INCOTERMS®2020

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 INCOTERMS® 2020

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CONTENT AN OVERVIEW OF INCOTERMS®
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3 FUNDAMENTALS OF INCOTERMS® 2020

DIFFERENCES BETWEEN INCOTERMS® 2010 AND 2020

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 PART 1
AN OVERVIEW OF INCOTERMS

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 HISTORY AND DEVELOPMENT

FUNDAMENTALS

Part I
REMARKS

CLASSIFICATIONS
 INCOTERMS QUIZ
T/F
1. The Incoterms® rules are derived from ‘International Contract Terms’
2. The Incoterms® rules are a set of International Commercial Law
3. The Incoterms® rules are not applicable to domestic trade transactions
4. The Incoterms® rules address the transfer of property/title/ownership of the goods sold.

5. The Incoterms® rules are applicable to contract of carriage

6. The Incoterms® rules are automatically applicable to sale of goods contract

7. Variations of Incoterms rules (FOB Stowed and trimmed; CIF landed;…) are stipulated in
Incoterms
8. Use of ® trademark symbol (the circled R trademark indicator) is required when referring to
Incoterms
9. The Incoterms® rules cater for materials transported by pipeline, such as oil and gas
I. AN OVERVIEW OF INCOTERMS

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 1. HISTORY AND DEVELOPMENT

WHAT?

WHO?
INCOTERMS

WHEN?

WHY?
WHY INCOTERMS?

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 DISCUSSION
• Incoterms = Trade terms?
• Incoterms = Shipping terms?
• Incoterms = Delivery terms?
• Incoterms = Payment terms?

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1. HISTORY AND DEVELOPMENTS
1936 EXW, FCA, FOR/FOT, FAS, FOB, C&F, CIF
1953 Adding EX SHIP & EX QUAY
1967 Adding DAF & DDP
1976 Adding FOB airport
1980 Adding CPT & CIP
1990 Removing FOR/FOT & FOB airport; adding DDU

2000 13 terms similar to those of Incoterms 1990

2010 11 rules, DEQ→ DAT; DAF, DES, DDU→ DAP

2020 11 rules, DAT → DPU

 INCOTERMS 2010 vs. 2000
INCOTERMS 2000 INCOTERMS 2010

Name INCOTERMS 2000 INCOTERMS ®

2010

Terms TERMS RULES

DEQ DAT
DAF, DES, DDU DAP
Grouping 4 groups: E-F-C-D 2 Groups
International Trade Domestic and
International Trade
FOB, CFR, SHIP’S RAIL ON BOARD
CIF 11
I. OVERVIEW OF INCOTERMS

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FUNDAMENTALS OF INCOTERMS

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2. FUNDAMENTALS OF INCOTERMS
WHAT THE INCOTERMS RULES DO

• Obligations:
Who does what as between seller and buyer, e.g. who
organises carriage or insurance of the goods or who obtains
shipping documents and export or import licences;

• Risk: Where and when the seller “delivers” the goods, in other
words where risk transfers from seller to buyer; and

• Costs: Which party is responsible for which costs, for example

transport, packaging, loading or unloading costs, and checking or
security-related costs.
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2. FUNDAMENTALS OF INCOTERMS
WHAT THE INCOTERMS RULES DO NOT DO

• whether there is a contract of sale at all;

• the specifications of the goods sold;
• the time, place, method or currency of payment of the price;
• the remedies which can be sought for breach of the contract of sale;
• most consequences of delay and other breaches in the performance of contractual
obligations;
• the effect of sanctions;
• the imposition of tariffs;
• export or import prohibitions;
• force majeure or hardship;
• intellectual property rights; or
• the method, venue, or law of dispute resolution in case of such breach.
Perhaps most importantly, it must be stressed that the Incoterms® rules do NOT deal with
the transfer of property/title/ownership of the goods sold.
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I. OVERVIEW OF INCOTERMS

