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Incoterms

Transport logistics with CargoLine

What are Incoterms?

Since 1936, the Incoterms of the International Chamber of Commerce (ICC) have been regulating the rights and obligations between seller and buyer or exporter and importer in a clear and uniform manner worldwide. Although they have no legal status and do not replace a sales contract, the Incoterms make it easier to draft and give both parties legal certainty. This prevents misunderstandings and costly disputes and thus reduces the risk of legal complications for both parties.

A new version came into force on January 1, 2020. The changes compared to the last version from 2010 mainly concern the presentation and order of the clauses as well as some application notes, which we explain below. The aim of the revision was primarily to improve user-friendliness. An overview is available for download here . *

Attention: As the old Incoterms are still valid, the ICC recommends the following formulation when using Incoterms 2020: " [selected Incoterms® clause] [named port, place or location] Incoterms® 2020 ". Ditto when using, for example, the Incoterms 2010 " [selected clause] Incoterms® 2010 ".

*(All statements without guarantee)

What has changed in the Incoterms

Current version 2020 vs. version 2010 (most important changes)

1. Different coverage levels in CIF and CIP
2. Renaming of DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded)
3. Inclusion of safety-related requirements

In detail

1. Different coverage levels in CIF and CIP
Also in accordance with Incoterms® 2020, the seller is obliged to take out transport insurance at his own expense in accordance with the CIF and CIP clauses. In contrast to the Incoterms® 2010, however, different minimum coverage is now required for the two clauses. The minimum coverage to be observed when agreeing the CIF clause remains unchanged. The transport insurance, which is to be taken out by the seller up to the named port of destination, must continue to at least correspond to the coverage in accordance with clauses (C) of the Institute Cargo Clauses or similar clauses (insurance of named risks). If the CIP clause is agreed, however, the seller must now cover the insurance cover that corresponds to clauses (A) of the Institute Cargo Clauses (all-risk cover) up to the named receiving depot. However, when using both the CIF and CIP clauses, the contracting parties are free to agree different insurance coverage.

2. Renaming of DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded / delivered named destination unloaded)
According to the DAT clause of Incoterms® 2010, the seller had delivered the goods as soon as they were unloaded from the means of transport at a "terminal". According to the application notes for the Incoterms® 2010, the term “terminal” was explicitly not to be understood from a technical point of view, but any unloading location was meant. However, this has often been misunderstood. This fact was taken into account in the Incoterms® 2020 by renaming the previous DAT clause to DPU (Delivered at Place Unloaded) to clarify.

3. Inclusion of safety-related requirements
Safety-related requirements for the transport of goods have been included in rules A 4 and A 7 of each clause of Incoterms® 2020. As in relation to the other clauses of the Incoterms®, it must also be taken into account here that these only apply directly to the parties to the sales contract and are not the subject of the transport contract.

These are the three most important innovations. Other changes concern the bills of lading with on-board notation under the FCA clause, the organization of transport with the seller's or buyer's own means of transport in FCA, DAP, DPU and DDP, the non-consideration of the VGM (Verified Gross Mass) and the warning against the use of the DDP and EXW clauses in cross-border goods traffic.

(Source: Forwarding and Logistics Association Hesse / Rhineland-Palatinate e.V.)

What you should know about the current Incoterms

  • The Incoterms consist of a total of eleven trade clauses, seven of which can be applied to all types of transport and four to sea and inland waterway transport:
    • EXW, FCA, CPT, CIP, DAP, DPU and DDP for all modes of transport
    • FAS, FOB, CFR and CIF for ocean freight and inland shipping
  • The clauses do not replace a sales contract, but merely specify individual contractual items such as certain obligations of the sales contract partners, transfer of risk and allocation of costs.
  • Incoterms are only legally binding if they have been properly agreed.
  • Changing them jeopardizes legal security.
  • The clauses are only suitable for B2B business.
  • The new Incoterms can also be used in national trade.
  • Incoterms 2010 and older retain their validity, so it is advisable to state the version used in each case (see above)
  • For container shipping, the ICC has recommended since 2010 to use FCA instead of FAS and FOB as well as CPT and CIP instead of CFR and CIF.
  • DDP: Instead of delivering DDP, it is advisable for a sender to deliver DAP or DPU (formerly DAT) with the addition "including import clearance" or "exclusive import clearance". Why? DDP represents a maximum obligation on the part of the sender, ie he bears all costs and risks up to the destination of the goods and is obliged to clear them for export and import, to pay all duties and to take care of all customs formalities. With DDP, a sender must also be aware that he needs a partner for customs clearance in the country of destination.
  • EXW: It is recommended that both the recipient and the sender use FCA, named place, instead of EXW: FCA protects the recipient of the goods from having to organize the loading and preparing the export documents themselves, and offers better protection in the event of damage that arise in the course of loading. Insofar as only exporters are permitted to apply for export permits due to legal requirements in the exporting country, the EXW clause is completely unsuitable from the buyer's point of view. But the sender also benefits from the clearer regulation with regard to liability, costs and scope of tasks.

Version 2010 vs. Version 2000

  • The revised version of the Incoterms published on January 1, 2011 only contains eleven instead of 13 clauses.
  • DAP replaces DAF, DES and DDU.
  • DAT (from 2020 DPU) replaces DEQ.
  • In the case of CIF, CFR, FOB, the transfer of risk only takes place when the goods are deposited on the ship deck (previously: ship railing).
  • In the case of the C-clauses, the buyer is now obliged to provide the insurance-relevant information.
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