ICC Incoterms(R) 2020 Rules Leaner Guide

Learner Guide

Compiled by:

Global Maritime Legal Solutions

A World Class Knowledge Centre

This Module is suitable for training towards the FIATA Diploma, TETA, QCTO
Qualifications and similar courses.

www.gmls.co.za

Official ICC Approved Trainer

ADVANCED

Learner Guide compiled by:

Mark Goodger

Creation date – September 2019
Copyright ©
Global Maritime Legal Solutions (Pty) Ltd.

No part of this book may be reproduced in any form or by any means without written
permission from the publisher

WARNING AGAINST PLAGIARISM

The author of GMLS Incoterms® 2020, in conjunction with ICC Headquarters Paris
stipulations, has been required to pass the Trainer Exams of the ICC Academy for
2010 and 2020 Incoterms® in order to be accredited and qualified to deliver this
training to you today.
This knowledge attained by the Trainer comes at great cost, physical knowledge,
training and capacity efforts.
You may NOT distribute, copy, sell etc., such material to ay organisation or person
without the express written permission of GMLS Management.

__________________________________________________________________________________ 2
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

LEARNER GUIDE

Interpret and apply International Commercial
Terms

OVERALL OBJECTIVES OF THIS MODULE
The person completing this training programme will be able to demonstrate knowledge about
international commercial terms, the roles and responsibilities regarding delivery, carriage,
costs, and risks, and make recommendations on the usage of international commercial terms.

• What the Incoterms Rules Do?
• What the Incoterms Rules do NOT do?
• How best to incorporate the Incoterms Rules?
• Delivery, Risks and Costs in Incoterms Rules?
• Incoterms Rules and the Carrier?
• Rules for the Contract of Sale and their relationship to other contracts?
• The 11 Incoterms 2020 Rules – “Sea and Inland Waterway”, and “Any Mode of Transport”

– getting it right!
• Order within the Incoterms Rules?
• Differences between Incoterms® 2010 and 2020?
• Caution with variants of Incoterms Rules?

__________________________________________________________________________________ 3
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Outcome Test/Assessment Criteria

1. The history and origin of the International Commercial Terms are explained with
examples, and the importance of the controlled landed cost;

2. The impact of the International Commercial Terms is explained as they apply to trade;
3. The legality of the International Commercial Terms is identified with examples;
4. Terms and acronyms of the International Commercial Terms are identified with examples;
5. The Buyer’s and Seller’s responsibilities are explained;
6. The Buyer’s and Sellers responsibilities are identified using examples and discussing the

changes between the 2010 and 2020 versions;
7. The Buyer’s and Seller’s risks are identified using examples;
8. The Carriage of the Buyer’s and Seller’s responsibilities is explained with examples;
9. The costs of the Buyer and the Seller are identified with examples;
10. Recommendations on what the Rules do, and do not do, are explained;
11. Recommendations are developed to compare to others, as well as risks, especially to

Buyers;
12. The advantages and disadvantages of recommendations are identified with examples;
13. Recommendations are made and identified with examples;
14. Recommendations are justified with examples;
15. Identify and solve problems related to the interpretation and application of International

Commercial Terms;
16. Work effectively with others to ensure the correct application of the International

Commercial Terms;
17. Collect, analyse, organise, and critically evaluate information pertaining to the use of

International Commercial Terms;
18. Communicate effectively when making recommendations on the application of

International Commercial Terms;
19. Use science, weather, climate, and technology to interpret and apply International

Commercial Terms;
20. Demonstrate an understanding of the world trade sphere, geography etc., as maybe

impacted by Incoterms and the consequences of the incorrect interpretation and
application of International Commercial Terms on both the student/learner and the
organisation.

__________________________________________________________________________________ 4
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

INDEX

1. Introduction
2. What they are?
3. Making the choice and how
4. What changed?
5. Factors to consider
6. Case Studies and Practice of implementation
7. Conclusion

1. Introduction

FOREWORD in the Incoterms® 2020 Booklet by John W.H. Denton, AO, ICC Secretary General

“The growth of the global economy has given most businesses greater access than
ever before to markets all over the world. Goods are sold today in more countries,
in larger quantities, in greater variety, and at a faster pace as a result. But, as both
the volume and complexity of global trade increase, so do possibilities for
misunderstandings and costly disputes when sale contracts are not adequately
drafted.

The ICC Incoterms® rules on the use of domestic and international trade terms
address this risk by facilitating the conduct of global trade. Reference to an
Incoterms® 2020 rule in a contract for the sale of goods clearly defines the parties’
respective obligations regarding topics such as risk, cost and arrangement of
transport and customs clearance, thereby reducing the potential for legal
complications.”

__________________________________________________________________________________ 5
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Incoterms Rules also deal with the obligations to clear the goods for export and import, the
packing of goods, the buyer’s obligation to take delivery and to provide proof that the respective
obligations have been duly fulfilled.
Although Incoterms® 2020 Rules are extremely important for the implementation of the contract
of sale, a great number of problems which may occur in such a contract are not dealt with at all,
like transfer of ownership and other property rights, breaches of contract and the consequences
following from such breaches as well as exemptions from liability in certain situations.

NB!! It should be stressed that Incoterms® 2020 Rules are not intended to replace such contract
terms that are needed for a complete contract of sale either by the incorporation of standard
terms or by individually negotiated terms.
Legal Guidelines in the use of the “Incoterms® Rules” Trademark
There are some internal communications and legal guidelines for usage of the Incoterms® 2020
Rules Trademark and graphic symbols which should always be adhered to.
The Incoterms® Rules and Explanatory Notes and all other content of ICC Publication on
Incoterms® Rules are subject to ICC copyright. When incorporating into a Sales Contract, it is
not necessary to use the trademark symbol. Refer to www.https://iccwbo.org/incoterms-
copyright/.

Your Trainer must be Qualified!!