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 3. REMARKS

• It is not mandatory to use INCOTERMS® in a sale

contract.
• INCOTERMS® are not price clauses, but do have an
impact on the pricing.
• Sales contracts which are based on a former version
(e.g. INCOTERMS® 2000) remain valid according to the
terms of that version.
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 3. REMARKS

• Buyers and sellers should refer to the appropriate

version of the INCOTERMS®
e.g. FOB Hamburg, INCOTERMS® 2010.
• It is possible to add clauses or change the wording of
INCOTERMS®.
e.g. CFR Charleston port USA incl. THC, CUC, ISPS in
Charleston.
FCA Vienna Airport loaded on aircraft.
DDP Hanoi Vietnam VAT unpaid.
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 3. REMARKS
1. The contract No.170211 VCT-FETA on 17/1/2011 b/w VIET
COTTON YARN INVESTMENT TRADING JSC & FETA
TEKSTIL SAN.TIC.LTD.STI:
“ ALL OTHER CONDITIONS, WHICH NOT STATED IN THIS
CONTRACT, WILL REFER TO INCOTERMS 2000”
2. The contract No. BVQA400 b/w FORMOSA INDUSTRIES
CORPORATION & NANYA PLASTICS CORPORATION:
“ The INCOTERMS 2000 will be used for this contract”

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 I. INCOTERMS®

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CLASSFICATIONS

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 PART 2
FUNDAMENTALS OF
INCOTERMS®2020

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 KEY DEFINITIONS
•Pre-carriage •Port-to-port
•Main-carriage •Port-to-door
•On-carriage •Omni-modal
•Door-to-door •On-board
•Door-to-port •Delivery
 KEY DEFINITIONS

❖Pre-carriage = any inland movement BEFORE the container is

delivered to the port/terminal

❖On-carriage = any inland movement AFTER the container is

picked up from the port/terminal
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 The seller’s obligations The buyer’s obligations
• A1 General obligations • B1. General obligations
• A2. Delivery • B2. Taking Delivery
• A3. Transfer of risks • B3. Transfer of risks
• A4. Carriage • B4. Carriage
• A5. Insurance • B5. Insurance
• A6. Delivery/Transport • B6. Delivery/Transport
Document Document
• A7. Export- Import Clearance • B7. Export- Import Clearance
• A8.Checking/Packaging/Marking • B8.Checking/Packaging/Marking
• A9. Allocations of costs • B9. Allocations of costs
• A10. Notices • B10. Notices

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 EXW – EX WORKS
• EXW (insert named place of delivery) Incoterms® 2020
→ EXW ABC Co.,Ltd , 15 D5 Street, Ward 25, Binh Thanh District, Hochiminh City, Viet Nam,
Incoterms 2020
➢ The Seller’s obligations:
- General obligations (A1):
- Delivery (A2):
 EXW – EX WORKS
➢ The Seller’s obligations:
- Transfer of risks (A3):
- Carriage and Insurance (A4, A5):
- Customs Clearance (A7):
- Notices (A10):

→ Free from loading, carriage and insurance, customs formalities

→ EXW represents the minimum responsibility for the seller
 EXW – EX WORKS
➢ The buyer’s obligations:
- Taking delivery (B2):
- Transfer of risks (B3):
- Carriage (B4):
- Insurance (B5):
- Customs Clearance (B7):
- Notice (B10):
 EXW – EX WORKS
➢ Notes:
- Transport mode: EXW may be used irrespective of the mode or modes
of transport, if any, selected.
- EXW may be suitable for domestic trades, where there is no intention at
all to export the goods.
- EXW imposes the least set of obligations on the seller → The buyer
should use it with care.
- EXW may be used if:
 VARIATIONS OF EX-WORKS
• EXW-LOADED
– Why is it common?
– Who would bear the risk of loss of or damage to the goods occurring while the
loading operation?

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 DISCUSSION
A US exporter received a letter of credit with the anticipated price quote,
Ex Works. However, the letter of credit required an on-board ocean bill of
lading from Oakland, California, to be presented to the bank before it
released the payment. Discuss the risks the exporter may suffer.

