Top

Incoterms® 2020 Explained

Shipping and Logistics Incoterms® 2020 Explained
Incoterms 2020 - Logistics outsourcing solution by atmanas

Incoterms® 2020 Explained

Incoterms® 2020

Incoterms® is is an abbreviation for “International Commercial Terms”. This term represents a very useful form of communication and is actually aimed at reducing confusion among buyers and sellers.

An Incoterm represents a universal term for a transaction between the importer and exporter, so that both sides understand the tasks, costs, risks, and liabilities, as well as logistics and management of transport of the output produced by the importing country.

 Incoterms are all possible ways to distribute the responsibilities and obligations between two parties. It is important for the buyer and seller to predefine the responsibilities and obligations for the carriage of goods.

 

Incoterms® 2020 Rules

  • EX Works
  • Under the rules Incoterms 2020, EXW means that the seller has fulfilled his obligation when the goods are made available to the buyer, usually at the location of the seller. 
  • The seller must package the appropriate goods or as specified in the agreement between the parties. The buyer is responsible for loading goods in transport and everything you need, to get the goods to their final destination.
  • That means that if damage occurs when goods are loaded onto the transport of the buyer, the buyer is at risk even if the seller is helping with the load.
     
  • Cost And Freight
  • Under this term, it is the responsibility of the seller to either making the goods available at its own premises or at a named place.
  • In either case, the seller is the one who is responsible for loading the goods on the buyer’s transport.
  • Under the new rules, Incoterms 2020 FCA allows the parties to agree to the sales contract.
  • The buyer should ask your carrier to issue a lading bill with the notation on board for the seller.

 

  • Free Alongside Ship
  • Under the Incoterms 2020 rules, FAS means that the seller has fulfilled his obligation when the goods are made available to the side of the ship (eg, a dock or barge) nominated by the buyer at the agreed port of shipment.
  • Free On Board
  • Under the Incoterms 2020 rules, FOB means that the seller has fulfilled his obligation when the goods are loaded on the vessel chosen by the buyer at the port of shipment.
  • With FOB, the seller is responsible for loading the goods in transport, while the buyer is responsible to get the goods to the destination.
  • Free Carrier
  • Under the Incoterms 2020 rules, FCA means that the seller loads the goods in the transport of the buyer at the place of the seller, or the seller gets it delivered to another agreed place.
  • Very often, the buyer hires a transport that collects the goods in the warehouse of the seller.

 

Changes in Incoterms® 2020

 

  • DAT Becomes DPU
  • The most noticeable change for old Incoterms is changing the name of the term Delivered at Terminal (DAT) instead of Delivered at Place Unloaded (DPU).
  • ICC renamed this term because the buyer became clear that sometimes and/or seller want the arrival of goods to a place different from the terminal.
  • FCA and On-Board Bills of Lading
  • The seller is responsible for loading the goods on the buyer’s transport.
  • Under the new rules, Incoterms 2020 FCA allows the parties to agree to the sales contract.
  •  The buyer should ask your carrier to issue a lading bill with the notation on board for the seller.

 

  • Different Levels of Insurance Coverage
  • Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP) are the Incoterms that helps in identifying which party must purchase insurance for at least part of the export journey. 
  • In both cases that responsibility falls on the seller.
  • In Incoterms 2020 rules, the seller is now responsible for purchasing a higher level of insurance coverage—at least 110%.
  • DIY Sellers
  • Incoterms 2020 rules, recognize vendors do-it-yourself (DIY) where they tend to use their own transport for the delivery of goods. 
  • The terms now clearly state that marketers can get a contract of carriage made or can arrange for the required transportation.
  • Security Requirements
  • The safety requirements of import and export have increased significantly and become more formalized over the past decade. 
  • The Incoterms 2020 rules specifically call those requirements in their discussion of buyer and seller responsibilities in each of the commercial terms.

 

Incoterms 2010 specified that under both these terms the seller was responsible for obtaining the minimum level of coverage identified by Clause C of the Institute Cargo Clauses.

 

Ps: Book your free consultation with MFREIGHTS Logistics executive and get a complete
digital transformation
here

Note: the Incoterm image is only for the explanatory purpose and is relevant for Incoterm 2010

 

No Comments

Leave a Comment