Incoterms
2020
introduction
What is Incoterms 2020?
• Refers to the International Commercial Terms
published by the International Chamber of
Commerce.
• These are predefined commercial terms used in
international trade, transactions or procurement.
• It is composed of 11 incoterms.
• It is also the 9th version of the incoterms.
Terminologies relevant to the topic:
1. Seller – refers to the party which makes the goods
available for sale. (nagbebenta)
2. Buyer – refers to the party who purchases the goods
in question in exchange for money. (bumibili)
3. Country of Origin – refers to the country at which the
goods were bought. (seller’s country or exporting
country)
4. Country of Destination – the country at which the
goods shall be transferred to (buyer’s country or
importing country)
Terminologies relevant to the topic:
5. Freight – compensation paid for the international
transfer of goods (transportation cost)
6. Insurance - coverage by contract that guarantees
the protected and safe transfer of goods.
7. Carrier – refers to international transport
operators (airlines, shipping lines, freight forwarders,
non vessel operating common carrier etc.)
The 11 International
Commercial Terms 2020
EXW - Ex-Works (Multimodal)
Means that the seller delivers when it places the
goods at the disposal of the buyer at the seller’s
premises or at another named place (i.e.,works,
factory, warehouse, etc.). The seller does not need to
load the goods on any collecting vehicle, nor does it
need to clear the goods for export, where such
clearance is applicable.
FCA - Free Carrier (Multimodal)
Means that the seller delivers the goods to the carrier
or another person nominated by the buyer at the
seller’s premises or another named place. The parties
are well advised to specify as clearly as possible the
point within the named place of delivery, as the risk
passes to the buyer at that point.
CPT - Carriage Paid To (Multimodal)
Means that the seller delivers the goods to the carrier
or another person nominated by the seller at an
agreed place (if any such place is agreed between
parties) and that the seller must contract for and pay
the costs of carriage necessary to bring the goods to
the named place of destination.
CIP - Carriage And Insurance Paid To (Multimodal)
Means that the seller delivers the goods to the carrier or
another person nominated by the seller at an agreed place (if
any such place is agreed between parties) and that the seller
must contract for and pay the costs of carriage necessary to
bring the goods to the named place of destination.
‘The seller also contracts for insurance cover against the
buyer’s risk of loss of or damage to the goods during the
carriage. The buyer should note that under CIP the seller is
required to obtain insurance only on minimum cover. Should
the buyer wish to have more insurance protection, it will need
either to agree as much expressly with the seller or to make its
own extra insurance arrangements.”
DAP - Delivered At Place (Multimodal)
Means that the seller delivers when the goods are
placed at the disposal of the buyer on the arriving
means of transport ready for unloading at the named
place of destination. The seller bears all risks involved
in bringing the goods to the named place.
DPU - Delivered At Place Unloaded (Multimodal)
Means that the seller delivers when the goods, once
unloaded, are placed at the disposal of the buyer at a
named place of destination. The seller bears all risks
involved in bringing the goods to, and unloading
them at the named place of destination.
DDP - Delivered Duty Paid (Multimodal)
Means that the seller delivers the goods when the
goods are placed at the disposal of the buyer, cleared
for import on the arriving means of transport ready
for unloading at the named place of destination. The
seller bears all the costs and risks involved in bringing
the goods to the place of destination and has an
obligation to clear the goods not only for export but
also for import, to pay any duty for both export and
import and to carry out all customs formalities.
FAS - Free Alongside Ship (Via Vessel)
means that the seller delivers when the goods are
placed alongside the vessel (e.g., on a quay or a
barge) nominated by the buyer at the named port of
shipment. The risk of loss of or damage to the goods
passes when the goods are alongside the ship, and
the buyer bears all costs from that moment onwards.
FOB - Free On Board (Via Vessel)
Means that the seller delivers the goods on board
thevessel nominated by the buyer at the named port
of shipment or procures the goods already so
delivered.The risk of loss of or damage to the goods
passes when the goods are on board the vessel, and
the buyer bears all costs from that moment onwards.
CFR - Cost and Freight (Via Vessel)
Means that the seller delivers the goods on board the
vessel or procures the goods already so delivered.
The risk of loss of or damage to the goods passes
when the goods are on board the vessel. the seller
must contract for and pay the costs and freight
necessary to bring the goods to the named port of
destination.
CIF - Cost, Insurance and Freight (Via Vessel)
Means that the seller delivers the goods on board the vessel or
procures the goods already so delivered. The risk of loss of or
damage to the goods passes when the goods are on board the
vessel. The seller must contract for and pay the costs and
freight necessary to bring the goods to the named port of
destination.
‘The seller also contracts for insurance cover against the
buyer’s risk of loss of or damage to the goods during the
carriage. The buyer should note that under CIF the seller is
required to obtain insurance only on minimum cover. Should
the buyer wish to have more insurance protection, it will need
either to agree as much expressly with the seller or to make its
own extra insurance arrangements.”
Formulas
EXW = Cost of Goods
FCA = EXW + O/C
FOB = EXW + O/C
FAS = EXW + O/C
CFR = FOB/FAS + FRT
CPT = FCA + FRT
CIF = FOB/FAS + FRT + INS
CIP = FCA + FRT + INS
DAP = Any F term + FRT + Destination O/C
DPU = Any F term + FRT + Destination O/C
(unloading)
DDP = Any F term + FRT + Destination O/C + Duties & Taxes
