IMPORT & EXPORT MANAGEMENT
1 INCOTERMS 2020
THE NECESSITY OF INTERNATIONAL RULES
Risk = indicating who is responsible in case of damage or loss.
Ownership= indicates to whom the goods belong, which is of importance when one of the parties
goes broke
In 1936 International Chamber of Commerce (ICC) in Paris establishing the most common
international trade terms. The results are now known under the name INCOTERMS = international
rules for the interpretation of trade terms
11 terms
The intention of the Incoterms is to give an answer primarily by regulating:
The division of costs between seller and buyer,
The division of the risk between seller and buyer: who is entitled to the transport insurance
policy
the division of tasks between seller and buyer as regards packing, export and import customs
clearance, …
For each of these, the ICC defines the critical point as that point in transit where the seller’s
responsibility ends and the buyer’s responsibility begins.
Each term must be followed by an indication of the place where the delivery is made. Specific
reference must be made to the Incoterms® 2020. Not just fob, but ‘fob Hamburg, Incoterms ® 2020
The ICC has grouped them in four basically different categories, in which the main carriage is meant
as the main stretch the goods will have to travel
,The categories are:
Group E: departure Ex works: EXW
Group F: main carriage unpaid by seller Free Carrier: FCA
Free alongside ship: FAS
Free on board: FOB
Group C: main carriage paid by seller Carriage paid to: CPT
Carriage and insurance paid to: CIP
Cost and freight: CFR
Cost, insurance, freight: CIF
Group D: paid till arrival Delivered at place: DAP
Delivered at place unloaded: DPU
Delivered duty paid: DDP
Whilst EXW represents the minimum obligation for the seller, DDP represents his maximum
obligation.
1.1 THE INCOTERMS 2010 BY MODE OF TRANSPORT
Originally regulated only sea transport
The Incoterms 2020 have not only been adapted to new transportation techniques such as
unitization of cargo in containers, multimodal and roll-on/roll-off (RORO) traffic. They have also been
made suitable for use in situations where Electronic Data Interchange (EDI) is applied.
EDI = is a computer application defined as the automatic sending and receiving of standard
messages, in this case international trade documents
,Any mode of transport, including multi-modal:
Ex works
Free Carrier
Carriage paid to
Carriage and insurance paid to
Delivered at place
Delivered at place unpaid
Delivered duty paid
Sea and inland waterways
Free alongside ship
Free on board
Cost and freight
Cost, insurance and freight
1.2 INTERPRETATION OF INCOTERMS
Incoterms determine the division of risks, costs and tasks
Costs
Incoterms determine to what point the seller has to bear certain costs, and as from when the buyer
has to bear certain costs.
These costs are:
Costs for shipment
Costs for loading/unloading and handling the goods
Costs for packing
Costs for insurance
Costs for customs formalities (import/export/transit)
Risks
Determine till which certain point the risk for damage to or loss of the goods is for seller’s account,
and from which point the buyer bears these risks.
, Tasks
Determine which party bears the responsibility for customs formalities and all other customs-related
issues.
Delivery
Delivery is used to indicate where the risk of loss of, or damage to the goods passes from the seller to
the buyer.
Depending on the Incoterm chosen, delivery means:
Placing the goods at the disposal of the buyer
Hand the goods over for carriage
Deliver the goods at destination
1.3 ANALYSIS OF INCOTERMS
EXW – Ex Works (… named place)
This rule places minimum responsibility on the seller, who merely has to make the goods
available, suitably packaged, at the specified place, usually the seller’s factory or depot.
The buyer is responsible for loading the goods onto a vehicle for all export procedures; for
onward transport and for all costs arising after collection of the goods.
The seller fulfils his obligation of delivery when placing the goods duly packed at the disposal
of the buyer in the seller’s premises or another named place.
The buyer has to collect the goods at the seller’s premises and must bear all costs and risks
to bring the goods to the final destination
Ex Works is applicable for any mode of transport (also multimodal), however it is most
suitable for road haulage.
Ex Works implicates the least obligations for the seller.
FCA - Free Carrier (… named place)
The seller must deliver the goods to the carrier or another person nominated by the buyer at
the agreed point, if any, at the named place on the agreed date or within the agreed period.
Delivery is completed:
o If the named place is the seller’s premises, when the goods have been loaded on the
means of transport provided by the buyer.
o In any other case, when the goods are placed at the disposal of the carrier or another
person nominated by the buyer on the seller’s means of transport, ready for unloading.