__________________________________________________________________________________ 6
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

History of Incoterms
o Developed by the ICC (International Chamber of Commerce)
o First Published creation – 1936
o Regularly updated – Contemporary Commercial Practice
o Other ICC Instruments are:
- UCP 600
- ICC Model Contracts
- Arbitration

[INSTRUMENTS THAT ARE BREAKING DOWN BARRIERS TO TRADE]
o Recent 2020 changes and 2010:
- Customs Free Trade Zones - DPU
- Security & Customs requirements – Additional Emphasis
- Electronic communications
- Insurance Cover and New Cover obligations
o Were 13 Rules in the 2000 version
o 11 Rules only in 2010 version – In 2 Sections
o 11 Rules in 2020 version – Also in 2 Sections

__________________________________________________________________________________ 7
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

2. What they are?
Definition of Incoterms® Rules (as prescribed by the ICC)

o Incoterms are a series of International Sales Terms, published by the International
Chamber of Commerce (ICC) and which is widely utilised in international commercial
transactions.

o These terms are accepted by governments, legal authorities and practitioners worldwide
for the interpretation of most commonly used terms in international trade.

o This reduces or remove altogether uncertainties arising from different interpretations of
such terms in different countries.

o The scope of this is limited to matters relating to rights and obligations of the parties to
the contract of sale with respect to the delivery of goods sold.

o These terms are utilised to divide transaction costs and responsibilities between the
Buyer and the Seller and reflect state-of-the-art transportation practices.

o They closely correspond to the United Nations Convention on Contracts for the
International Sale of Goods.

o One of the most frequent problems in the use of Incoterms rules is the choice of the
wrong rule for the particular type of contract.

__________________________________________________________________________________ 8
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Rules for Domestic and International Trade
o Incoterms Rules have traditionally been used in international sale contracts where goods
pass across national borders. In various areas of the world, however, trade blocs, like the
European Union, have made border formalities between different countries less
significant.
o Consequently, the subtitle of the Incoterms® Rules formally recognises that they are
available for application to both international and domestic sale contracts. As a result,
the Incoterms® Rules clearly state in a number of places that the obligation to comply
with export/import formalities exists, only where applicable.
o Thus, the two 2010 developments had persuaded the ICC that a movement in this
direction is timely. Firstly, traders commonly use Incoterms Rules for purely domestic sale
contracts.
o The second reason is the greater willingness in the United States to use Incoterms Rules
in domestic trade, rather than the former Uniform Commercial Code shipment and
delivery terms.

Trade provides mankind's most significant meeting place, the market. In primitive societies, only
religious events - cult rituals or rites of passage such as marriage - brought people together in a
comparable way, but in these cases, the participants are already linked, by custom or kinship.
Agricultural, mineral, finished goods and produce and everyday household goods tend to make
short journeys in domestic markets to and from a local market. Trade in a grander sense, between
distant places, is a different matter. It involves entrepreneurs and middlemen, people willing to
accept delay and risk in the hope of a large profit. We need to understand the relevance to the
Contract of Sale.
Economists have differed on the real benefits of international trade. The increase in the export
market is highly beneficial to an economy, but on the other hand the increase in imports can be
a threat to the economy of that country. It has been the worry of the policy makers to strike the
right balance between free trade and restrictions.
International trade can develop an economy, but at the same time certain domestic players can
be outperformed by financially stronger multi nationals and forced to close down or get merged.
Sometimes these multinational companies become so powerful, especially in smaller countries,
that they can dictate political terms to the government for their benefit.
International trade is characteristically costlier in comparison terms of domestic trade. There are
a number of reasons such as, tariffs, cost of delay, cost related to differences in legal system, etc.
The factors of production like labour and capital are more mobile within the territories of the
country than across other countries.

__________________________________________________________________________________ 9
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

International trade is restricted to the exchange of goods and services. It does not encourage the
exchange of production factors, which may be more beneficial in certain cases. The assessment
of risks in the international trade plays an important role in deciding the modes of payment to
be used for the settlement between buyer and seller and choice of Incoterm.
It therefore became necessary for countries globally to find a harmonised and uniform system
which would minimise risks whilst at the same time promoting trade and removing barriers
across borders.

__________________________________________________________________________________ 10
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

The ICC – Breaking down Barriers to Trade

Incoterms Rules are a series of pre-defined commercial terms published by the International
Chamber of Commerce (ICC) and widely used in international commercial transactions. The
Incoterms® Rules are intended primarily to clearly communicate the responsibilities, costs and
risks associated with the transportation and delivery of internationally traded goods.
Incoterms® Rules are accepted by governments, legal authorities, and practitioners worldwide
for the interpretation of most commonly used terms in international trade.
They are intended to reduce or remove altogether uncertainties arising from different
interpretation of such terms in different countries.
First published in 1936, Incoterms® Rules have been periodically updated, with the ninth
version—Incoterms® 2020 Rules - having been released for January 1, 2020. Incoterms is a
trademark registered by the International Chamber of Commerce (ICC).
When referring to the current version, it must ALWAYS be written “Incoterms® 2020 Rules”1.

1 Source ICC Incoterms Introduction Notes

__________________________________________________________________________________ 11
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

3. Making the Choice and How?

Incoterms® Rules

The ninth published set of pre-defined terms, Incoterms® 2020 Rules defines 11 rules.

The 2000 version divided the Rules into 4 Categories. The 2010 version introduced 2 distinct
classes which has been retained in the 2020 version.

The larger group of seven rules applies regardless of the method or mode of transport, with the
smaller group of four being applicable only to sales that solely involve transportation over water.

The Incoterms® 2020 Rules are thus also divided into 11 Rules in 2 Sections and they explain a
set of trade terms, each denoted by a three-letter abbreviation, reflecting business-to-business
practice in contracts for the sale of goods. The Incoterms rules describe the responsibilities, costs
and risks involved in the delivery of goods from sellers to buyers.

How to use the Incoterms® 2020 Rules

1. Incorporate the Incoterms® 2020 Rules into your contract of sale

If you want the Incoterms® 2020 Rules to apply to your contract, you should make this
clear in the contract, through such words as, "[the chosen Incoterms rule including the
named place, followed by “Incoterms® 2020 Rules".

