Incoterms 2020

The Incoterms 2020 meet a demonstrable need in the market for on-board bills of cargo under the Free Carrier (FCA) Incoterms rule. This change is highly desirable, especially at banks, in the case of payment under an L/C.

The Incoterms 2020 provide for different levels of insurance coverage under the Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP) rules. For example, with CIP the seller must agree to insurance with a higher coverage ratio (Institute Cargo Clauses A). Parties can separately agree to more limited coverage
handle.

The Incoterms 2020 take into account the transport of goods with own means of transport at FCA, Delivery at Place (DAP), Delivery at Place Unloaded (DPU), and Delivered Duty Paid (DDP).

The three-letter abbreviation for Delivered at Terminal (DAT) has been changed to DPU. This was mainly done to indicate more emphatically that the destination can be any place and not just a terminal. The condition for using this Incoterms condition is that it is a place where the goods can be unloaded, as unloading is an obligation of the seller.

The Incoterms 2020 includes safety-related requirements among the obligations regarding transport and costs.

The 11 current Incoterms will all continue to exist. However, a number of requirements have been added for the obligations regarding transport and the associated costs of transport. In addition to these changes, a number of adjustments have been made:

EXW

EXW, Ex Works: The seller of a good makes this good available to the buyer at a delivery address agreed by both parties, for example a production facility of the seller. Upon delivery, the buyer is fully responsible for further transport, including transport costs and insurance of the cargo. The seller must only make the cargo packed and available at the 'factory gate'. The buyer must take care of loading and all documentation.

FCA

FCA, Free Carrier: This term is similar to EXW, with the difference that the seller now takes care of the loading of the vehicle, vessel or aircraft at the place of transfer to the buyer. The seller also provides any necessary export documents.

CPT

CPT, Carriage Paid To: Here the seller takes care of the transport of the goods to the agreed delivery address, but without also taking on the insurance. In this contractual agreement, the buyer must ask himself whether he will have to pay for additional costs along the way, such as transshipment costs.

CIP

CIP, Carriage and Insurance Paid for: This term is similar to CPT, but in this case the seller also takes care of the insurance of the cargo up to the agreed delivery address. That address can actually be anything, ranging from a branch of the buyer to a transport hub along the way, for example a port (terminal).

DAP

DAP, Delivered At Place: The seller takes care of the entire process to the agreed
place of delivery, but is not responsible for unloading. The buyer must ensure this and
also for customs clearance upon import and for the payment of excise duties due,
from the point where charge transfer takes place.

THAT

DAT, Delivered At Terminal: This term does not differ much from DAP, with the difference that now the
seller is responsible for unloading at the place of delivery.

DDP

DDP, Delivered Duty Paid: Here the seller actually bears all costs (transport, import taxes, insurance) until the moment of delivery to the agreed address. More or less the mirror image of EXW. These terms can be used throughout the entire transport chain, including, for example, intermodal transport, where there are more transshipment points. There are four more specifically for the
international shipping and inland shipping:

FAS

FAS, Free Alongside Ship: The seller takes care of the entire process, including import documentation and duties, for the entire route to the port of unloading, after which all obligations are transferred to the buyer. The transshipment costs are therefore also borne by the buyer.

FOB

FOB, Free On Board: EXW is probably the best-known Incoterm. In this case the
seller for the transport, including insurance and any customs duties, to the port
of load. Once the cargo has passed the ship's side, all obligations are transferred to the ship
buyer.

CFR

CFR, Cost And Freight: Deviates from FOB in that the seller now also takes care of the crossing by ship to the agreed delivery point.

CIF

CIF, Cost, Insurance and Freight: Similar to CFR, but now the seller also takes care of the insurance of the cargo during the crossing until the destination where the cargo is actually delivered to the buyer.

It is therefore expected that we will say goodbye to EXW, at least in international transport, and perhaps also to FAS and DDP. It will be replaced by two Incoterms, namely DTP and DPP, which limits the number of terms, currently eleven, to ten.