June 2, 2024
What are Incoterms?
The Incoterms® rules are the international regulations that apply to the trade for the sales of goods worldwide; these rules are in place to clarify the buyer's responsibilities and the seller/shipper in the international shipments of global goods. The Incoterms® rules assist the mutual understanding of responsibilities for the sale of goods worldwide between buyers and sellers and the export and import shipping process.
Launched by the International Chamber of Commerce (ICC), the new set of rules entered into force on January 1st, 2020. As of this date, all sales contracts should refer to the Incoterms® 2020 rules as the latest version of the Incoterms® rules.
Why are Incoterms used in international shipping?
They are the authoritative rules for determining how costs and risks are allocated to the parties; they guide individuals and companies participating in the import and export of global trade. These rules are regularly incorporated into contracts and have become part of the daily language of trade between buyers and sellers.
Key Incoterms 2020 changes - What's new?
- Provides for demonstrated market need concerning bills of lading (BL) with an on-board notation and the Free Carrier (FCA) rule.
- Aligns different insurance coverage levels in Cost Insurance and Freight (CIF) and Carriage and Insurance Paid to (CIP).
- Includes arrangements for carriage with own means of transport in Free Carrier (FCA), Delivery at Place (DAP), Delivery at Place Unloaded (DPU), and Delivered Duty Paid (DDP).
- There is a change in the three-letter name for Delivered at Terminal (DAT) to Deliver at Place Unloaded (DPU).
- Includes security-related requirements within carriage obligations and costs.
Download Incoterms® 2020 Highlights in PDF Here
'Incoterms® 2020 rules make business work for everyone by facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world to understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions, and help build confidence in our valuable global trading system.'ICC Secretary General John W.H. Denton AO
Valuable Incoterms 2020 information
Incoterms®doesnot constitute a complete contract but rather becomes a part of it. Forits application, the following formula should be used:
(The chosen Incoterm®rule)followed by (Named port, place or point)Incoterms®2020
Example: "CIF Amsterdam Incoterms®2020"or "DAP 1500 Rankin Road, Houston, TX United States Incoterms®2020."
If there is no year stated in the Incoterms®, then the following applies:
- Until December 31st, 2019, the Incoterms®2010 apply.
- From January 1st, 2020, the Incoterms®2020 applies.
Suppose a different year is stated, e. g. Incoterms®1980, then respective terms apply.
Don't get confused by Incoterms terminology and use the correct international commercial terms! Crane Worldwide Logistics created an Incoterms® 2020 PDF chart to help better understand these changes. Are you familiar with all the shipping terms? Reach out if we can provide further support on international regulations!
Download Incoterms® 2020 Matrix in PDF Here
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How many Incoterms are there in 2020?
Incoterms 2020 summary
Any Mode of Transport
- EXW - Ex Works - Seller is only responsible for having the goods packed made available at the seller's premises. The buyer bears the full risk and costs from there to the destination - including the loading of the cargo.
- FCA - Free Carrier - Seller is only responsible for delivery to the named place. The seller is responsible for the loading. Risk and cost are transferred to the buyer as soon as delivered at the named place. Unloading is the buyer's responsibility.
- CPT - Carriage Paid To - Seller arranges the transportation and costs to the named destination. Risk is transferred to the buyer once delivered at the first carrier.
- CIP - Carriage and Insurance Paid to - Seller arranges the transportation, costs, and insurance on behalf of the buyer to the named place at the destination. Risk is transferred to the buyer once delivered at the first carrier. The seller must obtain extensive insurance cover complying with insurance Cargo Clauses (A) or a similar clause in the buyer's name.
- DAP - Delivered at Place - Seller delivers the goods to the agreed place at the destination. Seller assumes all costs and risks until the goods are ready for unloading at the named place of destination.
- DPU - Delivered at Place Unloaded- Seller assumes all costs and risks until the goods are unloaded at the agreed named place of destination. The buyer is responsible for import customs formalities.
- DDP - Delivery Duty Paid- Seller delivers goods to the agreed place destination. Seller assumes all costs - including import formalities and risks until the goods are ready for unloading at named place of destination.
Sea and Inland Waterway Transport
- FAS - Free Alongside Ship - Seller is responsible for delivering goods at the port alongside the vessel. From this point, onwards risk and cost transfer to the buyer.
- FOB - Free On Board - Seller is responsible for goods loaded onboard thevessel. Risk and cost are transferred as soon as the goods have been loaded on board the vessel.
- CFR - Cost andFreight- Seller covers freight costs to the named port of destination or place. Risk is transferred as soon as the goods have been loaded on board the vessel.
- CIF - Cost, Insurance, and Freight - Seller covers insurance and freight costs to the named port of destination or place. Risk is transferred as soon as the goods have been loaded on board the vessel. Seller is required to obtain the minimum insurance cover complying with Institute Cargo Clauses (C) in the buyer's name.
Did you know? The most commonly used Incoterms areEXW – Ex-Works · DAP – Delivered At Place · DDP – Delivered Duty Paid.
8 facts about Incoterms you should know
- The international regulations all started way back over 200 years ago: In 1812, British Courts established Free On Board (FOB) shipment terms indicating who is liable for damage in shipping were established. These established rules were the seeds that would eventually grow into Incoterms® we know today!
- Booming Trade: Up until 1936, the original FOB rules were updated only once. It was in this year that the ICC would publish 6 rules, making these the first truly global standardization for worldwide trade.
- World War II: After the second world war, lots of international trade standards and agreements had to be mended, re-written, and new rules established.
- New Modes = New Rules: As new forms and methods of transportation emerged, Incoterms had to evolve as well. In 1953, 3 new rules were added to include Trains, Trucks, and specific costs.
- FOB: The first air freight was officially delivered in 1910, but it took until 1976 to include air FOB rules into Incoterms®!
- Electronification: in 1990, Incoterms® underwent a massive re-build, as more and more electronic services became available.
- Ever-changing landscape: In 2010, with so many changes and increases with international shipping, Incoterms® had to make adjustments as well. In 2010, 4 Incoterms were done away with, and 3 all-new Incoterms were added.
- Incoterms® 2020 were released!
Free Incoterms® 2020 Training available to you...
Watch now our webinar about Incoterms® 2020 and learn from Christopher Palmer, CraneWorldwide Logistics'Director of Projects.
With a wealth of logistics industry expertise, learn more about the different Incoterms and the impact on buyers and shippers when using the different commercial terms. Crane Worldwide Logistics is available to support your international shipments. Reach out below if you would like to learn more.
For more information about all of the incoterm rule definitions, you can check out our Incoterms Glossary, highlighting the detail on all of 11 Incoterm international shipping regulations. EXW, FCA, CPT, CIP, DAP, DPU, DDP for any mode of transport. FAS, FOB, CFR, CIF for sea and inland waterway transport. If you have any questions relating to Incoterms or require freight forwarding or logistics support, please don't hesitate to reach out to our logistics experts. Crane Worldwide Logistics is present in 120 locations in 30 countries, we are here to help!
Check it out herein our Knowledge Center along with market updates, industry insights, and more. We are here to help you navigate your international shipping needs, reach out below for logistics support.
