Incoterms is a set of terms governing international trade relations. By international trade terms we mean the standard terms of international trade agreements. These terms define the responsibilities of the parties to the transaction, regulate the ownership of the cargo, the damage to the cargo, the transfer of liability for incorrect documentation, and so on.

The first Incoterms was published in 1936, then changed in 1953, 1967, 1976. Since 1980, Incoterms has started to change regularly every 10 years; it has been updated in 1990, 2000, 2010 and 2020.
Incoterms 2020 came into force on January 1 of 2020, but the use of older versions is also possible now. That is why when reminding about the condition of cargo transportation, it should be mentioned what year the change is about.

The rules are foreign trade terms abbreviated to the first three letters, which describe the prevailing trading practice in the world.

Incoterms 2020 has 4 groups of basic terms of cargo delivery (E, F, C և D). They are divided according to the distribution of responsibilities between the parties to the foreign trade transaction.

Group E (loading)

 

EXW («Ex Works»)    The seller makes the goods available at their premises, or at another named place. Buyer incurs the risks for bringing the goods to their final destination. The buyer is also responsible for completing all the export and import documentation.

 

Group F (Shipping paid by buyer)

 

FCA («Free Carrier») This term means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. Seller pays for carriage to the named place.
FAS («Free Alongside Ship») This term means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. The seller is required to clear the goods for export. The buyer has to bear all costs & risks of loss or damage to the goods from that moment.
FOB («Free On Board») This term means that the seller delivers when the goods pass the ship's rail at the named port of shipment. This means the buyer has to bear all costs & risks to the goods from that point. The seller must clear the goods for export.

 

Group C (Main Shipping Paid by Supplier)

 

CPT («Carriage Paid To»)  This term means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all costs occurring after the goods have been so delivered. The seller must clear the goods for export.
CFR («Cost and Freight») This term means the seller delivers when the goods pass the ship's rail in the port of shipment. Seller must pay the costs & freight necessary to bring the goods to the named port of destination, BUT the risk of loss or damage, as well as any additional costs due to events occurring after the time of delivery are transferred from seller to buyer. Seller must clear goods for export.
CIP («Carriage and Insurance Paid to») This term means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination, also has to procure insurance against the buyer’s risk of loss or damage to the goods during the carriage.
CIF («Cost, Insurance and Freight»)  The seller delivers when the goods pass the ship’s rail in the port of shipment. Seller must pay the cost & freight necessary to bring goods to named port of destination. Risk of loss & damage same as CFR. Seller also has to procure marine insurance against buyer’s risk of loss/damage during the carriage. Seller must clear the goods for export.

 

Group D (Delivery)

 

DAT («Delivered At Terminal») Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal. This term may be used for any mode of transportation.
DAP («Delivered At Point») Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer.
DDP  («Delivered Duty Paid») This term represents maximum obligation to the seller. This term means the seller delivers the goods to the buyer, cleared for import, and unloaded from arriving means of transport at the named place of destination, the seller also will bear all costs & risks of carrying out customs formalities including the payment of duties, taxes & customs fees.
DPU («Delivered at Place Unloaded» , formerly referred to as DAT for “Delivered at Terminal”) requires the seller to deliver the goods at the disposal of the buyer after they’ve been unloaded from the arriving means of transport.
DPU is the only Incoterms rule that requires the seller to unload goods at the place of destination.
DPU can apply to any—and more than one—mode of transport. The buyer and seller should specify and agree upon a named place of destination.
DPU requires the seller to clear goods for export, where applicable, without any obligation to clear the goods for import, pay import duty or carry out import customs formalities.