Incoterms 2020-2030

Incoterms® Groups

The grouping of Incoterms® 2020 is created based on the means of transport, just like Incoterms® 2010 , however, we still find it useful to refer to the distribution in 4 groups E, F, C and D used in previous versions:

Incoterms® Rule E:

EXW

From the moment the seller makes the goods available to the buyer at the designated place in the country of origin, the buyer is responsible for all costs, risks and insurance, from the loading of the goods at that same place, through all transport and customs procedures, until reaching the destination.

Incoterms® Rule F:

FAS, FCA, FOB.

The seller is responsible for the costs and risks until the goods, already cleared for export, are loaded onto the means of transport designated by the buyer or once said goods are made available to the carrier of the buyer at the designated place in the country of origin where the goods will begin their journey to the country of destination. Once the goods have been loaded onto the means of transport designated by the buyer, it is the buyer who is responsible for the costs and is responsible for the goods, as well as for processing the import customs in the country of destination.

Incoterms® Rule C:

CFR, CIF, CIP, CPT.

The seller is responsible for the costs of transport and similar to the agreed place of delivery and for the risks until the goods, already cleared for export, are loaded onto the means of transport designated by the buyer or once said goods are made available to the carrier of the buyer at the designated place in the country of origin where the goods will begin their journey to the country of destination. From this point on, the buyer is fully responsible for the goods, as well as for processing the import customs in the country of destination.

Incoterms® Rule D:

DAP, DDP, DPU.

The seller is responsible for the costs and risks of transport until the goods are delivered to the designated place in the country of destination agreed with the buyer. Delivery may be made with the goods cleared for import (DDP), uncleared on the means of transport to be unloaded (DAP) or uncleared after unloading from the means of transport (DPU). From then on, the buyer is responsible.

Incoterms® in detail one by one

EXW - Ex Works - Ex factory (+agreed delivery location)

In Factory or Ex Works is that the seller is only responsible for delivering the goods to its own or external facilities designated by it. The buyer assumes all risk from there to destination. Under Ex Works conditions, the seller makes the merchandise available to the buyer at its own premises but has no obligation to load the merchandise on the vehicle that comes to collect the merchandise, nor will it dispatch the merchandise for export. The incoterm® EXW rule means the minimum obligation for the seller. If the seller offers to load the goods on the collection vehicle, we recommend using the FCA (Free Carrier) rule since this Incoterm® rule obliges the seller to load the goods at his own risk.

FCA - Free Carrier - Free Carrier (+ agreed delivery location)

“Free Carrier” is when the seller delivers the goods to the carrier (the person responsible for carrying out the shipment) or to another person designated by the buyer at the seller's premises or at another agreed place. If the delivery point is at the seller's facilities, the merchandise is delivered with its load on the means of transport arranged by the buyer. If the designated place is another, the merchandise is delivered when it is ready for unloading on the seller's means of transport at the agreed point. It is recommended to specify in detail the agreed place of delivery, since the risk passes to the buyer with the delivery of the goods. The incoterm® FCA rule requires the seller to clear the merchandise for export, if applicable. However, FCA exempts the seller from any obligation to clear the merchandise for import, payments of import duties or import customs procedures.

Incoterms® meaning of group C: CPT, CIP, CFR and CIF

The 4 Incoterms® of the "C" family have a load of different obligations and functionalities, but they agree that the seller must carry out and manage the transport to the agreed point, although the risks of the delivery of the merchandise will be stay at origin.

What does each Incoterm® 2020 group C mean?

CFR: Cost And Freight - Cost and Freight
CIF: Cost, Insurance and Freight - Cost, Insurance and Freight
CPT: Carriage Paid To
CIP: Carriage and Insurance Paid - Transportation and Insurance paid up to

While CIF and CFR can be used solely and exclusively for means of maritime or river transport, CIP and CPT Incoterms are multimodal, that is, they can be applied to any means of transport: air, sea, land or rail. On the other hand, CIF and CIP require the contracting of transport insurance, unlike CFR and CPT, which do not share this obligation.

What are the differences between CIF and CIP?

The Incoterms "CIF" and "CIP" not only differ in the means of transport for which they must be used - multimodal transport (CIP) or maritime transport (CIF) - but also in the type of insurance required in them. While CIP requires the seller to obtain insurance coverage that complies with Institute Cargo Clauses (A) or similar - which are the broadest - CIF requires only ICC (C) or similar coverages.

What customs procedures do CIF and CIP Incoterms® require?

In all Incoterms® of the “C” family, it will be the importer/buyer who must carry out the customs procedures for import and the seller/exporter who must carry out the customs procedures for export. Each party takes care of this customs process with their respective authorities. The correct use of each of the Incoterms® will allow commercial transactions to be carried out quickly and minimizing conflicts.

CPT Carrier Paid To - Transport paid to (+agreed delivery location)

“Transport Paid To” is when the seller delivers the merchandise to the carrier (the person responsible for carrying out the shipment) or another person designated by the seller at an agreed place. With this rule, the seller must contract and assume the transportation costs to take the merchandise to the agreed place. The seller pays for transportation to the agreed destination, but delivers the goods to the buyer (with transfer of risk) placing them in the hands of the carrier hired by said seller. The incoterm® CPT rule requires the seller to clear the merchandise for export, if applicable. However, CPT exempts the seller from any obligation to clear the merchandise for import, payments of import duties or import customs procedures.

