ICC Incoterms(R) 2020 Rules Leaner Guide

No Description No Description

accordance with A2, other than other than those payable by the seller
those payable by the buyer under B9; under A9;

b) The costs of providing the usual b) the seller for all costs and charges
proof to the buyer under A6 that the related to providing assistance or
goods have been delivered; information under A4, A5, A6 and A7(b);

c) Where applicable, duties, taxes and c) where applicable, duties, taxes and
any other costs related to export other costs related to transit or import
clearance under A7(a); and clearance under B7(b); and

d) The buyer for all costs and charges d) any additional costs incurred either
related to providing assistance in because:
obtaining documents and (i) the buyer fails to nominate a
information in accordance with carrier or another person under
B7(a). B10, or

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

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

A10 Notices B10 Notices

The seller must give the buyer sufficient The buyer must notify the seller of:
notice, either that the goods have been a) the name of the carrier or another
delivered in accordance with A2, or that
the carrier or another person nominated person nominated within sufficient time
by the buyer, has failed to take the goods as to enable the seller to deliver the
within the time agreed. goods in accordance with A2;
b) the selected time, if any, within the
period agreed for delivery when the
carrier or person nominated will receive
the goods,

c) the mode of transport to be used by the
carrier or the person nominated
including any transport-related security
requirements; and

d) the point where the goods will be
received within the named place of
delivery.

Page 7 of 7
© GMLS 2020

DPU (Delivered at Place Unloaded)
Explanatory Notes

1. Delivery and risk - "Delivered at Place Unloaded" means that the seller delivers the goods, and
transfers risk, to the buyer:
- when the goods,
- once unloaded from the arriving means of transport,
- are placed at the disposal of the buyer,
- at a named place of destination, or,
- at the agreed pint within that place, if any such point is agreed.

The seller bears all risks involved in bringing the goods to, and unloading them, at the named place of
destination. In this Incoterms® 2020 Rule therefore, the delivery and arrival at destination are the
same. DPU is the only Incoterms® 2020 Rule that required the seller to unload the goods at
destination. The seller should therefore ensure that it is in a position to organise unloading at the
named place. Should the parties intend the seller not to bear the risk and cost of unloading, the
DPU rule should be avoided and DAP should be used instead.
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. Identifying the place or point of delivery/destination precisely - The parties are well advised to
specify the destination place or point as clearly as possible and this for several reasons:
i. Risk of loss of or damage to the goods transfers to the buyer at that point of delivery/destination,
and it is best for the seller and the buyer to be clear about the point at which that critical transfer
happens.
ii. The costs before that place or point of delivery/destination are for the account of the seller and the
costs after that place or point are for the account of the buyer.
iii. The seller must contract or arrange for the carriage of the goods to the agreed place or point of
delivery/destination. If it fails to do so, the seller is in breach of its obligations under this rule and
will be liable to the buyer for any ensuing loss. The seller would, for example, be responsible for
any additional costs levied by the carrier to the buyer for any additional on-carriage.

Page 1 of 6
© GMLS 2020

4. 'or procuring the goods so delivered' - The reference to "procure" here caters for multiple sales
down a chain (string sales), particularly common in the commodity trades.
5. Export/Import clearance - DPU requires the seller to clear the goods for export, where
applicable. However, the seller has no obligation to clear the goods for import or for post-delivery
transit through third countries, to pay any import or to carry out any import customs formalities. As
a result, if the buyer fails to organise import clearance, the goods will be held up at a port or inland
terminal in the destination country.
The answer is the buyer:
- delivery will not have occurred yet, B3(a) ensuring that the risk of loss of or damage to the goods is
with the buyer until transit to a named inland pint can be resumed. If, in order to avoid this scenario,
the parties intend the seller to clear the goods for import, pay any import duty or tax and carry out
any import customs formalities, the parties might consider using DDP.

Page 2 of 6
© GMLS 2020

ARTICLES

DPU (Delivered at Place Unloaded)

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 Delivery B2 Delivery

The seller must unload the goods from The buyer must take delivery of the goods
the arriving means of transport and must when they have been delivered under A2.
then deliver them by placing them at the
disposal of the buyer at the agreed point,
if any, at the named place of destination
or by procuring the goods so delivered.
In either case, the seller must deliver the
goods on the agreed date or within the
agreed period.

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 fulfil its obligations in

accordance with B7, then it bears all
resulting risks of loss of or damage to
the goods; or

b) the buyer fails to give notice in
accordance with B10, then it bears all
risks of loss of or damage to the goods

Page 3 of 6

© GMLS 2020

No Description No Description

from the agreed date or the end of the
agreed period for delivery,

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

A4 Carriage B4 Carriage

The seller must contract or arrange, at its The buyer has no obligation to the seller to
own cost, for the carriage of the goods make a contract of carriage.
to the named place of destination, or to
the agreed point, if any, at the named
place of destination. If a specific point is
not agreed or is not determined by
practice, the seller may select the point
at the named place of destination that
best suits its purpose.

The seller must comply with any
transport-related security requirements
for transport to the destination.

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
buyer must provide the seller, upon the
seller’s request, risk, and cost, with
information that the seller 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 document
seller’s cost, with any document provided under A6.
required to enable the buyer to take
over the goods.

