On January 1st, 2020, the new Incoterms® became effective. Indeed, the International Chamber of Commerce (ICC) officially released the new terms for the international shipping of goods: they will be in place for the next 10 years.
Since 2016, the ICC has been working on the new Incoterms® rules, in order to answer to all the needs of our sector. As a matter of fact, with the evolution of the market, and new trends gaining more importance, new necessities have sprung in the freight forwarding field.
What are the Incoterms®?
The Incoterms® are a set of rules – first presented in 1936 - developed to specify the following points in an international contract for shipping goods:
- Obligations: what has to do the seller and what has to do the buyer, in terms of insurance policy, issuing documents and export/import license.
- Risks: where does the responsibility of the seller end? Where does the responsibility of the buyer starts?
- Expenses: Which costs depend on the seller? Which ones on the buyer?
The Incoterms® 2020 rules
There were 11 rules in Incoterms® 2010: ten of them have been slightly updated, with no name change, whereas Incoterms® 2010 rule DAT (Delivered At Terminal) was changed to DPU (Delivery At Place Unloaded) in Incoterms® 2020.
So, what should you know about the Incoterms® 2020 rules? Find out here below:
- EXW (Ex Works): This Incoterms® rule is used for all types of transport, and represents the one with the least obligations for the seller. Taxes – such as VAT – are only required in the destination country. Customs declaration is used to prove that the goods have left the country of origin. This Incoterms® rule can also be used for domestic shipments – inside the same country and/or customs union. In that case, customs clearance is not necessary.
- FCA (Free Carrier): In this rule, used for air and road forwarding, the seller has responsibility of the goods until the goods are delivered to the carrier chosen by the buyer. After numerous market demands, in ICC Incoterms® 2020 FCA rule now enables the parties to agree for the buyer to ask the carrier to issue an onboard bill of lading to the seller.
- FAS (Free Along Ship): In this rule, meant for ocean freight, the seller must transport the goods to the port.
- FOB (Free on Board): In this rule, meant for ocean freight, the responsibility of the goods of the seller is until the products are loaded on the vessel.
- CPT (Cost Paid To) and CFR (Cost & Freight): In this cases, the seller has responsibility of the goods until the terminal. CPT is used for road and air freight, CFR is used for sea shipments.
- CIF (Cost Insurance and Freight) and CIP (Cost Insurance Paid To): Under Incoterms® 2010, the seller had to provide a Clause C level of insurance for both Incoterms® rules. This is the most elementary level, and even though can be fitting for bulk commodity cargoes, it is not the same with manufactured goods.
- For this reason, In ICC Incoterms® 2020 CIF keeps the same insurance requirements (i.e. Clause C) but CIP has increased the insurance level required to Clause A.
- DPU (Delivery At Place Unloaded): In Incoterms® 2010, the DAT rule meant that the goods were delivered once unloaded at a terminal. Many expressed the idea to get an Incoterms® rule that allowed delivery at not just a terminal. Therefore, the DAT Incoterms® rule will be now known as DPU, so that it does not refer to just “terminals”.
- DAP (Delivery At Place): The seller has the responsibility of the goods (and all costs) until the unloading; the buyer is responsible for customs clearance.
- DDP (Delivery Duty Paid): All responsibilities are on the seller until the final destination.
Here at D.B. Group, our teams are always keen on studying your case and designing the best solution for your shipments.
If you need any further information, don’t hesitate to contact us!