Incoterms – International Commercial Terms – are fundamental in practice for indicating the conditions of delivery of goods in international trade.
Since 1936, the International Chamber of Commerce (ICC) has been responsible for the development of these terms, which are subject to due review based on the developments in international trade, for their corresponding periodic updating. Thus, various modifications have been made over time. The most notable are those of 1945, 1953, 1967, 1976, 1980, 1990, 2000, and 2010.
The new modifications introduced in this review stage have recently been reported with the scope of putting them into effect as of 2020.
In this regard, we consider it important to highlight certain points regarding this fundamental indicative mechanism that does not allow the possibility of its ignorance by those involved in international trade.
Regarding this note, we would like to thank the International Chamber of Commerce, the Argentine Chamber of Commerce and Services and the CAECE University for the invitation to the Directorate of Customs News to the INCOTERMS®2020 Approved Expert Training International Chamber of Commerce – ICC Argentina, carried out prior to the presentation of Incoterms®2020.
General features
What are the objectives of INCOTERMS®?
The objective of the INCOTERMS® It is to indicate the conditions of delivery of goods in international trade, clarifying the costs of transactions between the parties – buyer/seller – and delimiting the responsibilities of these subjects.
Are INCOTERMS® established by any regulation?
Although no international or national standard establishes these terms, they have been voluntarily adopted as a fundamental basis for the use and signaling of rules in international commercial operations by the parties involved, generating a use and custom. And from this, different regulations have adopted them when describing terms of foreign trade operations. An example of this are the Customs Codes of different nations.
How many rulers and letters are used?
The INCOTERMS® rules consist of eleven three-letter commercial terms, which express practices in contracts for the sale of goods.
What do INCOTERMS® rules describe?
They describe the obligations, risks and costs of each party: buyer and seller.
What do INCOTERMS® rules not do?
The INCOTERMS® rules are not a sales contract; they may form part of that trade agreement when incorporated but do not replace it. They reflect the commercial practice for any merchandise. In this sense, the INCOTERMS® rules do not deal with the existence of a sales contract, nor with specifications of the merchandise, nor with payment terms, nor with legal remedies in case of breaches of the sales contract, nor with the effects of delay in delivery or other breaches of the sales contract itself. Nor with the effects of sanctions, the determination and imposition of tariffs, prohibition of export or import, force majeure, excessive burden or intellectual property rights. It is not its concern with the system, venue or legislation for resolving disputes in case of such breach, nor does it deal with the transfer of ownership and/or title and/or possession of the merchandise sold.
Do any modifications that may be made or any term left out prevent its use?
No. All INCOTERMS® can be used, so it is always important to indicate the year of the version when indicating the term. This is essential to avoid future difficulties in knowing which INCOTERMS® rules apply to the case.
What would be an example?
In order to determine the conditions that can be agreed between the parties, the INCOTERMS® rule should be specified as follows: FOB INCOTERMS2010.
Is it necessary to indicate the port, place or designated point?
The indication of the place next to the INCOTERMS® rule is of great importance. With the exception of the C rules, the named place indicates where the goods are delivered and this determines where the risk is transferred from the seller to the buyer. In this context, it should be noted that in the D rules, the named place is the place of delivery and the place of destination, and the seller must arrange transport to that point; C rules: the named place indicates the destination to which the seller must arrange and pay for the transport of the goods, which is not the place or port of delivery. E.g. FCASanghaiINCOTERMS2020.
From the INCOTERMS 2010 version to the version INCOTERMS2020
What are the INCOTERMS® in force in 2010?
EXW, FCA, CPT, CIP, DAT, DAP, DDP, FAS, FOB, CFR, CIF.-
What are INCOTERMS® version 2020?
EXW, FCA, CPT, CIP, DAP, DPU, DDP, FAS, FOB, CFR, CIF.-
What is its general scope?
EXW – Ex Works
FCA – Free Carrier
CPT – Transportation Paid Up To
CIP – Transportation and Insurance Paid Up To
DAP – Delivered on Place
DPU – Delivered at Place Unloaded
DDP – Delivered Duty Paid
FAS – Free Alongside Ship
FOB – Free on Board
CFR – Cost and Freight
CIF – Cost, Insurance and Freight
What are the goals of the new changes in the 2020 version?
