Since January 1, 2020, all imports and exports are regulated by the new 2020 incoterms.
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, the incoterms have been periodically reviewed to adapt to the reality of the moment and the changes experienced by international trade.
Changes in the incoterms 2020
The main changes of the 2020 incoterms with respect to the 2010 incoterms are:
- The incoterm DAT (Delivered at Terminal), which disappears, is replaced by DPU (Delivered at Place Unloaded). For purposes it is only a name change, since the obligations and responsibilities are the same, but the new DPU name allows to agree to deliver anywhere, not necessarily at the terminal, but also.
- New conditions are established in the contracting of insurance for CIF and CIP incoterms.
- For maritime transport under the FCA incoterm, the buyer may ask the shipping company or its agent to issue the BL with the annotation "on board" for the seller.
Things to keep in mind when applying the Incoterms 2020
- In order for the BL “house” to be valid, it must be indicated that it is governed by the UCP 600 regulation (norms that regulate documentary credits, because it is the only one that the HOUSE admits).
- Indicate that the 2020 incoterms are applied in the sales contract because if they cannot apply the 2010 or 2000 incoterms.
What are the 2020 incoterms?
These are the incoterms in force since January 1, 2020:
EXW Ex Works
- The seller / exporter make the merchandise available to the buyer in its own warehouses, only taking care of its packaging.
- The buyer / importer, therefore, are the one who assumes all the expenses and responsibilities since the merchandise crosses the warehouse, before loading it. The insurance is not mandatory, but if it is contracted, the buyer would assume it since it is who assumes the risk.
This incoterm should not be used if the seller delivers the merchandise in a place other than its facilities.
FCA Free Carrier
- The seller delivers the merchandise at an agreed point and assumes costs and risks until the merchandise is delivered at that agreed point, including the costs of export clearance. Thus, the seller takes care of internal transport and export customs procedures, except if the designated place is the seller's facilities (FCA warehouse), in which case the merchandise is delivered at that point loaded on the means of transport. Arranged by the buyer at the buyer's cost.
- The buyer assumes the expenses from loading on board to unloading, including insurance if it is contracted because it is who assumes the risk when the goods are loaded in the first means of transport.
The novelty of the FCA with respect to the 2010 incoterms is that when it comes to maritime transport, the buyer can instruct his carrier to issue a B / L (Bill of Landing / Shipping Letter), to the seller with the specification "on board" (on board), as proof of the delivery of the merchandise to facilitate the operation of the documentary credits and that the credit is paid to the seller as a Bank guarantee but which is not a party to the transport contract).
FAS Free Alongside Ship
- The seller delivers the merchandise at the loading dock of the port of origin and assumes the costs until delivery, as well as the export customs procedures.
- The buyer manages the cargo on board, stowage, freight and other expenses until delivery at destination, including import clearance and insurance if hired as it is not mandatory. It also assumes the risks once the merchandise is at the loading dock before loading onto the ship.
This incoterm is only valid for maritime transport and is generally used for special goods that have particular cargo needs, it is not usual for palletized cargo or containers.
FOB Free On Board
- The seller assumes the expenses until the merchandise is loaded on board, at which time it also transmits the risks, as well as the export clearance and expenses at origin. It is also responsible for contracting the transport, although this is the responsibility of the buyer.
- The buyer is responsible for the costs of freight, unloading, import procedures and delivery at destination, as well as insurance if he wishes to contract it. The transfer of risks takes place when the goods are on board.
This incoterm is only used for maritime transport and should not be used for goods in containers since responsibility is transferred when the goods are loaded on board the ship (the goods are physically touching the floor of the ship), but the containers are not loaded in When they arrive at the terminal, therefore, if the merchandise suffered any damage while it is in the container, it would be very difficult to establish when it happened.
CFR Cost and Freight
- The seller bears all costs until the merchandise reaches the port of destination, including export clearance, costs at origin, freight and generally unloading costs.
- The buyer takes care of the import and transport formalities to the destination. He also assumes the risk when the merchandise is on board, so although it is not mandatory, he usually takes out insurance.
This incoterm is only used in maritime transport.
CIF Cost, Insurance and Freight
- The seller assumes, as in CFR, all expenses until arrival at the destination port including export dispatch, expenses at origin, freight and generally unloading, but also must originally contract insurance, although the risk is transferred to the buyer once the merchandise is loaded at board.
- The buyer is the one who assumes the import and transport costs to the destination.
The novelty of this incoterm in the 2020 version refers to the insurance coverage that the seller must contract, noting that they must be the same as those provided by Clauses C of the Institute Cargo Clauses, that is, the insurance must cover until arrival at port of destiny. It is an incoterm that is only used for maritime transport. It is a widely used incoterm since it determines the customs value.
CPT Carriage Paid To
- The seller assumes the expenses until the merchandise is delivered to the agreed place, that is, it is responsible for all the expenses at origin, the export clearance, the main transport and generally, the destination expenses.
- The buyer assumes the import procedures, the insurance if contracted, since it is not mandatory. The risk passes to the buyer once the merchandise is loaded to the first means of transport contracted by the seller.
This incoterm is valid for any means of transport.
CIP Carriage and Insurance Paid
- The seller bears the expenses until delivery to the agreed place at destination, that is, the expenses at origin, export clearance, freight and also the insurance, which is mandatory.
- The importer takes care of import procedures and delivery to destination and assumes the risk when the merchandise is loaded in the first means of transport.
The novelty in this incoterm with respect to the 2010 incoterms resides again in the insurance coverage, in this case, the insurance, in addition to being mandatory, must contain the same coverage as those provided by Clauses A of the Institute Cargo Clause, the merchandise must be insured until delivery to the carrier at destination.
DPU Delivered at place Unloaded
- The seller assumes the costs and risks originated in origin, packaging, loading, export dispatch, 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 what it does is expand the delivery options since DAT indicated that the delivery had to be made at the terminal, now with DPU the entry can be made in another agreed place in addition to the terminal.
DAP Delivered At Place
- The seller assumes all costs and risks of the operation except for import clearance and unloading at destination, that is, all expenses at origin, freight and internal transport.
- The buyer only has to deal with import clearance and unloading.
This incoterm is valid for all means of transport, the insurance is not compulsory, but if the expenses will be contracted, the seller will assume them.
DDP Delivered Duty Paid
- The seller assumes all costs and risks from packaging and verification in its warehouses to delivery to the final destination, including export and import dispatches, freight and insurance if contracted.
- The buyer only has to receive the merchandise and generally unload it, although the seller can also take care of it.
This incoterm is just the opposite of EXW; the seller assumes all costs and risks.