CIP - Carrier and Insurance Paid To - Transport and Insurance paid to (+agreed delivery location)

The seller pays for transportation to the agreed destination, but delivers the goods to the buyer (with transfer of risk) placing them in the hands of the carrier hired by said seller. This Incoterm requires the seller to take out insurance coverage under ICCA or similar conditions. In the Incoterm® CIP rule, the seller must establish insurance coverage in compliance with the Institute Cargo Clauses (A), although it is also possible for the buyer and seller to agree on a lower level of coverage. In Incoterms 2010® limited insurance coverage was sufficient.

DAP - Delivered at Place - Delivered in place (+ agreed delivery place)

“Delivered in Place” is when the seller delivers the merchandise, with transfer of risk, when it is made available to the buyer in the means of transport prepared for unloading at the agreed destination. The seller bears all the risks of bringing the merchandise to the agreed place. It is recommended to specify in detail the agreed destination, since the risks up to that point are assumed by the seller. If you want the seller to clear the merchandise for import or carry out any customs import procedure, the Incoterm® DDP (Delivered Duty Paid) rule should be used.

Delivered at Place Unloaded (DPU) – Goods delivered and unloaded at the agreed place

The Incoterm® DPU (Goods delivered and unloaded at agreed delivery location) establishes that the seller delivers the merchandise, with transfer of risk, when it, once unloaded from the means of transport, is made available to the buyer at the place of delivery. agreed destination.

DDP - Delivered Duty Paid - Delivered Duty Paid (+agreed delivery location)

“Duty Paid Delivered” is when the seller delivers the merchandise, with transfer of risk, when he makes it available to the buyer cleared for importation in the means of transport of arrival prepared for unloading at the agreed destination. The seller bears all the risks of bringing the merchandise to the agreed place and must clear the merchandise for both import and export, as well as carry out all related customs procedures.

The incoterm® DDP rule is the maximum obligation for the seller. It is recommended to specify in detail the agreed destination, since the risks up to that point are assumed by the seller. If the seller cannot obtain import clearance, this rule is not used. If you want the buyer to assume all the risks and costs of import clearance, it is recommended to use DAP (Delivered in Place). Taxes payable upon import, such as VAT, will be borne by the seller.

FAS - Free Alongside Ship - Free Alongside Ship (+agreed delivery location)

“Free Side of Ship” is when the seller delivers the goods to the buyer when the goods are placed alongside the ship (or barge) designated by the buyer at the port of shipment. From this point on, the risk is assumed by the buyer.

It is recommended to specify in detail the loading point at the agreed port of shipment, since the risks and costs up to that point are assumed by the seller.

When the merchandise must be grouped or consolidated in containers, the seller delivers it to the carrier at a container terminal. From that moment, the seller loses control of the merchandise and it goes through multiple movements to be grouped in a container. When this happens, it is recommended to use the Incoterm® FCA (Free Carrier) rule.

The incoterm® FAS rule requires the seller to clear the merchandise for export, if applicable. However, FAS exempts the seller from any obligation to clear the merchandise for import, payments of import duties or import customs procedures.

FOB - Free On Board - Free on Board (+agreed delivery location)

“Free on Board” is when the seller delivers the merchandise on board the ship designated by the buyer at the port of shipment. The risk is transmitted when the goods are on board the ship.

It is recommended to specify in detail the loading point at the agreed port of shipment, since the risks and costs up to that point are assumed by the seller.

When merchandise must be grouped or consolidated in containers, the seller provides it to the carrier at a container terminal. From that moment on, the seller loses control of the merchandise, which undergoes several movements to be grouped in a container. When this happens, it is recommended to use the Incoterm® FCA (Free Carrier) rule.
The incoterm® FOB rule requires the seller to clear the merchandise for export, if applicable. However, FOB exempts the seller from any obligation to clear the merchandise for import, payments of import duties or import customs procedures.

In Incoterm® FAS, FCA and FOB rules, the seller delivers the merchandise to a means of transport chosen by the buyer.

At the time the merchandise is grouped or consolidated in containers, the seller delivers it to the carrier at a container terminal. From there, the seller loses control of the merchandise, which goes through multiple movements to be grouped in a container. In this situation, it is recommended to use the Incoterm® FCA rule.

CFR - Cost and Freight - Cost and Freight (+agreed delivery location)

“Cost and Freight” is when the seller assumes the cost and freight, unpaid duties, to the agreed port of destination. Delivery occurs and risk passes when the goods are on board the vessel. When merchandise is grouped or consolidated in containers, the seller provides it to the carrier at a container terminal. From that moment on, the seller loses control of the merchandise, which undergoes several movements to be grouped in a container. When this happens, it is recommended to use the Incoterm® CPT rule.

CIF - Cost, Insurance and Freight - Cost, Insurance and Freight (+agreed delivery location)

With the Incoterm® CIF, the seller assumes the cost of insurance and freight, unpaid duties, to the agreed port of destination. Delivery occurs and risk passes when the goods are on board the vessel. This Incoterm requires the seller to take out limited insurance coverage on ICCC or similar conditions. In the Incoterm® CIF rule, used mainly for the trade of raw materials, the Institute's Cargo Clauses (C) are maintained in their default position, leaving it up to negotiation between buyer and seller to agree on higher coverage.