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 LOGO
FCA: Free carrier

FCA means that the seller delivers the goods to the

buyer in one or other of two ways.
1- When the named place is the seller’s premises:
 LOGO
FCA: Free carrier

2- When the named place is another place, the goods are delivered:
 LOGO
Named place in container transport by sea

❖ Container Yard (CY) is a place where containers are

stored before loading on to the vessel or after unloading
from the vessel/ship once it arrives at Port. A Container
Yard is primarily used for FCL (Full container load
shipment).

❖ Container freight station (CFS) is majorly used for LCL

(Less than container load) shipments. The goods before
loading on to the vessel/ship are taken to CFS to be
consolidated and after arriving to the port are taken to
CFS to be de-consolidated. The goods are also weighted
and checked at CFS before loading on the vessel.
 LOGO
Named place in container transport by sea

FCL = Full Container Load

LCL = Less than Container Load
FCA – Free Carrier

➢ FCA (insert Named place of delivery) Incoterms 2020

FCA Tan Son Nhat Airport, Viet Nam – Incoterms 2020.

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FCA – Free Carrier
➢The seller’s obligations:
- Delivery (A2):
-Transfer of risks (A3)
- Carriage and Insurance (A4, A5): No obligation
- Delivery document (A6): .
- Export Clearance (A7)
- Checking, packaging, packing (A8)
- Allocation of costs (A9)
- Notices (A10)

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FCA – Free Carrier
➢The buyer’s obligations:
- Transfer of risks (B3):
-Carriage (B4)
-Delivery document (B6):
-Import clearance (B7)
-Allocation of costs (B9)
-Notices (B10):
-Notes:
▪ Used irrespective of mode of transport
▪ Especially suitable for container transport
▪ FCA should be used instead of FAS or FOB if the seller does not
intend to deliver the goods alongside the ship or on board.

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 INCOTERMS® 2020

FAS – Free Along Side Ship

FAS (insert named port of shipment) Incoterms
2020
→ FAS Cat Lai port, Viet Nam, Incoterms 2020
→ How to place the goods alongside ship?
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 INCOTERMS® 2020 LOGO

FAS: Free alongside ship (insert Named

port of shipment) Incoterms® 2020
Free Alongside Ship means that the
seller delivers the goods to the buyer
when the goods are placed alongside the
ship (e.g. on a quay or a barge)
nominated by the buyer at the named
port of shipment or when the seller
procures goods already so delivered.
LOGO
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FAS – Free Alongside ship
➢The seller’s obligations:
- Delivery (A2):
-The seller must deliver the goods either by placing them alongside the
vessel nominated by the buyer at the loading point, if any, indicated by
the buyer at the named port of shipment or by procuring the goods so
delivered.
The seller must deliver the goods on the agreed date or at the time
within the agreed period notified by the buyer or, if no such time is
notized, then at the end of the agreed period and in the manner
customary at the port.
- Transfer of risks (A3)
- Carriage (A4):
- Insurance (A5)
- Delivery document (A6):
- The seller must provide the buyer, at the seller’s cost, with the usual
proof that the goods have been delivered
- Unless such proof is a transport document, the seller must provide
assistance to the buyer, at the buyer’s request, risk and cost, in
obtaining a transport document.
-Export clearance (A7) 48
FAS – Free Alongside ship

➢The buyer’s obligations:

- Transfer of risks (B3)
- Carriage (B4)
- Delivery document (B6)
- Import Clearance (B7)
- Allocation of costs B9
- Notices (B10):
- Notes:
• Used only for sea or inland waterway transport
• Not suitable for containerized goods (using FCA instead of FAS);
• Lighterage/barge charges need to be allocated

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 INCOTERMS® 2020 LOGO

FOB: Free on board + Named port

“Free on Board” means that the seller
delivers the goods on board the vessel
nominated by the buyer at the named
port of shipment or procures the goods
already so delivered.
 INCOTERMS® 2020

