in the port of export shipment but must pay the costs for bringing the goods to the port of destination,  ie  the full journey by water.

Under CFR, the buyer becomes responsible for the goods and all associated extra costs and risks once they have been delivered over a ship's rail at the outgoing port.

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Cost, Insurance and Freight (CIF) means that the seller is responsible for arranging and paying for the main carriage, but the risk of damage or extra costs stays with the buyer.

New in the 2020 version of this Incoterm is that the seller must arrange insurance cover in line with what is stipulated in Institute Cargo Clauses (C), which is the minimum coverage. In other words, the goods must be covered until their arrival at the destination port. This Incoterm is only used in shipping. It is widely used as it determines the customs value.

CIF means that as the seller, you deliver the goods on board the vessel or procure the goods already so delivered. The risk of loss of or damage to the goods passes from you to the buyer when the goods are on board the vessel. You must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

As the buyer, you are responsible for the goods and all associated risks once they have been delivered over a ship's rail at the port of shipment.

CIF is used only for goods shipped by  sea or inland waterway transport .

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The Carriage Paid To (CPT) Incoterm means that the seller is responsible for arranging and paying for the main carriage, but the risk of damage or extra costs stays with the buyer.

CPT requires that the seller must clear goods for export. Under CPT, the buyer becomes responsible for onward transport costs and risks once the nominated carrier has delivered the goods.

Under CPT, as the seller you are responsible for choosing a carrier and delivering the goods to them. You are also responsible for paying the cost of transport to deliver the goods to a named destination. You must also clear goods for export.

As the buyer, you become responsible for all risks associated with the goods once they have been delivered to the nominated carrier.

CPT can be used for  any form of transport  and for more than one type.

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The Carriage & Insurance Paid To (CIP) Incoterm means that the seller is responsible for arranging and paying for the main carriage, but the risk of damage or extra costs stays with the buyer.

As the seller, you bear the costs up to delivery at an agreed place at destination, i.e., the costs at origin, export clearance, freight and you’re also obliged to arrange and buy insurance covering the buyer's risks of damage or loss during transport.

As the buyer, you are liable for the risks associated with the goods once they are delivered to the first means of transport. You become responsible for costs once they reach their destination.

Under CIP, the buyer becomes responsible for onward transport costs and risks once the nominated carrier has delivered the goods. New in Incoterms 2020 under CIP relates to insurance cover. Under CIP insurance has always been mandatory, it now though, must contain the same coverage as what is stipulated in Institute Cargo Clauses (A).

CIP can be used for  any form of transport  and for more than one type.

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Delivered at Place (DAP) means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

The DAP Incoterm is suitable for  all types of transport .

As the seller, you’re responsible for making the goods available at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place, except for clearing the cargo, unloading, nor duties and taxes.

Insurance is not mandatory but if taken out the seller bears the cost.

Under DAP, buyers are responsible for risks and costs associated with clearing goods for import, duties, and unloading.

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Delivered at Place Unloaded (DPU) means that the seller delivers when the goods, once unloaded, are placed at the disposal of the buyer at a named place of destination. The seller bears all risks involved in bringing the goods to, and unloading them at the named place of destination.

As the seller, you’re responsible for making the goods available at the disposal of the buyer and unloading them from the arriving means of transport at the named place of destination. The seller bears all risks involved in bringing the goods to the named place, except for clearing the cargo, duties and taxes.

This Incoterm is new and replaces DAT from Incoterms 2010. In effect, it increases delivery options since DAT stated that delivery must take place at the terminal, whereas with the new DPU term, delivery can take place at an agreed place other than the terminal.

Under DPU, buyers are responsible for risks and costs associated with clearing goods for import and duties.

The DPU Incoterm is suitable for  all types of transport .

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Delivered Duty Paid (DDP), means the seller covers all costs and risks involved to bring goods to the named destination place, including import customs clearance and duties & taxes.

The DDP Incoterm is suitable for  all types of transport .

The seller must deliver the goods to a named destination, unload and clear them for import. The seller has responsibility for all costs and risks linked to bringing the goods to the named destination. The seller must pay all duties, taxes and charges in the country of import.

As the buyer, you assume risk as soon as you have access to the goods. You usually unload them, but this can also be done by the seller.

This Incoterm is not used if the seller is unable to arrange an import licence. Some taxes, such as VAT, can be excluded from the seller's obligations and transferred to the buyer. This variation to the Incoterm should be written into the sales contract. This Incoterm is the exact opposite of Ex Works (EXW).

