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Incoterms 2020

What are Incoterms?

Incoterms (International Commercial Terms) can be taken as a set of optional international rules that the International Chamber of Commerce has compiled and defined on the basis of more or less standardized practices by merchants.

Incoterms are rules that determine:

Distribution of expenses.  

So that both the seller and the buyer know what expenses are included in the sale price, thus facilitating comparison with other offers, whether domestic or international.

Risk transfer.

 Because they define the time and place where the seller's responsibility ends and the buyer's begins.

Delivery of the merchandise.

They indicate the specific place where the seller must deposit the merchandise and, therefore, the point where the buyer must collect it.

At Banco Sabadell we want to help your company in its international business operations.


 

What's new in Incoterms 2020

See the major changes.

Incoterm classification and rules

The International Chamber of Commerce classifies Incoterms according to the mode of transport used.

For any transport mode or modes

As long as the transport is by air, train or truck or, if more than one mode of transport is used, or any combination of them, including ships (for example, container transport).

EXW (Ex Works)
The seller fulfils his delivery obligation once the merchandise has been placed in his own premises (factory, warehouse, etc.) at the buyer's disposal Read more...

FCA (Free Carrier)
The seller agrees to deliver the merchandise, after having carried out the export clearance, to the carrier designated by the buyer at an agreed point within the country of origin. Read more...

CPT (Carriage Paid To)
The seller delivers the merchandise to the main carrier, bearing the cost until the merchandise arrives at the agreed destination. Read more...

CIP (Carriage and Insurance Paid To)
The seller bears the costs of the main transport until the merchandise reaches the agreed destination, as well as the freight transport insurance that entitles the buyer to claim directly from the insurer. Read more...

DAP (Delivered at Place)
The seller bears the risks and costs of locating the merchandise at the agreed point in the destination country prepared for unloading. Read more...

DPU (Delivered at Place Unloaded)
The seller has fulfilled his obligation to deliver the merchandise once it has been made available to the buyer at the agreed destination, unloaded but not cleared for import. Read more...

DDP (Delivered Duty Paid)
The seller fulfils his responsibilities at the time he leaves the merchandise at the buyer's disposal at the agreed point in the destination country, cleared for import, assuming all risks and costs (including customs duties, taxes and delivery costs of the goods). Read more...

For maritime transport and inland waterways

When the delivery point and the place to which the merchandise is transported are ports.

FAS (Free Alongside Ship)
The seller delivers the goods to the side of the ship at the agreed port of shipment. Read more...

FOB (Free On Board)
The seller delivers the goods on board the ship at the agreed port of shipment. Read more...

CFR (Cost and Freight)
The seller delivers the merchandise on board the ship at the agreed port of shipment, bearing the cost of the main transport to place the merchandise in the destination port. Read more...

CIF (Insurance and Freight)
The seller has the same obligations as under the CFR term and, moreover, must obtain maritime transport insurance against the risk of loss or damage to the goods. This insurance policy must entitle the buyer to claim directly from the insurer. Read more...

Recommendations when using Incoterms

  1. Always include the expression "Incoterms 2020" after the Incoterms term. For example: "CIF Istanbul (Incoterms 2020)".
  2. Use only the 11 Incoterms in force in their three letter form, followed by the agreed delivery point or port.
  3. Give precise instructions to the carrier regarding the Incoterms term used to ensure that the transport contract agrees with the sale contract.
  4. FAS, FOB, CFR and CIF Incoterms must be used exclusively for traditional maritime transport (goods loaded on board a ship).
  5. For containers, multimodal and general cargo, use the Incoterms EXW, FCA, CPT, CIP, DAP, DPU and DDP.
  6. Incoterms C (CIF, CFR, CIP and CPT) are not arrival or delivery contracts at destination but lading contracts. Delivery occurs at origin, as in group F.
  7. Remember that additional specifications may be required regarding:
    • When will delivery take place and who should carry out the loading and unloading.
    • Insurance coverage and its geographical and temporal scope.
    • The limitations regarding transportation (refrigerated containers, prohibition of merchandise on deck ...).
    • Force majeure, exonerative or temporary extension clauses, especially if you are responsible for customs clearance or delivery to a point located in the interior of the country.
  8. See the Incoterms® 2020 publication of the International Chamber of Commerce.

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