Training and Terminology

Comprehensive Guide to Incoterms 2020

International Commercial Terms for Global Transport

Ettehad Holding, with the aim of enhancing the knowledge of its clients and business partners, presents this comprehensive guide to introduce Incoterms 2020. Incoterms (International Commercial Terms) are a set of standardized rules developed by the International Chamber of Commerce (ICC) that define responsibilities, costs, and risks related to the transportation and delivery of goods in global trade. The 2020 version has been in effect since January of that year and includes 11 rules applicable to various modes of transport (sea, air, land, and multimodal).

Incoterms 2020 Rules

Group E: Delivery at Origin

EXW (Ex Works) – Delivery at Seller’s Premises

Description: The seller makes the goods available at their premises (factory or warehouse). The buyer bears all costs and risks.
• Usage: Suitable for buyers seeking full control of the transport.
• Responsibilities:
o Seller: Prepares the goods.
o Buyer: Loading, transport, insurance, and customs clearance.
• Note: Minimum responsibility for the seller.

Group F: Delivery at Origin without Freight Paid

FCA (Free Carrier) – Delivery to Carrier

Description: The seller delivers the goods to the carrier or a location designated by the buyer. Risk transfers after delivery.
• Usage: Suitable for multimodal transport.
•Responsibilities:
o Seller: Delivery to carrier and export clearance.
o Buyer: Freight, insurance, and import clearance.
• 2020 Change: Seller can now request a bill of lading.

FCA

FAS (Free Alongside Ship) – Delivery Alongside Ship

• Description: The seller delivers the goods alongside the ship at the port of origin. The buyer is responsible for loading.
• Usage: Specific to non-containerized sea transport.
• Responsibilities:
o Seller: Delivery alongside the ship and export clearance.
o Buyer: Loading, transport, and insurance.

FAS

FOB (Free On Board) – Delivery on Board the Vessel

• Description: The seller loads the goods on board the ship at the port of origin. Risk transfers after loading.
• Usage: Non-containerized sea transport.
• Responsibilities:
o Seller: Loading and export clearance.
o Buyer: Transport, insurance, and import clearance.

Group C: Delivery at Origin with Freight Paid

CFR (Cost and Freight) – Cost and Freight

• Description: The seller pays the transport cost to the port of destination, but risk transfers after loading.
• Usage: Non-containerized sea transport.
• Responsibilities:
o Seller: Freight and export clearance.
o Buyer: Insurance, unloading, and import clearance.

CFR

CIF (Cost, Insurance, and Freight) – Cost, Insurance, and Freight

• Description: Same as CFR, but the seller also provides minimal insurance (110% of goods’ value).
• Usage: Non-containerized sea transport.
• Responsibilities:
o Seller: Freight, insurance, and export clearance.
o Buyer: Unloading and import clearance.

CIF

CPT (Carriage Paid To) – Freight Paid to Destination

• Description: The seller pays freight to the destination, but risk transfers upon delivery to the carrier.
• Usage: All modes of transport.
• Responsibilities:
o Seller: Freight and export clearance.
o Buyer: Insurance, unloading, and import clearance.

CPT

CIP (Carriage and Insurance Paid To) – Freight and Insurance Paid

Description: Similar to CPT, but the seller provides more comprehensive insurance.
• Usage: All modes of transport.
• Responsibilities:
o Seller: Freight, comprehensive insurance, and export clearance.
o Buyer: Unloading and import clearance.
• 2020 Change: Requirement for more extensive insurance coverage.

CIP

Group D: Delivery at Destination

DAP (Delivered at Place) – Delivered at Destination

• Description: The seller delivers goods at the agreed place of destination (unloading not included).
• Usage: All modes of transport.
• Responsibilities:
o Seller: Transport and export clearance.
o Buyer: Unloading and import clearance.

DAP

DPU (Delivered at Place Unloaded) – Delivered at Destination with Unloading

• Description: The seller delivers goods at the agreed place of destination, already unloaded.
• Usage: All modes of transport.
• Responsibilities:
o Seller: Transport, unloading, and export clearance.
o Buyer: Import clearance.
• 2020 Change: Replaces DAT, with delivery possible at any location.

DPU

DDP (Delivered Duty Paid) – Delivered with Customs Duties Paid

Description: The seller is responsible for all obligations (transport, insurance, customs clearance) up to the destination.
• Usage: For buyers seeking minimum responsibility.
• Responsibilities:
o Seller: Transport, insurance, and customs clearance.
o Buyer: Receiving the goods.

DDP

Key Changes in Incoterms 2020

DPU replaces DAT: Delivery can be at any location, not just terminals.
• CIP Insurance: More comprehensive insurance is now mandatory.
• FCA and Bill of Lading: Sellers can now obtain on-board bills of lading.
• Cost Transparency: More detail in clauses A9/B9.
• Transport Security: New security requirements introduced.

Practical Tips for Using Incoterms

• Specify Version and Place: In contracts, clearly state the version (e.g., Incoterms 2020) and the exact place (e.g., FCA Shanghai).
• Choose the Right Rule: Select the rule appropriate for your goods and mode of transport.
• Proper Insurance: Under CFR and CPT, the buyer must arrange insurance.
• Professional Advice: Work with freight forwarders or customs advisors.

Incoterms 2020 Summary Table

Rule	Mode of Transport	Delivery Point	Seller’s Responsibility	Buyer’s Responsibility
EXW	All Modes	Seller’s Premises	Preparing goods	Transport, insurance, customs
FCA	All Modes	To Carrier	Delivery to carrier, export clearance	Transport, insurance, customs
FAS	Sea	Alongside Ship	Delivery alongside ship, export clearance	Loading, transport, insurance
FOB	Sea	On Board Ship	Loading, export clearance	Transport, insurance, customs
CFR	Sea	Destination Port	Freight, export clearance	Insurance, unloading, customs
CIF	Sea	Destination Port	Freight, insurance, export clearance	Unloading, customs
CPT	All Modes	Destination	Freight, export clearance	Insurance, unloading, customs
CIP	All Modes	Destination	Freight, comprehensive insurance, export clearance	Unloading, customs
DAP	All Modes	Destination	Transport, export clearance	Unloading, customs
DPU	All Modes	Destination (Unloaded)	Transport, unloading, export clearance	Customs
DDP	All Modes	Destination	Transport, insurance, customs clearance	Receiving goods