From 1 January 2020 all imports and exports are regulated by the new Incoterms 2020.
Incoterms are a series of accepted and internationally recognized standards that establish the rights and obligations of the buyer and seller in commercial exchanges that indicate the conditions of SALE. Since their creation, Incoterms are periodically revised to adapt to the reality of the moment and to the changes that international trade is experiencing.
Changes in the Incoterms 2020
The main changes in Incoterms 2020 with respect to Incoterms 2010 are
- Incoterm DAT (Delivered at Terminal) is replaced by DPU (Delivered at Place Unloaded), which disappears. For purposes it is only a change of name, since the obligations and responsibilities are the same, but the new name DPU allows to agree the delivery in any place, not necessarily in terminal, but also.
- New conditions are established in the insurance contract for the CIF and CIP Incoterms.
- For maritime transport under Incoterm FCA, the buyer may ask the shipping company or its agent to issue the BL with the notation “on board” to the seller.
Things to consider when applying Incoterms 2020
- For the “house” BL to be valid, it must be indicated that it is governed by the UCP 600 regulations (rules governing documentary credits, because it is the only one that supports the HOUSE).
- Indicate that the Incoterms 2020 are applied in the sales contract because if they cannot apply the Incoterms of the year 2010 or 2000.
EXW Ex Works/ En Fábrica
The seller/exporter makes the goods available to the buyer in his own warehouses, only taking care of the packaging.
The buyer/importer, therefore, is the one who assumes all the expenses and responsibilities since the goods cross the warehouse, before loading them. Insurance is not compulsory, but if it is taken out, it is the buyer who assumes the risk.
This Incoterm should not be used if the seller delivers the goods to a place other than his premises.
FCA Free Carrier/ Libre transportista
The seller delivers the goods at an agreed point and bears the costs and risks until the goods are delivered at that agreed point, including the costs of export clearance. In this case, the seller arranges for inland transport and export customs clearance, unless the named place is the seller’s premises (FCA warehouse), in which case the goods are delivered there loaded on to the means of transport arranged by the buyer, the cost being borne by the buyer.
The buyer bears the costs from loading on board to unloading, including insurance if contracted for as the risk is borne by the buyer when the goods are loaded on the first means of transport.
The novelty of the FCA with respect to the Incoterms of 2010 is that when it comes to maritime transport the buyer can indicate to its carrier to issue a B/L (Bill of Lading), to the seller with the specification “on board”, as proof of delivery of the goods to facilitate the operation of documentary credits and thus the credit is paid to the seller as a guarantee of the Bank but is not a party to the transport contract).
FAS Free Alongside Ship/ Libre al costado del buque
The seller delivers the goods to the loading bay of the port of origin and bears the costs until delivery, as well as the customs export formalities.
The buyer manages the loading on board, stowage, freight and other costs until delivery at destination, including import clearance and insurance if contracted as it is not mandatory. Adenás assumes the risks once the goods are in the loading dock before being loaded onto the ship.
This Incoterm is only valid for sea transport and is generally used for special goods that have particular loading requirements, not usually for palletized cargo or containers.
CFR Cost and Freight/ Coste y flete
The seller bears all costs until the goods reach the port of destination, including export clearance, costs at origin, freight and generally the costs of unloading.
The buyer takes care of the import formalities and the transport to the destination. He also assumes the risk at the time the goods are on board, so although not mandatory, insurance is usually taken out.
This incoterm is only used in maritime transport.
CIF Cost, Insurance and Freight/ Coste, seguro y flete
The seller assumes as in CFR all costs until arrival at the port of destination including export clearance, costs at origin, freight and usually unloading but also originally must arrange insurance even if the risk is transferred to the buyer once the goods are loaded on board.
The buyer is the one who assumes the costs of import and transport to destination.
The novelty of this Incoterm in the 2020 version refers to insurance coverage to be contracted by the seller pointing out that they must be the same as those provided by Clause C of the Institute Cargo Clauses, ie insurance must cover until arrival at port of destination. It is an incoterm that is only used for sea transport. It is a widely used Incoterm since it determines the customs value.
CPT Carriage Paid To/ Transporte pagado hasta
The seller bears the costs until the goods are delivered at the agreed place, i.e. he takes care of all the costs at origin, the export clearance, the main transport and generally the costs at destination.
The buyer assumes the import formalities, insurance if contracted, as it is not mandatory. The risk passes to the buyer once the goods are loaded onto the first means of transport contracted by the seller.
This Incoterm is valid for any means of transport.
CIP Carriage and Insurance Paid/ Transporte y seguro pagados hasta
The seller bears the costs until delivery at the agreed place of destination, i.e. costs at origin, export clearance, freight and also insurance, which is compulsory.
The importer is responsible for import formalities and delivery at destination and bears the risk when the goods are loaded on the first means of transport.
The novelty in this Incoterm with respect to the 2010 Incoterms lies again in the insurance coverage, in this case, the insurance in addition to being mandatory must contain the same coverage as that provided by Clause A of the Institute Cargo Clause, the goods must be insured until delivery to the carrier at destination.
DPU Delivered at place Unloaded/ Entregada en lugar descargada
The seller assumes the costs and risks arising at origin, packing, loading, export clearance, freight, unloading at destination and delivery at the agreed point.
The buyer assumes the import clearance procedures.
This Incoterm is newly created and replaces DAT, in reality it expands the delivery options since DAT indicated that delivery should be made at the terminal, now with DPU it can be made at another agreed place besides the terminal.
DAP Delivered At Place/ Entregado en un punto
The seller assumes all costs and risks of the operation except for import clearance and unloading at destination, i.e. all costs at origin, freight and inland transport.
The buyer must only deal with the import clearance and the unloading.
This Incoterm is valid for all means of transport, insurance is not compulsory, but if it is contracted the seller would assume the costs.
DDP Delivered Duty Paid/ Entregado con derechos pagados
The seller assumes all costs and risks from packing and verification at its warehouses to delivery at the final destination, including clearance for export and import, freight and insurance if contracted.
The buyer must only receive the goods and generally unload them, although the seller can also take care of this.
This incoterm is just the opposite of EXW, the seller assumes all costs and risks.