2. Choose the appropriate Incoterms® 2020 Rule

The chosen Incoterms® 2020 Rule needs to be appropriate to the goods, to the means of
their transport, and above all to whether the parties intend to put additional obligations,
for example such as the obligation to organise carriage or insurance, on the seller or on
the buyer. The Explanatory Notes to each Incoterms® 2020 Rule contain information that
is particularly helpful when making this choice. Whichever Incoterms® 2020 Rule is
chosen; the parties should be aware that the interpretation of their contract may well be
influenced by customs particular to the port or place being used. Look out for the words
in the Articles Q1/B1 to A1/B10 “The Usual”.

3. Specify your place or port as precisely as possible

The chosen Incoterms® 2020 Rule can work only if the parties name a place or port and
will work best if the parties specify the place or port as precisely as possible.

4. The concept of PLACE OF DELIVERY and NAMED PLACE

Key to an understanding of the Incoterms® 2020 Rules is an appreciation that, whilst risks
pass from seller to buyer at one point, under certain of the Incoterms Rules, cost and
responsibility pass from seller to buyer at a point further along the transport chain.

Within each Incoterm Rule there are thus two points:

The point of delivery: This is the point at which the risk in the goods passes from seller to
buyer with consideration to A9 and B9.

__________________________________________________________________________________ 12
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

The named place: This is the point at which the goods are made available to the buyer by
the seller: It is thus the point at which responsibilities and costs move from seller to
buyer.
However, (and this appears to be the source of much confusion) under the “C” terms the
point of delivery and the named place are NEVER the same.
The seller’s cost and responsibilities extend beyond the delivery point in all of the “C”
terms to the named place. Under CIP/ CPT, this will be an inland destination in the
buyer’s country.
Under CIF/ CFR, this will be a named port in the buyer’s country.
5. Remember that Incoterms® 2020 Rules do not constitute a complete contract of sale.
Incoterms® 2020 Rules do say which party to the sales contract has the obligation to make
carriage or insurance arrangements, when the seller delivers the goods to the buyer, and
which costs each party is responsible for. Incoterms® 2020 Rules, however, say nothing
about the price to be paid or the method of its payment. Neither do they deal with the
transfer of ownership of the goods, or the consequences of a breach of contract. These
matters are normally dealt with through express terms in the contract of sale or in the
law governing that contract.
The parties should be aware that mandatory local law may override any aspect of the sale
contract, including the chosen Incoterms® 2020 Rule.

The impact of the international commercial terms is explained as they apply to trade.

The Incoterms® 2020 Rules were created primarily for people inside the world of global trade.
Outsiders frequently find them difficult to understand. Seemingly common words such as
"responsibility" and "delivery" have different meanings in global trade than they do in other
situations or legal jurisdictions.

In global trade, "delivery" refers to the seller fulfilling the obligation of the terms of sale or to
completing a contractual obligation. "Delivery" can occur while the merchandise is on a vessel
on the high seas and the parties involved are thousands of miles from the goods. In the end,
however, the terms wind up boiling down to a few basic specifics:

Costs: who is responsible for the expenses involved in a shipment at a given point in the
shipment's journey?

Control: who owns the goods at a given point in the journey?

Liability: who is responsible for paying damage to goods at a given point in a shipment's
transit?

__________________________________________________________________________________ 13
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

It is essential for shippers to know the exact status of their shipments in terms of ownership and
responsibility. It is also vital for sellers and buyers to arrange insurance on their goods while the
goods are in their "legal" possession. Lack of insurance can result in wasted time, lawsuits, and
broken relationships.
The Incoterms® 2020 Rules can thus have a direct financial impact on a company's business. What
is important is not the acronyms, but the business results. Often companies like to be in control
of their freight.
That being the case, sellers of goods might choose to sell CIF, which gives them a good grasp of
shipments moving out of their country, and buyers, may prefer to purchase FOB, which gives
them a tighter hold on goods moving into their country.

NB!! Delivery in Incoterms describes, not only the obligations of the Seller to delivery, but also
the responsibility of the Buyer to take delivery!!

The Rules since 2010 can be used for domestic and international sales and deliveries!!

NB!! It is also important to reconsider some significant 2010 changes as highlighted below:
Explanatory Notes

Before each Incoterms® 2020 Rule you will find an Explanatory Note. The Explanatory Notes
explain the fundamentals of each Incoterms® 2020 Rule, such as when it should be used, when
risk passes, and how costs are allocated between seller and buyer.
The Explanatory Notes are not part of the actual Incoterms® 2020 Rules but are intended to
help the user accurately and efficiently steer towards the appropriate Incoterms® 2020 Rule
for a particular transaction.

Electronic communication
Previous versions of Incoterms® 2010 Rules have specified those documents that could be
replaced by EDI messages.
Since Articles A1/B1 of the Incoterms® 2010 Rules, however, now give electronic means of
communication the same effect as paper communication, as long as the parties so agree or
where customary. This formulation facilitates the evolution of new electronic procedures
throughout the lifetime of the Incoterms® 2020 Rules.
NB!! Ensure Electronic Communication is agreed and accepted in the Contract of Sale.

__________________________________________________________________________________ 14
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Status of this introduction
This introduction gives general information on the use and interpretation of the Incoterms®
2010 Rules but does not form part of those rules. Extracts identified should be noted as a
reference to the source being ICC Incoterms® 2020 and are the copyright belonging to ICC.

Explanation of terms used in the Incoterms® 2010 Rules2
As in the Incoterms 2000, 2010 and 2020 Rules, the seller's and buyer's obligations are presented
in mirror fashion, reflecting under column “A” the seller's obligations and under column “B” the
buyer's obligations. These obligations can be carried out personally by the seller or the buyer or
sometimes, subject to terms in the contract or the applicable law, through intermediaries such
as carriers, freight forwarders or other persons nominated by the seller or the buyer for a specific
purpose.

