Incoterms are a set of accepted and internationally recognized standards
that set the rights and obligations of buyers and sellers
trade by determining the conditions under which the transaction is carried out.
They are regularly reviewed to adapt them to reality
and the changes experienced by international trade.
On 1 January 2020, the new 2020 incoterms entered into force.

Incoterms 2020

EXW Ex Works/ at factory

The seller/exporter prepares the goods and makes it available to the buyer in their warehouses. It only deals with the packaging of the products.

The buyer/importer has all expenses and responsibilities since the goods leave the seller’s warehouse, before loading it. Insurance is not mandatory, but if contracted, it must be paid by the buyer, who assumes the risk.

This incoterm should only be used when the seller delivers the goods to their warehouses.

FCA Free Carrier/ free carrier

The seller delivers the goods to a place agreed with the buyer and assumes the costs and risks until the delivery of the goods there, including the cost of export clearance. The seller deals with internal transport and customs export procedures, unless the designated place is the seller’s premises (FCA warehouse), in that case the goods are delivered there loaded in the buyer’s means of transport, which bears the cost.

The buyer bears the costs from loading to unloading, including insurance, if contracted, as it is the one who assumes the risk when loading the goods on the first means of transport.

FAS Free Alongside Ship/ free next to the ship

The seller delivers the goods to the loading dock of the port of origin and assumes the costs up to delivery, as well as customs export procedures.

The buyer manages the cargo on board, stoeding, freight and other expenses until delivery at destination, including import clearance and insurance, if contracted, as it is not mandatory. It also assumes the risks that may exist since the goods are at the loading dock, before being loaded into the vessel.

This incoterm is only valid for maritime transport and is generally used for special goods that have particular loading needs, it is not common for goods that are palletized or in containers.

FOB Free On Board/ Free on board

The seller assumes the costs until the upload on board the goods, at which time he also transmits the risks, as well as the clearance of export and expenses at source. It is also responsible for contracting the transport, but the cost of this transport is at the buyer’s expense.

The buyer has the costs of freight, unloading, import and delivery procedures at destination, as well as insurance, if contracted. Risk transmission occurs when the goods are on board the ship.

This incoterm is only used for maritime transport but should not be used for goods loaded in containers as liability is transmitted when the goods are on board the vessel. Containers are not loaded as soon as they arrive at the terminal, so if the goods are damaged while in the container, before loading into the ship, it would be very difficult to establish when the damage occurred.

CFR Cost and Freight/ cost and freight

The seller takes care of all expenses until the goods arrive at the port of destination, including export clearance, expenses at source, freight and usually unloading costs.

The buyer takes care of the import and transport procedures to the place of destination. It also assumes the risk at the time the goods are on board, so insurance is usually contracted, although it is not mandatory.

This incoterm is only used in maritime transport.

CIF Cost, Insurance and Freight/ Cost, Insurance and Freight

The seller assumes as CFR all expenses until arrival at the port of destination including export clearance, expenses at source, freight and generally unloading. You must also take out insurance, even if the risk is transferred to the buyer once the goods are loaded on board the vessel.

The buyer is the one who assumes the costs of importing and transporting to the place of destination.

The novelty of this incoterm in 2020 refers to the insurance coverages to be contracted by the seller, specifying that they must be the same as those provided by Clauses C of the Institute Cargo Clauses, i.e. insurance must cover the goods until arrival at the port of destination. This incoterm is only used for maritime transport. It is widely used as it determines the customs value.

CPT Carriage Paid To/ paid transportation up to

The seller assumes the costs until the delivery of the goods at the agreed place, that is, he is responsible for all costs at source, the export clearance the main transport and generally, expenses at destination.

The buyer assumes the import procedures, the insurance if he hires it, since it is not mandatory. The risk passes to the buyer once the goods are 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/transportation and insurance paid up to

The seller is charged until delivery at the agreed place at the destination, including: expenses at source, export clearance, freight and also insurance which, in this case, is mandatory.

The importer is responsible for the import and delivery procedures at the place of destination and assumes the risk when the goods are loaded into the first means of transport.

The novelty of this incoterm is in the insurance coverages. In this case, insurance in addition to mandatory, must contain the same coverage as those provided by Clauses A of the Institute Cargo Clause, the goods must be insured until delivery to the carrier at the place of destination.

DPU Delivered at place Unloaded/ delivered in unloaded place

The seller assumes the costs and risks arising from origin, packaging, cargo, export clearance, freight, unloading at destination and delivery at the agreed place.

The buyer assumes the procedures of the import clearance.

This incoterm is new and replaces the DAT, expanding the delivery options. Now with DPU the delivery can be made in the terminal or elsewhere agreed.

DAP Delivered At Place/ delivered at one point

The seller assumes all costs and risks of the operation except the release of import and unloading at the place of destination, i.e. all expenses at origin, freight and internal 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 mandatory but, if contracted, must be paid by the seller.

DDP Delivered Duty Paid/ Delivered with Paid Rights

The seller assumes all costs and risks from packaging and verification in its warehouses, to delivery at the final destination, including export and import, freight and insurance clearances if contracted.

The buyer should only take care of receiving the goods and usually unload it, although the seller can also do so.

This incoterm is the opposite of EXW.