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Introduction to Incoterms® 
August 2020

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be able to explain why Incoterms have been created, and their recognition in international trade;

know how the Incoterms are categorised, named, and defined;

be able to articulate the points of cost & risk transfer from Seller to Buyer for each term

avatar

United Nations Commission on International Trade Law

1) Among the challenges in conducting export sales is agreeing on the details for transporting goods across borders.

2) A typical export will move through four storage facilities;

the domestic carrier's facility, the export terminal, the import terminal and the buyer's receiving dock…

3) …and change hands at least five times;

the shipper, the domestic ground carrier, the international carrier, the ground carrier in the import nation and finally the buyer.

4) Either the seller or the buyer needs to make arrangements for transport and import customs clearance.

The two parties must also agree on which has responsibility for the goods in case the shipment is damaged, lost or stolen.For centuries these issues were handled by tradition and standard practice, which often varied from nation to nation.

Disputes would arise when ever there were differences in the understanding of the obligations.

The International Chamber of Commerce (ICC) has addressed the difficulty by establishing a common set of rules that apply to all international sales.

The first set of rules, called "Incoterms 1936" short for international commercial terms, was published in 1936.

The standard has been updated eight times since then, the current standard is called Incoterms 2020.

The United Nations Commission on International Trade Law recognises Incoterms 2020.

This makes the it a worldwide standard and legally binding in contracts for parties conducting international trade.

What are Incoterms®?A set of 11 trade terms used in contracts for the sale and purchase of goods;

Incoterms® are not law, yet the commercial contract in which they are used can be legally binding;

They describe the obligations, costs, and transfer of risk;

The party responsible for arranging transportation, and payment of transportation charges is in control of the cargo;

The more responsibility the party has, the more control they have, and the more risks they bear (customs, licencing, freight, other formalities).

Incoterms® do not…Automatically apply.

Determine ownership, transfer of title or ownership of goods;

Determine payment terms between seller and buyer;

Protect parties from their own risk or loss, nor cover the goods before or after delivery.

What's changed since Incoterms® 2010?The Incoterm DAT (Delivered at Terminal) is replaced by DPU (Delivered at Place Unloaded).

Although this may appear to be merely a name change as the obligations and responsibilities remain the same, the new DPU term covers delivery to any  agreed place including, but not limited to, delivery at terminal.

There are new insurance requirements under Incoterms CIF and CIP.

In shipping, under the Incoterm FCA the buyer can ask the shipping company or their agent to issue a Bill of Lading to the seller with the notation "on board".

Incoterms® OverviewResponsibility Matrix – Obligations of Importer (Buyer) and Exporter (Seller)

Incoterms
Group E
Group F
Group C
Group D

Incoterms® - The Four CategoriesThe groups are arranged in order by which party has the most obligations for the goods being moved.

There are three terms in Group F that adds the additional obligation of ground transport to the export terminal to the seller's responsibilities.

Once delivered to the export terminal (typically a port or an airport) obligations shifts to the buyer.

The four terms in the C Group requires the seller to add international carriage to the list of obligations.

So the seller must now arrange and pay for transport by ship, plane or ground transport across borders.

In addition, two of the C Group terms also obligate the seller to arrange insurance on behalf of the buyer.

The D Group of terms requires the seller to take on most of the transport obligations.

These three different terms vary from simply paying to land the goods in the receiving terminal abroad, to taking care of all cost and obligations of getting the goods to the buyer's receiving dock overseas (including paying for customs).

The Incoterm Ex-Works (EXW) means the seller minimises their risk by making the goods available at their own premises.

The buyer loads the goods then arranges and pays for transport, customs clearance and insurance.

The buyer must arrange and pay for the transport having taken delivery of the goods.

The buyer is responsible for the goods, and anything that happens to them having taken delivery of them.

EXW means that the buyer carries all the risk and bears the entire cost for the movement of the goods once they are made available at the seller's premises.

Under this Incoterm, if you are selling goods, you are responsible for making the goods available to your buyer from your premises or an appointed place (such as a factory or depot).

Once you have made the goods available you are no longer responsible for them.

All three Incoterms beginning with "F" - Free Carrier (FCA), Free Alongside Ship (FAS) and Free On Board (FOB) - mean that the seller is responsible for arranging and paying for delivering the goods to a carrier.

The buyer pays for the main carriage onward from that point.

The seller delivers the goods to an agreed place and bears the costs & risks up to the point of delivery at the agreed place, including the cost of export clearance.

The seller is responsible for inland transport and export customs clearance unless the designated place is the seller's premises (FCA warehouse), in which case the goods are delivered there and loaded onto the means of transport arranged by the buyer at the buyer's expense.