Carrier: For the purposes of the Incoterms® 2010 Rules and now, the carrier is the party with
whom carriage is contracted.
Customs formalities: These are requirements to be met in order to comply with any applicable
customs regulations and may include documentary, security, information, or physical
inspection obligations.
Delivery: This concept has multiple meanings in trade law and practice, but in the Incoterms®
2010 Rules, it is used to indicate where the risk of loss of or damage to the goods passes from
the seller to the buyer.
Delivery document: This phrase is now used as the heading to article A8. It means a document
used to prove that delivery has occurred. For many of the Incoterms® 2020 Rules, the delivery
document is a transport document or corresponding electronic record. However, with EXW,
FCA, FAS and FOB, the delivery document may simply be a receipt. A delivery document may
also have other functions, for example as part of the mechanism for payment.
Electronic record or procedure: A set of information constituted of one or more electronic
messages and, where applicable, being functionally equivalent with the corresponding paper
document.
Packaging: This word is used for different purposes:
1. The packaging of the goods to comply with any requirements under the contract of sale.
2. The packaging of the goods so that they are fit for transportation.
3. The stowage of the packaged goods within a container or other means of transport.

2 Extracted and quoted from Incoterms® 2010 copyright ICC.

__________________________________________________________________________________ 15
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Where a sales transaction involves more than one country, a question which needs to be asked
is “Which country’s law will govern the contract?” This may be significant because the laws of
each country may be different. For example, the common law applied in England and
Singapore differs from the civil law of other European countries.
Even with countries from the common law tradition, such as England, the United States and
Australia, it can be observed that their contract laws are not identical. The answer to the
question of which country’s law applies is determined through the use of a set of rules called
the conflicts of laws rules (also known as rules of private international law), unless the law of
a particular jurisdiction is agreed in advance in the Contract of Sale.
It was the initiative of the International Chamber of Commerce to devise a set of terminology
describing the different costs, risks and responsibilities involved in the movement of goods
internationally.
The best way to understand why the Incoterms® 2020 Rules are necessary is to think about
how our lives would be without the Incoterms® 2020 Rules structure.
The situation would be where a buyer and a seller would have to agree on the transport of
the goods, who will bear the costs for what stage of the transport and at what point, will the
risk of loss and damage to those goods transfer between the seller and the buyer?
This could involve, maybe two to three pages of the different points, that would be covered
in an international contract of sale - JUST RELATED TO DELIVERY.
But by quoting a simple Incoterms® 2020 Rule, let’s say for example, if your seller quotes you
Incoterms® 2020 Rules “Free on Board” Singapore, and you understand that Incoterms® 2020
Rule, that one line, that term of delivery, in fact covers all those issues you would normally
have to debate in a sale contract. Thus, you would be able to buy under that Incoterms® 2020
Rule knowing exactly where your cost, risk and responsibilities begin and end.
Remember, the purpose of the Incoterms® 2020 Rules is to provide a set of international rules
for the interpretation of the most commonly used trade terms in foreign trade. Thus, the
uncertainties of different interpretations of such terms in different countries can be avoided
or at least reduced to a considerable degree.
Frequently, parties to a contract are unaware of the different trading practices in their
respective countries.
It appears that two particular misconceptions about the Incoterms® 2020 Rules are very
common. First, Incoterms® 2020 Rules are frequently misunderstood as applying to the
contract of carriage rather than to the contract of sale. Second, they are sometimes wrongly
assumed to provide for all the responsibilities which parties may wish to include in a contract
of sale.

__________________________________________________________________________________ 16
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

As has always been underlined by ICC, that the Incoterms® 2020 Rules deal only with the
relationship between sellers and buyers under the contract of sale, and, moreover, only do so
in some very distinct respects. While it is essential for exporters and importers to consider the
very practical relationship between the various contracts needed to perform an international
sales transaction - where not only the contract of sale is required, but also contracts of
carriage. Insurance and financing.
The Incoterms® 2020 Rules relate to only one of these contracts, namely the contract of sale,
but may have impacts concerning the others to consider.
Nevertheless, the parties' agreement to use a particular the Incoterms® 2020 Rule would
necessarily have implications for the other contracts.
To mention a few examples, a seller having agreed to a CFR- or CIF -contract cannot perform
such a contract by any other mode of transport than carriage by sea, since under these terms
he must present a Bill of Lading or other maritime document to the buyer which is simply not
possible if other modes of transport are used. FCA now addresses this issue.
The Incoterms® 2020 Rules deal with a number of identified obligations imposed on the
parties - such as the seller's obligation to place the goods at the disposal of the buyer or hand
them over for carriage or deliver them at destination - and with the distribution of risk
between the parties in these cases.
Further, they deal with the obligations to clear the goods for export and import, the packing
of the goods, the buyer's obligation to take delivery as well as the obligation to provide proof
that the respective obligations have been duly fulfilled.
Although the Incoterms® 2020 Rules are extremely important for the implementation of the
contract of sale, a great number of problems which may occur in such a contract are not dealt
with at all like transfer of ownership and other property rights, breaches of contract and the
consequences following from such breaches as well as exemptions from liability in certain
situations. It should be stressed that The Incoterms® 2020 Rules are not intended to replace
such contract terms that are needed for a complete contract of sale either by the
incorporation of standard terms or by individually negotiated terms.
Generally, The Incoterms® 2020 Rules do not deal with the consequences of breach of contract
and any exemptions from liability owing to various impediments. These questions must be
resolved by other stipulations in the contract of sale and the applicable law.
Imagine a world in which, for each and every transaction, sellers and buyers have to negotiate
the passing of risk, responsibility, and cost as a separate part of the contract with all the
potential danger of misunderstanding?
What the Incoterms Rule do is to address this issue: they are an internationally accepted code
in terms of which the various points at which risk, responsibility and cost pass from seller are
exactly defined.

__________________________________________________________________________________ 17
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

By using the Incoterms® 2020 Rules instead of negotiating the risk, responsibility, and cost
elements separately, international sellers and buyers remove a great deal of uncertainty from
their commercial objectives.

Incoterms break down Barriers to International Trade

The word “Incoterms” is an abbreviation of International Commercial Terms, and the Incoterm
chosen by seller and buyer for a particular transaction is thus an integral part of the contract of
sale. They tell seller and buyer what to do with respect to:

• carriage of the goods from seller to buyer
• export and import clearance
• insurance against transit risks
They also explain the division of costs and risks between seller and buyer.

