Incoterms
What do Incoterms and meaning of Incoterms 2020?
Incoterms, short for International Commercial Terms, are global trade rules defining responsibilities between buyers and sellers. They determine tasks like shipping, insurance, and customs clearance. Incoterms 2020, the latest version, consists of 11 terms like EXW (Ex Works) and FOB (Free on Board). Understanding Incoterms is crucial for international trade, ensuring clarity and avoiding disputes. For example, if goods are sold under FOB terms, the seller bears responsibility until the goods are loaded onto the vessel. It’s vital for businesses to grasp these terms to navigate the complexities of global commerce effectively.
What are the most common Incoterms?
The seven Incoterms® 2020 rules for any mode(s) of transport are:
- EXW – Ex Works (insert place of delivery)
- FCA – Free Carrier (Insert named place of delivery)
- CPT – Carriage Paid to (insert place of destination)
- CIP – Carriage and Insurance Paid To (insert place of destination)
- DAP – Delivered at Place (insert named place of destination)
- DPU – Delivered at Place Unloaded (insert of place of destination)
- DDP – Delivered Duty Paid (Insert place of destination).
Note: the DPU Incoterms replaces the old DAT, with additional requirements for the seller to unload the goods from the arriving means of transport.
The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:
- FAS – Free Alongside Ship (insert name of port of loading)
- FOB – Free on Board (insert named port of loading)
- CFR – Cost and Freight (insert named port of destination)
- CIF – Cost Insurance and Freight (insert named port of destination)
What Incoterms do and don’t cover
Incoterms Cover:
- Delivery obligations (who delivers where)
- Risk transfer (when risk shifts from seller to buyer)
- Cost allocation (who pays for what)
Incoterms Don’t Cover:
- Product details (quality, quantity, price)
- Payment terms (when and how buyer pays)
- liabilities (product liability, warranty)
Can I still use Incoterms 2010 after January 1, 2020?
Yes, you can still use Incoterms 2010 after January 1, 2020. Both parties to the contract just need to agree on using it. However, it’s recommended to use the latest version, Incoterms 2020.
Where can I learn more about the new Incoterms 2020 rules?
The International Chamber of Commerce (ICC) is the official source for information on Incoterms. Here are a couple of resources you can explore to learn more about the new Incoterms2020 rules:
ICC website: The ICC website provides a dedicated section on Incoterms 2020, including explanations, brochures, and FAQs. You can find it here: https://iccwbo.org/business-solutions/incoterms-rules/
ICC Incoterms 2020 handbook: The ICC also publishes a comprehensive handbook on Incoterms 2020. This handbook offers a more in-depth explanation of the rules and includes practical guidance for using them in international trade transactions. You can find information about purchasing the handbook on the ICC website.
*Disclaimer
The information provided on this website regarding Incoterms 2020 is intended for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy of the information presented, we recommend consulting with a qualified professional for specific guidance on Incoterms 2020 and their application to your international trade transactions.