❖FOB – Free on board

➢FOB + Named port of shipment, Incoterms
2020
FOB Cat Lai Port, Viet Nam – Incoterms 2020
FOB – Free on board
➢The seller’s obligations:
- Delivery (A2):
-Risk transfer (A3)
- Carriage (A4):.
- Insurance (A5)
- Delivery document (A6): Export clearance (A7)

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 DISCUSSION
An exporter and importer have agreed upon the Incoterms® 2020
rule FOB Cape Town port. At the time the sales contract was agreed
upon, it was unknown which shipping line or vessel would be used.
At the time of export, the exporter loads the container at its
premises and its forwarding agent arranges for the container to be
sent to the export stack for the vessel as advised by the
importer/agent; the container is placed into the export stack and
the importer is notified. The vessel nominated by the buyer is
delayed due to wind and collects the cargo only after the scheduled
loading date.
During the time after the export agent has placed the container into
the export stack, (which is customary in procuring the container so
delivered in South African ports) and the placing of the container on
board the vessel nominated by the buyer at the loading point, the
goods are damaged.
Who would bear the risk of damage to the goods?
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 DISCUSSION
Same as above, except the vessel is not delayed
due to wind, but the cargo is left behind on the
quayside due to a ‘short shipment’ resulting from
the vessel being overladen at the previous port of
call. The cargo is damaged between the time of
delivery into the export stack and when the
container is shipped on the next available vessel.
Who would bear the risk of damage to the goods?

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 INCOTERMS® 2020
❖ what is meant by ‘placing’ the
goods ‘on board’ the vessel? Are
securing, dunnage, and/or
trimming of the cargo required??
❖ ‘FOB secured stowed and
trimmed’?
 INCOTERMS® 2020
❖If goods are dropped during loading
and land on deck causing damage.
Who would be liable for this?
❖Under FOB, what happens if goods
are destroyed during loading when
only part of the goods has been put
on board? Has delivery been made,
so that risk for the goods already on
board has passed to the buyer?
❖ Who pays the cost of B/L?
 What does ‘on board’ mean?
❖ Port custom
❖Type of goods (out of gauge/super
heavy)
❖ RORO (Roll-on Roll off) Transport or
LOLO (Lift-on Lift-off) Transport
LOGO
 LOGO

www.themegallery.com
FOB – Free on board

➢The buyer’s obligations:

- Transfer of risks (B3)
- Carriage(B4)
- Delivery document: B6
- Import clearance(B7)
- Cost allocations B9
- Notice (B10):
- Notes:
• Used only for sea or inland waterway transport

• Not suitable for containerized goods (using FCA instead of FOB);

• Custom of loading port;
• Variations of FOB (FOB stowed, FOB trimmed)
• Usage of transport terms: FI, FO, FIO… 61
 Difference between FOB and FAS
• Delivery point;
• Allocation of cost and risks related to delivery:
+ Risks of loading: Seller;
+ Costs of loading: liner charter/voyage charter;
• Custom of the loading port;
• Proof of delivery: received for shipment/on board;

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 LINER CHARTER
• Liners are ship trading between fixed and predetermined number of
ports regardless whether they are full or empty.
• Liners follow a schedule of ports of loading and discharge, usually
adhering to a published timetable on set conditions of carriage and
often charged at a published rate or freight.
• Liner cargo is almost made up of manufactured or partly-
manufactured goods
• The vast majority (90%) of liner cargo is carried in container
• Liner freight includes loading, stowage/trimming and discharge
expenses
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 VOYAGE CHARTER
• Voyage chartering happens when a charter rents whole or part of a
ship for transporting his cargoes from port(s) of loading to port(s) of
discharge for a single or some of voyages
•Ships are running as the charterer’s requirements
• It almost always carries raw materials, very often in bulk such as iron
ore, grain, coal, and oil.
• Freight is determined by market to competitive and negotiated with
or without I, O, S, T → FIOST?
• Obligations and responsibility of carriers may be governed by both
Bill of lading and charterparty.
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 LOGO
BILL OF LADING