Usual, normal, and suitable carriage
Under the C-terms, it is for the seller to procure carriage "on usual terms - by the usual route in
a seagoing vessel — of the type normally used for the transport of goods of the contract
description".
The reference to what is "usual" and "normal" does not necessarily mean that the seagoing vessel
is, in fact, "suitable" or that it minimises the risk of loss of or damage to the goods.
However, if the seller knowingly selects a substandard vessel, which is therefore not "normal",
the buyer may hold him responsible, if there is damage to or loss of the cargo.
The maritime carrier's responsibility is usually limited to the exercise of due diligence in ensuring
that the vessel is seaworthy when it leaves port. He is exempt from liability for fire or for loss of
or damage to the cargo resulting from errors in the navigation and management of the vessel.
This limited liability explains the need for sellers and buyers to take out marine insurance to
protect themselves against risks they have to bear under the contract of carriage. If the goods
are sold under any of the C-terms, the buyer can obtain protection, either by the obligation of
the seller to take out insurance under CIF or through his own insurance arrangements – see the
changes to Insurance in CIP & CIF in the 2020 version.

The Bill of Lading
The fact that under the C-terms the seller procures the contract of carriage for the benefit of the
buyer puts the buyer in a position where he has to exercise rights against someone with whom
he has not made the contract.

__________________________________________________________________________________ 18
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

This, indeed, explains the development of the Bill of Lading used for maritime carriage.
Possession of the Bill of Lading controls the right to claim delivery of the goods from the carrier
at destination. It is a fundamental obligation of the seller under CFR and CIF to provide the buyer
with such a document, which enables him to claim the goods from the carrier at the port of
destination and, unless otherwise agreed, to sell the goods in transit by the transfer of the
document to a subsequent buyer – String Sales.
Traditionally, only the negotiable Bill of Lading could fulfil both of these functions. But in recent
years other maritime documents have also been used. Now, even without a Bill of Lading, the
buyer is entitled to claim the goods from the carrier at destination in certain circumstances, like
a Sea Waybill, which is a non-negotiable transport document.
So-called sea waybills (express bills of lading, non-negotiable waybills, liner waybills, cargo quay
receipts) contain instructions from the shipper to the carrier to deliver the goods to a named
person at destination.
These instructions can also be made irrevocable, with the result that the shipper is prevented
from giving further instructions to the carrier. The instructions can also be given by an electronic
data interchange message.
In addition, fundamental changes to the rules, if not properly introduced, could endanger the
status of the Incoterms® 2020 Rules, as a generally recognised international custom of the trade.
Indeed, the reason the 1980 UN Convention on Contracts for the International Sale of Goods
(CISG) did not deal with interpretation of trade terms was a belief that this task could be more
efficiently taken care of by the International Chamber of Commerce in cooperation with its
national committees worldwide.
To avoid confusion and difficulties in applying Incoterm, a reference to the current version should
always be made in the contract of sale. When parties negotiate their contract individually, they
should take care not only to refer to Incoterm but also to add the year. If they use a standard
contract, they should check whether it has been updated to include reference to "Incoterms®
2020 Rules".

Terms and acronyms of the international commercial terms are identified with
examples.

4. What has Changed?!!
Incoterms® 2010 Rules are standard trade definitions most commonly used in international sales
contracts.
Devised and published by the International Chamber of Commerce, they are at the heart of global
trade.

__________________________________________________________________________________ 19
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

A. There are 2 Sections as introduced in Incoterms® 2020 (DPU)

Any Mode of Transport Including Multimodal

EXW Ex Works (...named place)
FCA Free Carrier (...named place)
CPT Carriage paid to (...named place to destination)
CIP Carriage and Insurance Paid To (...named place to destination)
DAP Delivered at Place (...named place to destination)
DPU Delivered at Place Unloaded (...named place to destination)
DDP Delivered Duty Paid (...named place to destination)

Sea and Inland Waterway Transport (...named port of shipment)
FAS Free Alongside Ship (...named port of shipment)
FOB Free on Board (...named port of destination)
CFR Cost and freight (...named port of destination)
CIF Cost, Insurance and Freight

B. The Articles order has changed – A1 to A10 & B1 to B10

__________________________________________________________________________________ 20
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

The first class includes the seven Incoterms® 2020 Rules that can be used, irrespective of the
mode of transport selected and irrespective of whether one or more than one mode of transport
is employed. EXW, FCA, CPT, CIP, DAP, DPU and DDP belong to this class. They can be used even
when there is no maritime transport at all. It is important to remember, however, that these
rules can be used in cases where a ship is used for part of the carriage, combined or multimodal
transport. In the second class of Incoterms® 2010 Rules, the point of delivery and the place to
which the goods are carried to the buyer are both ports, hence the label "sea and inland
waterway” rules. FAS, FOB, CFR and CIF belong to this class. Under the last three Incoterms® 2020
Rules, all mention of the ship's rail as the point of delivery has been omitted in preference for
the goods being delivered when they are "on board” the vessel. This took place in the 2010
version. This more closely reflects modern commercial reality and avoids the rather dated image
of the risk swinging to and fro, across an imaginary perpendicular line.

At this juncture, please study the FCA & DPU Rules as provided.

C. Articles A & B

The Incoterms Rules cover these areas in a set of 10 Articles, numbered A1/B1 etc., the “A”
articles representing the Seller’s obligations, and the “B” articles representing the Buyer’s.

Internal Order of Articles

The broad sequence thereafter goes:

Ancillary contracts (A4/B4 and A5/B5, carriage and insurance
Transport documents (A6/B6)
Export/Import clearance (A7/B7)
Packaging (A8/B8)
Costs (A9/B9)
Notices (A10/B10)

__________________________________________________________________________________ 21
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

D.

