INCOTERMS 2020

Using Incoterms for Domestic Sales

Because they use Incoterms for international sales, some companies have started using Inocterms for their domestic sales as well instead of using the Uniform Commercial Code (UCC) terms. This is perfectly acceptable as long as their contracts identify what set of terms they're using.

Under the new Incoterms 2020 rules, FCA allows

the parties to agree in the sales contract that the buyer should instruct its carrier to issue a bill of lading with the onboard notation to the seller.

If parties want Incoterms 2020 Rules to apply, the best way to make that clear in their sales contracts and on their export paperwork as follows:

"[the chosen incoterms rule], [named port, place, or point] Incoterms 2020". For example: CIF, Shanghai, Incoterms 2020, or DAP, No. 123, ABC Street, Importland, Incoterms 2020

DDP (Delivered Duty Paid)

DDP Incoterms means the seller bears all risks and costs associated with delivering the goods to the named place of destination ready for unloading and cleared for import.

Incoterms for Any Mode of Transport

EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place), DPU (Delivered at Place Unloaded) ,DDP (Delivered Duty Paid)

The Importance of Incoterms 2020

Each Incoterms rule provides exporters and importers clear, succinct rules that help them understand their responsibilities, clarify any gray areas in contracts, and can save a lot of headaches when used correctly. Incoterms reduce the risk of legal complications by giving buyers and sellers a single home base from which to reference trade practices.

Incoterms for Sea and Inland Waterway Transport

FAS (Free Alongside Ship), FOB (Free on Board), CFR (Cost and Freight), CIF (Cost, Insurance, and Freight)

FCA (Free Carrier) II

Previously, problems occurred with this term when the seller was responsible for loading the goods on a truck or some other transport hired by the buyer and not directly on the international carrier. If the seller and buyer had agreed on using a letter of credit as the payment method for this transaction, banks often require the seller to present a bill of lading with an on-board notation before they can get paid. An international carrier won't typically provide a seller who did not present the goods directly to them with such a bill of lading.

EXW (Ex Works)

The seller fulfills its obligations by having the goods available for the buyer to pick up at its premises or another named place (i.e. factory, warehouse, etc.). Buyer bears all risk and costs starting when it picks up the products at the seller's location or other named place until the products are delivered to its location. Seller has no obligation to load the goods or clear them for export.

FCA (Free Carrier) I

The seller is responsible for either making the goods available at its own premises or at a named place. In either case, the seller is responsible for loading the goods on the buyer's transport and is responsible for delivery to the port and export clearance including security requirements. Risk transfers once the goods are loaded on the buyer's transport. This term has changed the most in the Incoterms 2020 rules.

DPU (Delivered at Place Unloaded)

Previously named Delivered at Terminal (DAT), this Incoterm has been renamed Delivered at Place Unloaded (DPU) because the buyer and/or seller may want the delivery of goods to occur somewhere other than a terminal. This term is often used for consolidated containers with multiple consignees, and it is the only term that tasks the seller with unloading the goods. Seller clears the goods for export and bears all risks and costs associated with delivering the goods and unloading them at the terminal at the named port or place of destination. Buyer is responsible for all costs and risks from this point forward including clearing the goods for import at the named country of destination.

DAP (Delivered at Place)

Seller clears the goods for export and bears all risks and costs associated with delivering the goods to the named place of destination not unloaded. DAP means the buyer is responsible for all costs and risks associated with unloading the goods and clearing customs to import the goods into the named country of destination.

CIP (Carriage and Insurance Paid To)

Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment, at which point risk transfers to the buyer. Seller is responsible for the transportation costs associated with delivering goods and procuring insurance coverage to the named place of destination. In Incoterms 2020 rules for CIP, the seller is now responsible for purchasing a higher level of insurance coverage—at least 110% of the value of the goods as detailed in Clause A of the Institute Cargo Clauses.

CPT (Carriage Paid To)

Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment, at which point risk transfers to the buyer. Seller is responsible for the transportation costs associated with delivering goods to the named place of destination but is not responsible for procuring insurance.

FOB (Free on Board)

Seller clears the goods for export and delivers them when they are on board the vessel at the named port of shipment. Buyer assumes all risks and cost for goods from this moment forward.

CIF (Cost, Insurance, and Freight)

Seller clears the goods for export and delivers them when they are on board the vessel at the port of shipment. Seller bears the cost of freight and insurance to the named port of destination. The seller is required to purchase the minimum level of insurance under Clause C of the Institute Cargo Clauses. This requirement is unchanged from Incoterms 2010. Buyer is responsible for all costs associated with unloading the goods at the named port of destination and clearing goods for import. Risk passes from seller to buyer once the goods are on board the vessel at the port of shipment.

CFR (Cost and Freight)

Seller clears the goods for export and delivers them when they are on board the vessel at the port of shipment. Seller bears the cost of freight to the named port of destination. Buyer assumes all risks for the goods from the time the goods have been delivered on board the vessel at the port of shipment.

FAS (Free Alongside Ship)

Seller clears the goods for export and delivers them when they are placed alongside the vessel at the named port of shipment. Buyer assumes all risks/costs for goods from this point forward.