1. Definition
❖ Bill of lading is a document issued by a carrier to a
shipper (exporter/seller/consignor), signed by the
captain, agent, or owner of a vessel, furnishing written
evidence regarding receipt of the goods (cargo), the
conditions on which transportation is made (contract of
carriage), and the engagement to deliver goods at the
prescribed port of destination to the lawful holder of the
bill of lading (Hinkelman, Edward G., 2008).
 LOGO

2. Functions
❖ Receipt of shipment: confirming whether goods have been
received in good condition.
❖ Evidence of carriage contract: having the carrier’s or the
carrier agent’s signature only.
❖ Document of title → security for payment
 LOGO

3. Types of B/L
❖ By receiver
❖ By negotiability
❖ By notes on B/L
❖ By shipment
❖ Transport process
 LOGO
3.1. By receiver

3.1.1. Straight B/L

❖ In the box consignee the name of the addressee is
entered.
❖ Only he has the right to receive the goods.
❖ Non-negotiable Bill.
❖ Not beneficial to use with COLLECTION and L/C mode of
payment.
 LOGO
3.1. By receiver

3.1.2. To order B/L (2 common cases)

a. To order blank endorsed
•“TO ORDER” or “TO ORDER OF THE SHIPPER”
❖ The shipper would endorse in blank on the back of the Bill of
Lading by signing with authorized signature and stamping with
the company’s seal (same seal as the one in L/C).
 LOGO
3.1. By receiver
b. To order of a Bank
❖ Ex: To order of HSBC Vietnam.
❖ It is the issuing bank that would endorse the B/L to enable
the applicant to take up of the delivery of the cargo once the
documents presented are complying or once the applicant
accepts to pay the discrepant documents.
 LOGO
3.1. By receiver
3.1.3. To bearer B/L
❖ Any holder in due course can claim the goods.
❖ Should not give it directly to the buyer with L/C or Collection
payment.
 LOGO
3.2. By negotiability

❖ Negotiability is the characteristic of a document that

allows it to be legally and freely transferable. It allows the
passing of its ownership from one party to another by
endorsement or delivery.
 LOGO
3.2. By negotiability

3.2.1. Negotiable B/L

B/L can be transferred by its consignee to a third party
by endorsing and delivering it to another party. (To order,
To bearer B/L)
3.2.2. Non-negotiable B/L
B/L can not be transferred by its consignee to a third
party by endorsing and delivering it to another party.
(Straight B/L)
 LOGO
3.3. By notes on B/L

3.3.1. Clean Bill of Lading

❖ A bill of lading issued by a carrier declaring that the goods
have been received in an appropriate condition, without the
presence of defects.
• “Shipped in good order and condition”.
 LOGO
3.3. By notes on B/L

3.3.2. Unclean Bill of Lading

❖ A bill of lading indicating some damage to, or loss of the goods.
It is also called a claused bill of lading.
• "goods insufficiently packed in accordance with the Carriage of Goods by Sea Act,"
“five boxes broken”, “ some bags torn”, “ case No. 12 missing,”
 LOGO
3.3. By notes on B/L

❖ In practice, a clean BL will be essential for the sales contract

and must be issued to fulfill the requirements stated in letters
of credit.
❖ Most banks refuse to accept any unclean bills of lading.
❖ By offering a letter of indemnity to carrier, indemnifying the
latter against all possible consequences.
 LOGO
3.4. By shipment on board

3.4.1. Received for shipment B/L

❖ A B/L which serves only as a receipt for goods accepted for
shipment on a named ship (vessel), and does not certify their
placement on board.
❖ Used where the goods arrive at the port of departure before
the vessel does.
 LOGO
3.4. By shipment on board

3.4.2. Shipped on board B/L

❖ This B/L evidences goods having been loaded on board the
specified vessel with loading date on it. In these cases, the
date of issuance of the B/L will be deemed to be the date of
shipment.
 LOGO
3.5. By transport process
3.5.1. Direct B/L
❖ Direct B/L means that the goods are shipped from the port
of loading direct to the port of destination without involving
transhipment.
3.5.2. Through B/L
❖ Different ships from origin to destination.
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 INCOTERMS® 2020 LOGO