The INCOTERMS2020 version aims to help the international trading community to make its operations more fluid. The presentation has been improved to guide users towards the correct rule for their sales contracts. This updates the guidance notes to explanatory notes for each INCOTERMS® rule. The demarcation and connection between the sales contract and its ancillary contracts is explained and the content of the INCOTERMS® rules is reordered, giving more prominence to delivery and risk.
What are the changes from the 2010 rules to the 2020 rules?
The changes made by ICC for INCOTERMS2020 are:
Bills of lading with the mention “on board” and the INCOTERMS FCA rule
Costs: where listed
Different levels of insurance coverage in CIF and CIP
Arrangement of transport with the seller's or buyer's own means of transport in FCA, DAP, DPU and DDP
Inclusion of safety-related requirements in transport obligations and costs
Explanatory notes for users
Why do the so-called explanatory notes for users appear?
The explanatory notes for users are of great value, as they explain the fundamentals of each INCOTERMS2020 rule, when they should be used, when the risk is transferred between a selling party and a buying party, how the costs are shared between these parties. Likewise, using the explanatory notes in the 2020 version makes it possible to determine the clarifications of the articles that provide clarity of the scope of the rules. For example: in the new order of the articles within the INCOTERMS2020 rules, the costs now appear in article A9/B9 of each INCOTERMS rule, which implies a relocation. Therefore, the purpose of these changes is to provide greater help to companies when choosing the most appropriate INCOTERMS rule for their commercial requirements.
What is the internal order of the INCOTERMS 2020 rules?
The internal order has been restructured. As a result, ten articles are established for each INCOTERMS2020 rule.
What are the articles and the subject matter?
A refers to the seller and B refers to the buyer.
A1/B1 General obligations
A2/B2 Delivery/Receipt
A3/B3 Risk transfer
A4/B4 Transport
A5/B5 Insurance
A6/B6 Delivery/transport document
A7/B7 Export/import clearance
A8/B8 Checking/packing/marking
A9/B9 Cost allocation
A10/B10 Notifications
What are INCOTERMS® for maritime and multimodal transport?
Multimodal: EXW, FCA, CPT, CIP, DAP, DPU, DDP
Maritime: FAS, FOB, CFR, CIF
What conditions does the new DPU rule introduced in the INCOTERMS®2020 version indicate?
The 2020 version of INCOTERMS® introduces the DPU rule, which determines “Delivery at Place Unloaded”. It should be noted here that the ICC has decided to introduce two changes to DAT and DAP. Firstly, it reverses the order in which these two INCOTERMS2020 rules are presented. Thus, DAP (where delivery occurs before unloading) is presented in INCOTERMS2020 before DAT. Also, the name of the DAT rule was changed to DPU (Delivery at Place Unloaded) emphasizing the possibility that the place of destination could be any place and not just a terminal. Note that in INCOTERMS2010, in the DAT rule, the seller delivered the goods once they were unloaded from the incoming means of transport at a terminal and the DAT guidance notes in INCOTERMS2010 define the word terminal broadly to include any place, whether covered or not. It is important to note that if the delivery location is not at a terminal, the seller must ensure that the location can unload.
The INCOTERMS2020 version rule has been set aside, can it be used?
Although the INCOTERMS2020 version leaves aside the term DAT in the face of the indicated modification, it may continue to be used by the contracting parties. However, its version year must always be indicated. E.g.: DAT INCOTERMS2010.-
What are the differences in coverage between CIF and CIP rules in INCOTERMS2020?
While INCOTERMS 2010 imposed on the seller the obligation to obtain at its own expense cargo insurance that complies at least with the minimum coverage provided for by the Institute's Cargo Clauses (C), in the INCOTERMS 2020 version this is maintained for the CIF rule, but for CIP the seller must now obtain insurance coverage that complies with the Institute's Cargo Clauses (A) increasing the coverage obtained by the seller for the benefit of the buyer. This does not imply that the parties can agree on a lower level of coverage.
From what specific date can the new version of INCOTERMS2020 be used?
Although it was presented on September 17, 2019, the INCOTERMS2020 version in its entirety can be used from January 1, 2020.
By: Dr. Guillermo Felipe Coronel, Lawyer specialized in Customs Law andApproved expert Incoterms 2020 International Chamber of Commerce – ICC Argentina
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