1 INCOTERMS 2020
THE NECESSITY OF INTERNATIONAL RULES
Risk = indicating who is responsible in case of damage or loss.
Ownership= indicates to whom the goods belong, which is of importance when one of the parties
goes broke
In 1936 International Chamber of Commerce (ICC) in Paris establishing the most common
international trade terms. The results are now known under the name INCOTERMS = international
rules for the interpretation of trade terms
11 terms
The intention of the Incoterms is to give an answer primarily by regulating:
The division of costs between seller and buyer,
The division of the risk between seller and buyer: who is entitled to the transport insurance
policy
the division of tasks between seller and buyer as regards packing, export and import customs
clearance, …
For each of these, the ICC defines the critical point as that point in transit where the seller’s
responsibility ends and the buyer’s responsibility begins.
Each term must be followed by an indication of the place where the delivery is made. Specific
reference must be made to the Incoterms® 2020. Not just fob, but ‘fob Hamburg, Incoterms ® 2020
The ICC has grouped them in four basically different categories, in which the main carriage is meant
as the main stretch the goods will have to travel
,The categories are:
Group E: departure Ex works: EXW
Group F: main carriage unpaid by seller Free Carrier: FCA
Free alongside ship: FAS
Free on board: FOB
Group C: main carriage paid by seller Carriage paid to: CPT
Carriage and insurance paid to: CIP
Cost and freight: CFR
Cost, insurance, freight: CIF
Group D: paid till arrival Delivered at place: DAP
Delivered at place unloaded: DPU
Delivered duty paid: DDP
Whilst EXW represents the minimum obligation for the seller, DDP represents his maximum
obligation.
1.1 THE INCOTERMS 2010 BY MODE OF TRANSPORT
Originally regulated only sea transport
The Incoterms 2020 have not only been adapted to new transportation techniques such as
unitization of cargo in containers, multimodal and roll-on/roll-off (RORO) traffic. They have also been
made suitable for use in situations where Electronic Data Interchange (EDI) is applied.
EDI = is a computer application defined as the automatic sending and receiving of standard
messages, in this case international trade documents
,Any mode of transport, including multi-modal:
Ex works
Free Carrier
Carriage paid to
Carriage and insurance paid to
Delivered at place
Delivered at place unpaid
Delivered duty paid
Sea and inland waterways
Free alongside ship
Free on board
Cost and freight
Cost, insurance and freight
1.2 INTERPRETATION OF INCOTERMS
Incoterms determine the division of risks, costs and tasks
Costs
Incoterms determine to what point the seller has to bear certain costs, and as from when the buyer
has to bear certain costs.
These costs are:
Costs for shipment
Costs for loading/unloading and handling the goods
Costs for packing
Costs for insurance
Costs for customs formalities (import/export/transit)
Risks
Determine till which certain point the risk for damage to or loss of the goods is for seller’s account,
and from which point the buyer bears these risks.
, Tasks
Determine which party bears the responsibility for customs formalities and all other customs-related
issues.
Delivery
Delivery is used to indicate where the risk of loss of, or damage to the goods passes from the seller to
the buyer.
Depending on the Incoterm chosen, delivery means:
Placing the goods at the disposal of the buyer
Hand the goods over for carriage
Deliver the goods at destination
1.3 ANALYSIS OF INCOTERMS
EXW – Ex Works (… named place)
This rule places minimum responsibility on the seller, who merely has to make the goods
available, suitably packaged, at the specified place, usually the seller’s factory or depot.
The buyer is responsible for loading the goods onto a vehicle for all export procedures; for
onward transport and for all costs arising after collection of the goods.
The seller fulfils his obligation of delivery when placing the goods duly packed at the disposal
of the buyer in the seller’s premises or another named place.
The buyer has to collect the goods at the seller’s premises and must bear all costs and risks
to bring the goods to the final destination
Ex Works is applicable for any mode of transport (also multimodal), however it is most
suitable for road haulage.
Ex Works implicates the least obligations for the seller.
FCA - Free Carrier (… named place)
The seller must deliver the goods to the carrier or another person nominated by the buyer at
the agreed point, if any, at the named place on the agreed date or within the agreed period.
Delivery is completed:
o If the named place is the seller’s premises, when the goods have been loaded on the
means of transport provided by the buyer.
o In any other case, when the goods are placed at the disposal of the carrier or another
person nominated by the buyer on the seller’s means of transport, ready for unloading.