Incoterms® 2020 and the Carrier
1. NB!! Choose the importance between Carriage and Sale Questions
2. In the “F” and “C” Rules we encounter words like:

“On-board”
“Handing them over”
“Placing at the disposal of”…
3. At this point, goods are delivered and at this point, risk transfers.
4. What if there is more than one Carrier? Therefore:
There could be one Carrier taking care of the entire leg, through Carriage, Combined
Transport Bill of Lading.
Seller could deliver to 1st Carrier in the chain. The problem is: Where does delivery or risk
transfer? 1st, 2nd or 3rd Carrier?
The above is for “C” or “F” Rules
5. Therefore, under FCA, risk transfers only when goods are placed at the disposal of the
Buyer’s engaged Transporter.
FCA terms to specify the point or place of delivery precisely, and in FOB if there is a feeder
or barge.
6. NB!! Delivery occurs when the goods are placed on Buyer’s Carrier:
“C” Terms = more complex = different solutions under different legal systems;
CPT & CIP, CFR & CIF may have initial Carriers
A2/A3 do not operate in a VACUUM = A4 – The Seller must contract for carriage of goods
from the agreed point/place of delivery to the named place of destination or point at that
place. In essence, the Seller must ensure a contract of carriage to the destination.

__________________________________________________________________________________ 22
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

E.

F.

G.

__________________________________________________________________________________ 23
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

H.

I.

__________________________________________________________________________________ 24
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

J.

Returning to the new Changes
a) Bills of Lading with an on-board notation and the FCA Incoterms Rule;
b) Costs, where they are listed;
c) Different levels of insurance cover in CIF and CIP;
d) Arranging for carriage with Seller’s or Buyer’s own means of transport in FCA, DAP, DPU

and DDP;
e) Change in the 3-letter initials for DAT to DPU;
f) Inclusion of security-related requirements within carriage obligations and costs;
g) Explanatory Notes for Users.

K.
Changes for DAT to DPU
The ICC decided to make two changes to DAT and DAP:
The order in which the two Incoterms® 2020 rules are presented has been inverted, and DAP,
where delivery happens before unloading, now appears before DAT.
The name of the rule DAT has been changed to DPU (Delivered at Place Unloaded), emphasising
the reality that the place of destination could be any place and not only a “terminal”.

__________________________________________________________________________________ 25
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

However, if that place is not in a terminal, the seller should make sure that the place where it
intends to deliver the goods is a place where it is able to unload the goods.

3-Letter initial change for DAT to DPU
The only difference between DAT and DAP in the Incoterms® 2010 Rules was that, in DAT the
Seller delivered the goods once unloaded from the arriving means of transport into a “terminal”;
Whereas in DAP, the Seller delivered the goods when the goods were placed at the disposal of
the Buyer on the arriving means of transport for unloading.
It will also be recalled that the Guidance Note for DAT in Incoterms® 2010 defined the word
“terminal” broadly to include “any place, whether covered or not…”

L.
Security-related Clearances and Information required for each Clearance
There is heightened concern about security in the movement of goods, requiring verification that
the goods do not pose a threat to life or property for reasons other than their inherent nature.

CUSTOMS AUTHORITY WCO SAFE FRAMEWORK OF STANDARDS

Therefore, the Incoterms® Rules have allocated obligations between the Buyer and Seller to
obtain or to render assistance in obtaining security-related clearances, such as chain-of-custody
information, in articles A7/B7 and A10/B10 of various Incoterms® Rules.
These made a rather subdued entry into the Incoterms® 2020 rules, through A2/B2 and A10/B10
in each rule.
Incoterms® 2020 rules were the first revision of the Incoterms rules to come into force after
security-related concerns became so prevalent in the early part of this century. Those concerns,
and the associated shipping practices, which they have created in their wake, are now much more
established.
Connected as they are to carriage requirements, an express allocation of security-related
obligations has now been added to A4 and A7 of each Incoterms rule. The costs incurred by these
requirements are also now given a more prominent position in the costs article, namely A9/B9.

M.

Explanatory Notes

o Before each Incoterms® 2020 Rule term you will find an Explanatory Note

o Explanatory Notes explain the fundamentals of each Incoterms® 2020 Rules term

__________________________________________________________________________________ 26
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

o The Explanatory Notes are not part of the actual Incoterms® 2020 Rules
o They are merely intended to assist the user, to accurately and efficiently steer towards

the appropriate Incoterms® rule for a particular transaction.

5. Factors to Consider
Explanation of Terms utilised in the Incoterms® Rules
For many Incoterms® 2020 Rules, the delivery document is a transport document. However, with
EXW, FCA, FAS & FOB, the delivery document may simply be a receipt.
“carrier” [party with whom carriage is contracted]
“customs formalities” [formalities to comply with Customs regulations]
“delivery” (normally multiple meanings) [Incoterms® Rules indicates where the risk of loss of or
damage to the goods passes]
“delivery document” [the document to prove delivery occurred] Incoterms® Rules.

NB!! IT IS USED TO INDICATE WHERE THE RISK OF LOSS OF OR DAMAGE TO THE GOODS PASSES
FROM THE SELLER TO THE BUYER.

__________________________________________________________________________________ 27
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Customs Clearance
The term “Customs Clearance” has given rise to many misunderstandings. Whenever reference
is made to an obligation of the Seller or the Buyer to undertake obligations in connection with
passing the goods through customs of the country of export or import, it is now made clear that
this obligation does not only include the payment of duty and other charges, but also the
performance and payment of whatever administrative matters are connected with the passing
of the goods through customs, and the information to the authorities in this connection.

__________________________________________________________________________________ 28
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

You need to Understand
o What are “Shipment sales”
o Like “F” and “C” rules
o Delivery and Destination in “C” rules, not the same place
o Risk transfers early in “C” rules
o More than one Carrier?
o Through Contract of Carriage!!

__________________________________________________________________________________ 29
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

Gaps, Overlaps and Unnecessary Costs
These are likely to arise – and all this, because the wrong Incoterms rule has been chosen for the
particular contract.
What makes the mismatch “wrong”, is that insufficient regard has been given to the two most
important features of the Incoterms rules, features which are mirrors of each other, namely the
port, place or point of delivery and the transfer of risks.

