International commercial transactions are facilitated by globally recognised commercial terms known as Incoterms. These terms define the responsibilities of buyers and sellers in international trade, and the International Chamber of Commerce (ICC) has published Incoterms since 1936. The latest version, Incoterms 2020, was published on September 10, 2019. In this blog post, we will provide an overview of the Incoterms 2020.
What are Incoterms?
Incoterms are standard trade terms used in international trade contracts to define the responsibilities of buyers and sellers regarding the delivery of goods. These terms specify who is responsible for paying for transportation, insurance, taxes, customs clearance, and other expenses related to the shipment of goods. Incoterms are not laws, but they are recognised and used by businesses and governments worldwide.
What’s New in Incoterms 2020?
Incoterms 2020 introduced several changes and updates to the previous version, Incoterms 2010. Here are the significant changes:
New Incoterms Rules: The Incoterms 2020 introduced a new Incoterm, known as Delivered at Place Unloaded (DPU). This term replaces the previous term, Delivered at Terminal (DAT).
Arranging Transport and Insurance: Under the Incoterms 2020, buyers and sellers must agree on who will arrange transport and insurance for the goods. The Incoterms also provide guidance on how to handle these arrangements.
Security Requirements: The Incoterms 2020 provide guidance on security requirements related to the shipment of goods, such as cargo inspection, packaging, and labeling.
Bills of Lading: The Incoterms 2020 clarify the responsibilities of buyers and sellers regarding the bills of lading, which is a document that provides evidence of the contract of carriage.
Cost Allocation: The Incoterms 2020 provide clear guidance on cost allocation related to the shipment of goods, such as loading and unloading costs, customs duties, and taxes.
Incoterms 2020 Rules
The Incoterms 2020 are divided into two groups based on the mode of transport used:
Incoterms for any mode of transport:
EXW (Ex Works)
FCA (Free Carrier)
CPT (Carriage Paid To)
CIP (Carriage and Insurance Paid To)
DPU (Delivered at Place Unloaded)
DAP (Delivered at Place)
DDP (Delivered Duty Paid)
Incoterms for sea and inland waterway transport:
FAS (Free Alongside Ship)
FOB (Free on Board)
CFR (Cost and Freight)
CIF (Cost, Insurance, and Freight)
Incoterms 2020 are a set of globally recognised commercial terms used in international trade to define the responsibilities of buyers and sellers regarding the delivery of goods. These terms were updated in 2020 to provide more clarity and guidance on issues such as security requirements, bills of lading, cost allocation, and arrangements for transport and insurance. Understanding and using Incoterms can help businesses avoid misunderstandings and disputes in international trade contracts.
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