Incoterms® 2020 rules – which entered into effect on January 1, 2020 – are the most recent update and the ninth set of international contract terms published by the International Chamber of Commerce with the first set having been published in 1936.

1. INCOTERMS
Their Importance in International Trading
By Pierre Lamour Taverne
International Trading & Brokerage Company
info@kashimex.com
Incoterms®
or International Commercial Terms are guidelines predetermined by the
International Chamber of Commerce (ICC) which are linked directly to international
commercial law. They are one of the most important aspect of international trade accepted
by governments to reduce or to remove uncertainties arising from the differing
interpretations of the rules in different countries. Getting acquainted with these procedures
will help to understand responsibilities and obligation for a seller and buyer and serve to
mitigate risks of disputes and disagreements with clients or suppliers.
Incoterms®
2020 rules – which entered into effect on January 1, 2020 – are the most recent
update and the ninth set of international contract terms published by the International
Chamber of Commerce with the first set having been published in 1936. They are in total
eleven (11) individual rules grouped into two categories reflecting mode of transport.
The first group includes seven (7) multimodal transport incoterms, these are:
1. Ex Works (EXW) or in Factory
2. Free Carrier (FCA)
3. Carrier Paid to (CPT)
4. Carriage and Insurance Paid to (CIP)
5. Delivered at Place (DAP)
6. Delivered at Place Unloaded (DPU)
7. Delivered Duty Paid (DDP)
The second one encompasses four (4) additional incoterms for sea and Inland Waterway
transport, these are:
8. Free Alongside Ship (FAS)
9. Free on Board (FOB)
10. Cost and Freight (CFR)
11. Cost, Insurance and Freight (CIF)
Multimodal Transport Incoterms
A transaction that takes place under the aegis of the first incoterm®
(EXW) means that you,
as the seller, abide to make the merchandise available to the buyer in your own premises
with no obligation to load the goods onto the carrier which retrieves them, nor to dispatch
them for export. When the merchandise is collected from the seller’s premises the risk of
loss is transferred to the buyer. This is the only term that says the buyer is responsible for
export clearance. Under this rule, if the buyer does not retrieve the goods after several

2. INCOTERMS
Their Importance in International Trading
By Pierre Lamour Taverne
International Trading & Brokerage Company
info@kashimex.com
notifications of their availability, the seller has the right to charge storage or move them to
a public storage facility at the buyer’s expense.
The basic definition of the second term – Free Carrier (FCA) – is quite simple and, at the
same time, can be complex. It means that sellers fulfill their obligation to deliver when the
goods are handed off to the named carrier at the named place. However, what makes it
more complicated is that named carrier could be an actual international carrier, it could be
a freight forwarder, or the name of the seller’s facility like EXW.
Referring to the third method – Carrier Paid to (CPT) – seller’s obligations will be
achieved when the goods are delivered to the named foreign destination. This foreign
destination is generally a freight terminal (an airport, seaport, rail terminal). Sellers are
responsible for paying the cost to bring the merchandise to the agreed place. The buyer is
responsible for import requirements, local delivery and unloading charges. However, the
buyers need to understand the risk of loss transferred from the seller to the buyer when the
goods are received by the main international carrier.
Carriage and Insurance Paid to (CIP), which is the fourth multimodal incoterms, obliged
exporters to purchase freight insurance with all risk coverage. The beneficiary of the
insurance is the buyer, not the seller.
Delivered at Place (DAP) required the seller to deliver the merchandise at the buyer’s
agree place upon the arrival means of transport. DAP is different from the CPT in the sense
that the risk of loss stays with the seller until the goods arrive at the named place even if
the risk and expenses of unloading are the buyer’s responsibility.
The definition of Delivered at Place Unloaded (DPU) is likely to be the same as
Delivered at Place (DAP). Except, under DPU, the risk and expenses of loading and
unloading the vessels are under the seller’s responsibility. The buyer is responsible for
import duty, taxes, and customs clearance.
Delivered Duty Paid (DDP) is not the most common way for the exporter to ship because
this is the highest obligation for the seller. The seller must arrange and pay all carriage to
named place. The buyer only bears risk from time of delivery at named place.
Besides the seven (7) multimodal transport incoterms mentioned above, let’s introduce the
four (4) additional incoterms for Maritime and Inland Waterway transport.

3. INCOTERMS
Their Importance in International Trading
By Pierre Lamour Taverne
International Trading & Brokerage Company
info@kashimex.com
Maritime and Inland waterway Transport
In international trading buyers and sellers should always analyze the incoterms®
to define
who has the risk and expense of loading and unloading a vessel. Under (FAS) Free
Alongside Ship, the seller is responsible for leaving the goods alongside the ship agreed
by the buyer. However, the risk and expense of loading and unloading the vessel will be
the buyer’s responsibility. On the other hand, if the product has been shipped using (FOB)
Free on Board, the risk and expense of loading will be the seller’s responsibility.
Cost and Freight (CFR) incoterm®, sellers will fulfill their obligations when the goods
are delivered to the named ocean destination. If the buyer does not have his own cargo
policy, he might consider buying (CIF) Cost, Insurance and Freight which will be the
seller’s responsibility to pay for the cargo insurance until the goods arrive at the destination
port.
Understanding these regulations should not be overlooked by the seller and/or the buyer.
For instance, let us say we have two shipments sitting in an origin terminal, and suddenly
something happened and damaged both shipments. One was sold on the CPT, the loss on
that shipment is on the buyer’s side. The other was sold on the CFR, the loss on that
shipment is the seller because the goods were not yet loaded on board the vessel. Thus,
proper use makes things clearer for both parties, gives assurance over prices, and eliminates
the likelihood of conflicts with customers or vendors; without a good understanding, one
will fail to choose the most appropriate Incoterm for the transaction.
Pierre Lamour TAVERNE
Executive Director