CFR: Cost and freight + Named port

Cost and Freight” means that the seller
delivers the goods to the buyer
• on board the vessel
• or procures the goods already so delivered.
The seller must contract for and pay the costs
and freight necessary to bring the goods to
the named port of destination.
 INCOTERMS® 2020
❖CFR – Cost and Freight
➢CFR + port of destination, Incoterms 2020
CFR Hai Phong Port, Việt Nam – Incoterms
2020
 INCOTERMS® 2020
❖ CFR – Cost and Freight
➢ Seller’s obligations:
- Delivery (A2):
- Transfer of risks (A3)
- Carriage (A4):
- Insurance (A5)
- Transport document (A6):
- Export clearance (A7)
- Cost allocation (A9)
➢ Buyer’s obligations
➢ Taking delivery and transfer of risks (B2, B3)
 Loading costs? Risks of unloading?
- Import clearance (B7)
- Cost allocations (B9)
- Notices (B10)
❖ Notes:
❑ Not suitable for containerized goods (using CPT instead of CFR).
❑ The buyer should contract for insurance.
❑ CNF, C&F, C + F: not recommended.
86
 INCOTERMS® 2020
❖ CIF - Cost, Insurance and Freight
➢ CIF + Named port of destination, Incoterms 2020
CIF Cat Lai Port, Viet Nam, Incoterms 2020.
➢ The seller fulfils his obligations by placing the insured goods on
board the vessel nominated by the seller at the agreed port of
loading or by procuring the goods already so delivered;
➢ Parties’ main obligations are similar to those in CFR, except for
insurance obligation
 INCOTERMS® 2020
➢ Seller’s insurance obligation:
▪ .
ICC – INTERNATIONAL CARGO CLAUSES (Lloyd’s Market Association/International
Underwriting Association ‘LMA/IUA’) – 01.01.2009
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 INCOTERMS® 2020 LOGO

CPT: Carriage paid to + Named place

CPT
Border Border

Seller Port of Port of Named

place
Buyer
shipment destination
COST

RISK
 INCOTERMS® 2020
❖ CPT – Carriage paid to
➢ CPT + Named place of destination
CPT Noibai Airport, Vietnam – Incoterms 2020

❖ Carriage Paid To” means that the seller delivers the goods—
and transfers the risk—to the buyer by handing them over to
the carrier contracted by the seller or by procuring the goods
so delivered. The seller may do so by giving the carrier
physical possession of the goods in the manner and at the
place appropriate to the means of transport used.
 INCOTERMS® 2020
❖ CPT – Carriage paid to
➢ Seller’s obligations
- Delivery and transder of risks (A2,A3)
- Carriage (A4)
- Insurance (A5)
- Transport Document (A6):
- Custom clearance(A7)
 INCOTERMS® 2020
➢ Buyer’s obligations
❖ Take delivery, bear all risks of loss of or damage to the goods from the time they
have been delivered;
❖ Notice the seller of time of dispatching/place of destination and bear all arising
costs and risks if fail to perform B10;
❖ Pay all additional charges relating to the goods in transit or unloading costs,
unless such costs are for the seller’s account under contract of carriage;
❖ Clear the goods for import;
❖ Notes:
❖ All modes of transport;
❖ If the two parties do not intend to deliver the goods on board, CPT should be
used instead of CFR;
❖ The buyer should contract for insurance;
101
 INCOTERMS® 2020
❖ CIP – Carriage and Insurance Paid to
❖ CIP + Named place of destination, Incoterms 2020
CIP Noibai Airport, Vietnam, Incoterms 2020
➢ Tổng quan:
The seller fulfils his obligations by delivering the insured goods to
the carrier or another person nominated by the seller at a place
agreed between the parties
→ Parties’ obligations are similar to those in CPT.
➢ Seller’s obligations
➢ Buyer’s obligations
➢ Transport document
➢ Insurance issue
 INCOTERMS® 2020
➢ Insurance obligation:

