Incoterms 2020 explained


Incoterms 2020 came into force on January, 1st, 2020, however, the use of the old versions is also possible at the present time. Incoterms rules do not replace the foreign trade contract, but only allow to significantly reduce and simplify it. The unified terms and conditions do not regulate the transfer of ownership of a product lot, nor do they specify the unit price or payment methods. They only record the distribution of obligations and financial expenses between the parties to the sale and purchase transaction, such as: payment for transportation, unloading of goods, customs clearance, payment of taxes and duties, insurance, as well as the transfer of risks in case of loss and possible damage to products.

No terms were removed or added in the new version. Only one delivery basis has changed its name: DAT is renamed DPU. However, renaming is more technical in nature. As in the previous version, some terms apply only to sea (river) transport mode and have not become universal.

One of the most common delivery bases (FCA) has changed, now its application allows the parties to the transaction to agree that the buyer can instruct the carrier to issue a sea bill of lading with an onboard record to the seller. This will allow the latter to fulfill the terms of the letter of credit in a short time.

The innovations also affected the terms of the CIP, the amount of the insurance amount has increased and must exceed 110 percent of the cost of the insured consignment.

The new version also explains the customs clearance of products at the border and introduces a new concept of "transport security". Both the seller and the buyer are allowed to use their own transport for transportation in the new version of the Rules, and not to enter into a contract with a third party, outsourcing this service.

In Incoterms 2020, there are 4 groups of basic conditions for the supply of products (E, F, C and D). They are divided according to the distribution of responsibilities between the parties to a foreign trade transaction. 

Incoterms 2020 FOR ANY TYPE OF TRANSPORT include seven rules that can be used regardless of the chosen means of transport, regardless of whether one or more than one type of transport is used. They can be used even in the absence of marine mode of transportation. These rules can be used when a vessel is used for a part of shipping.

These rules are:

1) EXW - Ex Works

2) FCA - Free Carrier

3) CPT - Carriage Paid To

4) CIP - Carriage and Insurance Paid to

5) DPU - Delivery to the Place of Unloading

6) DAP - Delivered At Point

7) DDP - Delivered Duty Paid

Incoterms 2020 FOR MARITIME AND INLAND WATERWAY TRANSPORT are used in both the place of departure and the place in which goods are shipped to the buyer are the ports.

These rules are:

8) FAS - Free Alongside Ship

9) FOB - Free On Board

10) CFR - Cost and Freight

11) CIF - Cost, Insurance and Freight