In these moments when international transport lives an atypical situation that requires special management by all those involved in the process, from XGL we remember INCOTERMS 2020, the agreements that govern imports and exports at a global level.
In January 2020, International Chamber of Commerce updated these rules to regulate the responsibilities, costs and risks that can be derived from each international commercial transaction. This is how the INCOTERMS 2020 look after the modifications.
What are Incoterms?
Incoterms (International Commercial Terms) can be considered a set of optional international rules that the International Chamber of Commerce has compiled and defined on the basis of practices that are more or less standardised by traders.
Incoterms basically define the extent to which the seller is responsible for the goods and what costs are to be borne by the seller and therefore included in the price.
Functions of Incoterms:
- The sharing of costs.
- The passing of risk.
- The place where the goods are to be delivered.
Classification of Incoterms 2020 costs
The International Chamber of Commerce classifies Incoterms according to the mode of transport used: sea, land or air. Thus, the first group includes 7 Incoterms (EXW, FCA, CPT, CIP, DAP, DPU, DDP) that can be used regardless of the mode of transport and whether they use one or more modes of transport. The second group includes 4 Incoterms (FAS, FOB, CFR and CIF) to be used when the goods are transported between two ports.
Incoterms 2020 costs irrespective of the mode of transport:
- EXW (Ex Works). The seller fulfils his obligation to deliver once he has placed the goods at his own premises (factory, warehouse, etc.) at the disposal of the buyer.
- FCA (Free Carrier). The seller fulfils his obligation to deliver. Once he has delivered the goods, after export clearance, to the carrier designated by the buyer at the agreed place.
- CPT (Carriage Paid To). The seller pays the freight for the carriage of the goods to the agreed destination.
- CIP (Carriage And Insurance Paid To). The seller has the same obligations as under CPT. In addition he must obtain transport insurance against the risk incurred by the buyer of loss of or damage to the goods during carriage.
- DAP (Delivered At Place). The seller has fulfilled his obligation to deliver the goods once they have been placed at the disposal of the buyer at the named place of destination.
- DDPU (Delivered At Place Unloaded). The seller has fulfilled his obligation to deliver the goods when they have been placed at the disposal of the buyer at the named place of destination, unloaded and not cleared for import.
- DDP (Delivered Duty Paid). The seller has fulfilled his obligation to deliver the goods once they have been placed at the disposal of the buyer at the named place of destination.
Incoterms 2020 maritime transport costs:
- FAS (Free Alongside Ship). The seller fulfils his obligation to deliver once he has placed the goods alongside the ship on the quay or the barges at the named point of shipment.
- FOB (Free On Board, Free On Borad). The seller fulfils his obligation to deliver once the goods have been placed on board at the named port of shipment.
- CFR (Cost And Freight). The seller must pay the costs and freight necessary to place the goods at the port of destination, but it is the buyer who bears the risk of loss or damage to the goods, together with any additional costs due to events that may occur after the goods have been placed on board the vessel at the port of shipment.
- CIF (Cost, Insurance and Freight). The seller has the same obligations as under CFR. In addition, he must obtain ocean freight insurance against the risk incurred by the buyer of loss of or damage to the goods during carriage.
Source: ICC Spain