What Factors to consider?
Electronic Communication
o Previous versions of Incoterms Rules have specified documents that could be replaced by

EDI messages,
o Articles A1/B1 of the Incoterms® Rules, now give electronic means of communication, the

same effect as paper communication,
o Facilitates the evolution of new electronic procedures throughout the lifetime of the

Incoterms® Rules.
ELECTRONIC COMMUNICATION NOW HAS THE SAME LEGAL STATUS AS PAPER
COMMUNICATION PLEASE ENSURE ELECTRONIC COMMUNICATION IS AGREED
NB!! Change in Terminal Handling 2010 version and NOW 2020!
Under Incoterms® 2020 Rules CPT, CIP, CFR, CIF, DAP, DPU and DDP, the Seller must make
arrangements for the carriage of the goods to the agreed destination. While the freight is paid
by the Seller, it is actually paid for by the Buyer as freight costs are normally included by the Seller
in the total selling price.
The carriage costs will sometimes include the costs of handling and moving the goods within port
or container terminal facilities and the carrier or terminal operator may well charge these costs
to the Buyer who receives the goods. In these circumstances, the Buyer will want to avoid paying
for the same service twice: once to the Seller, as part of the total selling price, and once
independently to the Carrier or the terminal operator.
The Incoterms® 2020 Rules seek to avoid this happening by clearly allocating such costs in articles
A9/B9 of the relevant Incoterms® 2020 Rules.
String Sales
In the sale of commodities, as opposed to the sale of manufactured goods, cargo is frequently
sold several times during transit “down a string”. When this happens, a Seller in the middle of
the string does not “ship” the goods because these have already been shipped by the first Seller
in the string.

__________________________________________________________________________________ 30
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

The Seller in the middle of the string therefore performs its obligations towards its Buyer not by
shipping the goods, but by “procuring” goods that have been shipped. For clarification purposes,
Incoterms® 2010 Rules include the obligation to “procure goods shipped” as an alternative to the
obligation to ship goods in the relevant Incoterms® 2010 Rules.

Variants of Incoterms® Rules
Sometimes the parties want to alter an Incoterms Rule. The Incoterms® Rules do not prohibit
such alteration, but there are dangers in so doing. In order to avoid any unwelcome surprises,
the parties would need to make the intended effect of such alterations extremely clear in their
contract.
Thus, for example, if the allocation of costs in the Incoterms® Rules is altered in the contract, the
parties should also clearly state whether they intend to vary the point at which the risk passes
from Seller to Buyer.

__________________________________________________________________________________ 31
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 32
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 33
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

6. Case Studies and Practice of implementation
NB!! During your face-to-face class training, we will deal with the following practice
class exercised.

__________________________________________________________________________________ 34
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 35
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 36
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 37
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 38
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 39
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 40
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 41
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 42
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

__________________________________________________________________________________ 43
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

ADVANCED

7. Conclusion

THE END

__________________________________________________________________________________ 44
©Global Maritime Legal Solutions (GMLS) Version 1 - 2019

This is accredited material that is copyrighted to GMLS and as such should not be copied or distributed without the express written permission
from GMLS management

FCA (Free Carrier)
EXPLANATORY NOTES

1. Delivery and risk—"Free Carrier (named place)" means that the seller delivers the goods to the
buyer in one or other of two ways:

First, when the named place is the seller's premises, the goods are delivered when they are loaded
on the means of transport arranged by the buyer.

Second, when the named place is another place, the goods are delivered:
a. when, having been loaded on the seller's means of transport,
b. they reach the named other place and
c. are ready for unloading from that seller's means of transport and
d. at the disposal of the carrier or of another person nominated by the buyer.
e. Whichever of the two is chosen as the place of delivery, that place identifies where risk transfers to
the buyer and the time from which costs are for the buyer's account.

2. Mode of Transport -This rule may be used irrespective of the mode of transport selected and may
also be used where more than one mode of transport is employed.

3. Place or point of delivery - A sale under FCA can be concluded naming only the place of delivery,
either at the seller's premises or elsewhere, without specifying the precise point of delivery within
that named place. However, the parties are well advised also to specify as clearly as possible, the
precise point within the named place of delivery. A named precise point of delivery makes it clear to
both parties when the goods are delivered and when risk transfers to the buyer; such precision also
marks the point at which costs are for the buyer's account, Where the precise point is not identified,
however, this may cause problems for the buyer. The seller in this case has the right to select the
point "that best suits its purpose": that point becomes the point of delivery, from which risk and costs
transfer to the buyer. If the precise point of delivery is not identified by naming it in the contract, then
the parties are taken to have left it to the seller to select the point "that best suits its purpose". This
means that the buyer may incur the risk that the seller may choose a point just before the point at
which goods are lost or damaged. Best for the buyer therefore to select the precise point within a
place where delivery will occur.

Page 1 of 7
© GMLS 2020

4. 'or procure goods so delivered' - The reference to "procure" here caters for multiple sales down a
chain (string sales), particularly, although not exclusively, common in the commodity trades.
5. Export/Import clearance - FCA required the seller to clear the goods for export, where
applicable. However, the seller has no obligation to clear the goods for import or for transit through
third countries, to pay any import duty or to carry out any import customs formalities.
6. Bills of Lading with an on-board notation in FCA sales - We have already seen that FCA is intended
for use irrespective of the mode or modes of transport used. Now, if goods are being picked up by
the buyer's road-haulier in Las Vegas for instance, it would be rather uncommon to expect a bill of
lading with an on-board notation to be issued by the carrier from Las Vegas, which is not a port and
which a vessel cannot reach for goods to be placed on board. Nonetheless, sellers selling FCA Las
Vegas, do sometimes find themselves in a situation where they need a bill of lading with an on-board
notation (typically because of a bank collection or a letter of credit requirement), albeit necessarily
stating that the goods have been placed on board in Los Angeles as well as stating that they were
received for carriage in Las Vegas, To cater for this possibility of an FCA seller needing a bill of lading
with an on-board notation, FCA Incoterms® 2020 has, for the first time, provided the following
optional mechanism. If the parties have so agreed in the contract, the buyer must instruct its carrier
to issue a bill of lading with an on-board notation to the seller. The carrier may or may not, of course,
accede to the buyer's request, given that the carrier is only bound and entitled to issue such a bill of
lading once the goods are on board in Los Angeles. However, if and when the bill of lading is issued
to the seller by the carrier at the buyer's cost and risk, the seller must provide that same document to
the buyer, who will need the bill of lading in order to obtain discharge of the goods from the
carrier. This optional mechanism becomes unnecessary, of course, if the parties have agreed that the
seller will present to the buyer, a bill of lading stating that the goods have been received for shipment,
rather than that they have been shipped on board, Moreover, it should be emphasised that, even
where this optional mechanism is adopted, the seller is under no obligation to the buyer as to the
terms of the contract of carriage. Finally, when this optional mechanism is adopted, the dates of
deliver inland and loading on board will necessarily be different, which may well create difficulties for
the seller under a letter of credit.

