What are the Incoterms 2020 in the International Trade?

port of shipment

If you are interested in international trade and knowing the world of Incoterms, is important that you know the latest update of 2020. It became effective from January 1, 2020. In this blog we leave you information on how many Incoterms there are, the categories, their uses and benefits for international trade.


What are Incoterms for the international trade?

The Commission on Commercial Law and Practice of the International Chamber of Commerce (CLP-CCI) developed the incoterms. And published for the first time in 1936 by the International Chamber of Commerce (CCI). (http://www.iccspain.org/) (https://iccwbo.org/). These Incoterms are used in international contracts, international trade, and whose definition is protected by copyright of ICC.

How many Incoterms are there in 2020?

According to the update of the Incoterms 2020 there are eleven Incoterms. In the first place, the aspects that were used to define and distribute the incoterms are the following.

  • Rights
  • Obligations
  • Expenses
  • Risks in international transport and insurance.
vessel in port incoterms

What are the four categories of Incoterms 2020 in international trade?

Incoterms are classified as categories, and these in turn in one time commercial terms. Additionally you can identify the Incoterms in the following table by categories:

  • (E output)
  • ( F free)
  • ( C cost)
  • (D delivered)
Four Categories of incoterms 2020

Also each commercial term of Incoterms operates differently and we can also group by means of transport used.It is also essential to distinguish the Incoterms, between direct delivery on departure and sale on arrival.

Firstly, Direct delivery at departure , in other words means that the merchandise travels at the buyer’s risk and expense, that is:

  • from its availability at the seller’s premises (EXW)
  • from the moment it went to the carrier for dispatch (FCA, FAS, FOB, CFR, CIF, CPT and CIP).

Secondly, Sale on arrival means that the merchandise travels at the seller’s risk and expense to the agreed point. This corresponds to 3 Incoterms: DAP, DAT, DDP.

Rules for sea and any mode transport incoterms

What are the advantages of Incoterms?

Some of the advantages are reducing the legal uncertainty caused by business practices in different countries in terms: risks, costs, responsibilities, documents, etc. Simplify negotiations in international trade. Avoid misunderstandings about obligations and responsibilities, between sellers and buyers. In conclusion is generate the same international language in terms of sale.

Why are Incoterms used?

In principle, each foreign trade operation requires the use of its type of Incoterms. Second, these terms help clarify the rules for shipping and receiving goods. Finally, we leave you below some of the uses of Incoterms:

  • The place of delivery of the merchandise.
  • Know what are the customs procedures and documents.
  • Transport and Insurance,
  • Know the transmission of risk in transport
  • Identify the logistics costs of the seller and buyer.
Hamburg Port Container Ship international trade

What are the most important changes in Incoterms 2020? 

The important changes is that the Incoterms have been in force since January 2020. Also there are some other changes we will describe below.

  • The DAT (Delivered at Terminal) is replacing for DPU (Delivered at Place Unloaded)a new incoterms. This is a redenomination in the acronyms, the obligations and functions are the same. Therefore, the merchandise is not only delivered at the terminal; but also to the warehouse or factory.
  • Changes includes requirements related to the different levels of insurance coverage: Cost Insurance and Freight (CIF), and in Carriage and Insurance Paid To (CIP).
  • Agreements for transport with their means in Free Carrier (FCA), Delivered at Place (DAP), Delivered at Place Unloaded (DPU), and Delivered Duty Paid (DDP).
  • FCA, the option of bill of lading “on board” (BL on Board). The seller is allowed to issue confirmation that the merchandise is on board the ship. In addition, the documentary credits, this transport document (BL) is used to justify the delivery.

Finally, to obtain more information about Incoterms you can access the guide to incoterms 2020. Here is the website of the International Chamber of Commerce. https://2go.iccwbo.org/incoterms-2020-eng-config+book_version-Book/ .

In addition, we share some of our blogs, on topics related to international trade. http://www.madiuc3m.com/business-chile-regulations and http://www.madiuc3m.com/business-chile-regulations https://madiuc3m.com/be-international/

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