▪ Unless otherwise agreed or customary in the particular trade, the seller must
obtain at its own cost cargo insurance complying with the cover provided by
Clauses (A) of the Institute Cargo Clauses (LMA/IUA) or any similar clauses
as appropriate to the means of transport used. T
▪ The insurance shall be contracted with underwriters or an insurance
company of good repute and entitle the buyer, or any other person having an
insurable interest in the goods, to claim directly from the insurer.
▪ The insurance shall cover, at a minimum, the price provided in the contract
plus 10% (i.e. 110%) and shall be in the currency of the contract.
▪ The insurance shall cover the goods from the point of delivery to at least the
named place of destination.
▪ The seller must provide the buyer with the insurance policy or certificate or
any other evidence of insurance cover.
 INCOTERMS® 2020
❖ Notes for C group
▪ Two critical points
▪ Avoid stipulating date of delivery at destination (date of arrival)
‘CIF Rotterdam not later than…’
‘Shipment to be arrived at discharging port before…’
▪ Unsuitability of minimum cover for manufactured goods
▪ C-terms are not equivalent to D-terms
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 INCOTERMS® 2020 LOGO

DAP: Delivered at place + Named place

DAP
Border Border

Seller Port of Port of Named

place
Buyer
shipment destination
COST

RISK
 INCOTERMS® 2020
➢ DAF – Delivered at Frontier
➢ DES – Delivered ex Ship
➢ DDU – Delivered Duty Unpaid

2000 2010
DAF
DES DAP
DDU
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109
 LOGO
ADDITIONS TO DDP

❖ DDP exclusive of duty, VAT and other import

charges.
 NOTES FOR D GROUP

➢DAP and DDP do not include unloading

➢If any difficulties seem likely to arise in relation to
the import of the goods into the buyer’s country, the
seller should try to avoid using the term DDP.
➢DPU or DAP and difficulties of reaching the final
destination

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 Y Y Y
Can you bear all costs and Can you obtain the Can you bring the
risks until the goods are required import goods to the named ???
delivered to the buyer? licenses and carry out place of destination?
the import formalities

N N
N

Y N
Can you organize transport
???
Y

and pay the freight up to the Is the place of Are the goods
agreed place of destination destination a sea shipped in a
(without guarantee of port? container?
arrival)
???
N Y

Can you bring the goods to

N
Y Y
the agreed place of Is the place of Are the goods ???
international/main shipment destination a sea shipped in a
and carry out all formalities port? container?
upon exportation
N Y ???
N

???
113
J&J Ltd. of Guangzhou, China, sold solar panel displays to Sunshine
Technologies for $300,000 USD CIF. J&J contracted their freight forwarder,
Better Freight International Ltd., to move the cargo on a door-toport basis to
the port of Chicago, Illinois. Better Freight was notified that the shipment
would be ready for pick up from J&J on the first of the month. The goods
were picked up on time and moved to the port of loading for export loading.
The proper Importer Security Filing (ISF) information was filed in a timely
manner and the shipping carrier Main Container Line loaded the container
accordingly. While in transit, the container was subject to carriage stress, and
movement causing damage to the solar panels resulting in 100% loss of the
quality of the goods. Sunshine, upon investigation, discovered that the freight
forwarder Better Freight and the container carrier Main Container Line were
notorious for damaged cargo and poor stowage of containers from the Far
East. Sunshine filed a claim with J&J for the full value of the cargo plus a 30%
profit that was expected after U.S. importation and U.S. resale. The seller, J&J,
upon receipt of notification of the claim for damages refused the claim and
informed Sunshine Technologies that they, J&J, were not liable for the loss or
damage. 114
 PART 3
CHANGES TO INCOTERMS®2020

115
Incoterms®2020
 Incoterms®2020
• Overall changes: steering users towards the right
Incoterms® rule for their sale contract.
– a greater emphasis in this Introduction on making the
right choice;
– a clearer explanation of the demarcation and
connection between the sale contract and its ancillary
contracts;
– upgraded Guidance Notes presented now as
Explanatory Notes to each Incoterms® rule; and
– a re-ordering within the Incoterms® rules giving
delivery and risk more prominence
 ORDER WITHIN THE INCOTERMS RULES
2010 2020