Page 2 of 7
© GMLS 2020

ARTICLES

FCA (Free Carrier)

No Description No Description

A1 General Obligations B1 General Obligations

The seller must provide the goods and The buyer must pay the price of the goods
the commercial invoice in conformity as provided in the contract of sale.
with the contract of sale and any other Any document to be provided by the buyer
evidence of conformity that may be may be in paper or electronic form as
required by the contract. agreed or, where there is no agreement, as
Any document to be provided by the is customary.
seller may be in paper or electronic form
as agreed, or where there is no
agreement, as is customary.

A2 The seller must deliver the goods to the B2 Delivery
carrier or another person nominated by
the buyer at the named point, if any, at The buyer must take delivery of the goods
the named place, or procure goods so when they have been delivered under A2.

delivered. The seller must deliver the
goods:

1. On the agreed date, or

2. At the time within the agreed
period notified by the buyer under
B10(b), or

3. If no such time is notified, then at
the end of the agreed period.

Delivery is completed either:
a) If the named place is the seller’s

premises, when the goods have
been loaded on the means of
transport provided by the buyer; or

b) In any other case, when the goods
are placed at the disposal of the
carrier or another person
nominated by the buyer on the
seller’s means of transport ready
for unloading.

Page 3 of 7
© GMLS 2020

No Description No Description

If no specific point has been notified by
the buyer under B10(d) within the
named place of delivery, and if there
are several points available, the seller
may select the point that best suits its
purpose.

A3 Transfer of risks B3 Transfer of risks

The seller bears all risks of loss of or The buyer bears all risks of loss of or
damage to the goods until they have damage to the goods from the time they
been delivered in accordance with A2, have been delivered under A2.
with the exception of loss or damage in If:
the circumstance described in B3. a) the buyer fails to give nominate a carrier

or another person under A2, or to give
notice in accordance with B10; or

b) the carrier or person nominated by the
buyer under B10(a) fails to take the
goods into its charge

then, the buyer bears all risks or loss of
or damage to the goods:

i. from the agreed date or in the
absence of an agreed date,

ii. from the time selected by the buyer
under B10(b); or, if no such time
has been notified,

iii. from the end of any agreed period
for delivery,

provided that the goods have been
clearly identified as the contract goods.

A4 Carriage B4 Carriage

The seller has no obligation to the buyer The buyer must contract or arrange, at its
to make a contract of carriage. own cost for the carriage of the goods, from
However, the seller must provide the the named place of delivery, except when
buyer, at the buyer’s request, risk, and the contract of carriage is made by the seller
cost, with any information in the as provided for in A4.
possession of the seller, including

Page 4 of 7
© GMLS 2020

No Description No Description

transport-related security requirements,
that the buyer needs for arranging
carriage. If agreed, the seller must
contract for carriage on the usual terms
at the buyer’s risk and cost.

The seller must comply with any
transport-related security requirements
up to delivery.

A5 Insurance B5 Insurance

The seller has no obligation to the buyer The buyer has no obligation to the seller to
to make a contract of insurance. make a contract of insurance.
However, the seller must provide the
buyer, at the buyer’s request, risk, and
cost, with information in the possession
of the seller that the buyer needs for
obtaining insurance.

A6 Delivery/transport document B6 Delivery/transport document

The seller must provide the buyer at the The buyer must accept the proof that the
seller’s cost, with the usual proof that goods have been delivered in accordance
the goods have been delivered, in with A2.
accordance with A2. If the parties have so agreed, the buyer
The seller must provide assistance to the must instruct the carrier to issue to the
buyer, at the buyer’s request, risk, and seller, at the buyer’s cost and risk, a
cost, in obtaining a transport document. transport document stating that the goods
Where the buyer has instructed the have been loaded (such as a bill of lading
carrier to issue to the seller a transport with an onboard notation).
document under B6, the seller must
provide any such document to the
buyer.

A7 a) Export Clearance B7 Export/Import Clearance

Where applicable, the seller must a) Assistance with export clearance
carry out and pay for all export Where applicable, the buyer must assist
clearance formalities required by the the seller, at the seller’s request, risk,
country of export, such as: and cost in obtaining any documents
• Export license; and/or information related to all export
clearance formalities, including security

Page 5 of 7

© GMLS 2020

No Description No Description

• Security clearance for export; requirements and pre-shipment
• Pre-shipment inspection; and inspection, needed by the country of
• Any other official authorisation. export.
b) Assistance with import clearance
Where applicable the seller must b) Import Clearance
assist the buyer, at the buyer’s
request, risk, and cost, in obtaining Where applicable, the buyer must carry
any documents and/or information out, and pay for all formalities, required
related to all transit/import by any country of transit and the country
clearance formalities, including of import, such as:
security requirements and pre-
shipment inspection, needed by any • import license and any license
country of transit or the country of required for transit;
import.
• Security clearance for import and any
transit;

• Pre-shipment inspection; and

• Any other official authorisation.

A8 Checking/Packing/Marking B8 Checking/Packing/Marking

The seller must pay the costs of those The buyer has no obligation to the seller.
checking operations (such as checking
quality, measuring, weighing, counting)
that are necessary for the purpose of
delivering the goods in accordance with
A2.

The seller must, at its own cost, package
the goods, unless it is usual for the
particular trade to transport the type of
goods sold unpackaged. The seller must
package and mark the goods in the
manner appropriate for their transport,
unless the parties have agreed on
specific packaging or marking
requirements.

A9 Allocation of costs B9 Allocation of costs

The seller must pay: The buyer must pay:

a) All costs relating to the goods until a) all costs relating to the goods from the
they have been delivered in time they have been delivered under A2,

Page 6 of 7
© GMLS 2020