A1-B1. General obligations of the seller-buyer A1-B1. General obligations

A2-B2. Licences, authorizations, security A2-B2. Delivery – Taking Delivery

clearances and other formalities
A3-B3. Contracts of carriage and insurance A3-B3.Transfer of risks

A4-B4. Delivery – Taking delivery A4-B4. Carriage

A5-B5. Transfer of risks A5-B5. Insurance

A6-B6. Allocation of costs A6-B6. Delivery/Transport Document

A7-B7. Notices to the buyer-seller A7-B7. Export- Import Clearance

A8-B8. Delivery document – Proof of delivery A8-B8. Checking/Packaging/Marking

A9-B9. Inspection of goods A9-B9. Allocations of costs

A10-B10. Assistance with information and A10-B10. Notices

related costs
 Incoterms®2020
• Major changes:
1. Bills of lading with an on-board notation and the
FCA Incoterms® rule
2. Costs, where they are listed
3. Different levels of insurance cover in CIF and CIP
4. Arranging for carriage with seller’s or buyer’s own
means of transport in FCA, DAP, DPU and DDP
5. Change in the three-letter initials for DAT to DPU
6. Inclusion of security-related requirements within
carriage obligations and costs
7. Explanatory Notes for Users
 CHANGES TO INCOTERMS®2020
1. On-board B/L in FCA
A6-B6 (Delivery/Transport document)
‘If the parties have so agreed, the buyer must
instruct the carrier to issue to the seller, at the
buyer’s cost and risk, a transport document stating
that the goods have been loaded (such as a bill of
lading with an onboard notation)’
 CHANGES TO INCOTERMS®2020
2. COSTS

• A6/B6: one-stop list of costs

 CHANGES TO INCOTERMS®2020
3. Different levels of insurance cover in CIF and CIP
• A5-B5 Insurance
‘Unless otherwise agreed or customary in the
particular trade, the seller must obtain at its own
cost cargo insurance complying with the cover
provided by Clauses (A) of the Institute Cargo
Clauses (LMA/IUA) or any similar clauses as
appropriate to the means of transport used.’
 CHANGES TO INCOTERMS®2020
4. CARRIAGE IN FCA, DAP, DPU, DDP
2010 A3a- B3a 2020 A4-B4

FCA Carrier Carrier/Buyer

DAP, DAT/DPU, Carrier/Seller

DDP
2010 A3a-B3a 2020 A4-B4
FCA B3a): ‘Contract B4; ‘The buyer must contract
for the carriage of or…………….. for the
the goods’. carriage of the goods’
DAP, DAT/DPU, A3a): ‘Contract A4: ‘ The seller must contract
DDP for the carriage of or ………………… for the
the goods’ carriage of the goods’
 CHANGES TO INCOTERMS®2020
5. DAT → DPU

2010 2020

DELIVERED AT TERMINAL OUT OF AT/OUT OF

TERMINAL TERMINAL

NOT UNLOADED

UNLOADED
DPU – DELIVERED AT PLACE UNLOADED (Named place of destination)
 CHANGES TO INCOTERMS®2020
6. Security-related requirements within carriage
obligations and costs
2010 2020
A2 Licences, A4 Carriage
authorizations, The seller must comply with any transport-
security related security requirements up to delivery
clearances and
other A7 Export/Import Clearance
formalities a) Export Clearance
Where applicable, the seller must carry out and
pay for all export clearance formalities required
by the country of export, such as:
- Export licence;
- Security clearance for export;
- Pre-shipment inspection; and
- Any other official authorisation
 DISCUSSION

Which factors affecting the choice of an

Incoterms rule?

The t

ransfer of risk takes place at the river port

127
 DISCUSSION

What are advantages and disadvantages of

the seller organising transport? The t

ransfer of risk takes place at the river port

128
Demurrage
(DEM) and
Detention
(DET)
 Thank You

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