A7 a) Export Clearance B7 Export/Import Clearance

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

Page 4 of 6

© GMLS 2020

No Description No Description

• Security clearance for including security requirements and
export/transit; pre-shipment inspection, needed by the
country of export and any country of
• Pre-shipment inspection; and transit (other than the country of
import).
• Any other official authorisation.

b) Import Clearance

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

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 and a) all costs relating to the goods from the
their transport until they have been time they have been delivered under A2;
unloaded and delivered in

Page 5 of 6
© GMLS 2020

No Description No Description

accordance with A2, other than b) the seller for all costs and charges
those payable by the buyer under B9; related to providing assistance in
obtaining documents and information in
b) The costs of providing the accordance with A7(b);
delivery/transport document under
A6. c) where applicable, duties, taxes and any
other costs related to import clearance
c) Where applicable, duties, taxes and under B7(b); and
any other costs related to export and
any transit clearance under A7(a); d) any additional costs incurred by the
and seller if the buyer fails to fulfil its
obligations in accordance with B7 or to
d) The buyer for all costs and charges give notice in accordance with B10,
related to providing assistance in provided that the goods have been
obtaining documents and clearly identified as the contract goods.
information in accordance with B5
and B7(a).

A10 Notices B10 Notices

The seller must give the buyer any notice The buyer must, whenever it is agreed that
required to enable the buyer to receive the buyer is entitled to determine the time
the goods. within an agreed period and/or the point of
taking delivery within the named place of
destination, give the seller sufficient notice.

Page 6 of 6
© GMLS 2020

USEFUL GUIDE

What Changed?

According to Professor Charles Debattista

(ICC Special Advisor), the most important
initiative behind the Incoterms® 2020
rules, has been to focus on how the
presentation could be enhanced, to steer
users towards the right Incoterms rule for
their sales contract. Thus !!

a) A greater emphasis in this introduction
on making the right choice;

b) A clear explanation of the demarcation
and connection between the sale
contract and its ancillary contracts;

c) Upgraded Guidance Notes presented
now as Explanatory Notes to each
Incoterm rule; and

d) A re-ordering within the Incoterms®
2020 rules Articles, giving delivery and
risk more prominence.

Article Changes in the 11 Rules

There has indeed been a radical shake-up in the

internal order in which the 10 Articles, within

each Incoterm® rule, have been organised. In

Incoterms® 2020, the internal order within each

Incoterm® rule now follows this sequence.

A1/B1 General Obligations
A2/B2 Delivery / Taking Delivery

A3/B3 Transfer of Risks
A4/B4 Carriage

A5/B5 Insurance
A6/B6 Delivery / Transport Document

A7/B7 Export / Import Clearance
A8/B8 Checking / Packaging / Marking

A9/B9 Allocation of Cost

A10/B10 Notices

The broad sequence flow:

Delivery A2/B2, read together with Risk A3/B3; 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); and

Notices (A10/B10)

NB!! Changes from
2010 version are
important and reflect
here as well as the
2020 version of
changes:

Use this checklist as a reminder:

1) NB!! The ICC recommends that you incorporate the rules
correctly into the contract of sale

2) Specify your named place, point, or port precisely

3) Remember that Incoterms rules do not give you a complete
contract of sale

4) In 2010 DAT and DAP replaces DAF, DES, DEQ and DDU. In 2020
DAT is replaced by DPU and DPU now comes after DAP in order

5) There are 11 rules in two classification sections – Rules for "Any
Mode" and rules for "Sea and Inland Waterway" transport

6) 2010 introduced Domestic delivery application and this is still
applicable to 2020

7) 2010 Guidance notes are now known as Explanatory notes

8) NB!! A1/B1 Electronic Communication must be agreed

9) Marine Insurance – 2010 accepted new institute cargo clauses.
2020 now shows CIF still as Cargo clause C, and CIP now as
Clause A - Still at 110%

10) Security related clearances introduced in 2010, now expanded in
more detail in 2020

11. Terminal Handling Charges – In 2010 clarified under A6/B6 and
in 2020 under A9/B9

12. String sales still applicable

13. Variants introduced in 2010 are still applicable but BEWARE!
When you use them.

14. The order of the articles within the rules are different from 2010
to 2020

15. Delivery points and carrier contracts. 2020 requires that the
seller must contract for the full multimodal / combined transport
service

16. What is meant by “On Board”?

17. FCA delivery points A2 and the catering for “On board B/L”

18. Arranging for Carriage with Seller or Buyer own means of
transport

19. NB!! VGM not included in 2020 version.

All rights as delivered in the French code of Intellectual
Property to the Incoterms Rules

For your training on the
new version contact:

[email protected]

FTW GUCTOOMINMTEERRNAT 2020

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FTW8857

Table of Contents

A. FOREWORD BY ICC SECRETARY GENERAL 2
B. INTRODUCTION TO THE IMPACT AND POTENTIAL LEGAL APPLICATION OF
THE NEW VERSION 4
C. THE CRITICAL CHANGES BETWEEN THE 2010 AND 2020 VERSIONS 8
D. Incoterms® 2020 INSIGHT / COMPARISON TABLE 9
E. RULES FOR MODES FOR TRANSPORT – MARITIME AND MULTIMODAL 9
F. QUICK REFERENCE TABLE 10
G. ICC Incoterms® 2020 – BRIEF OVERVIEW & INSIGHT 12
H. The Incoterms® 2020 RULES – BRIEF EXPLANATIONS 14
I. THE PURPOSE OF THE ARTICLES (LEGAL INTERPRETATION) 18
J. TERMS AND VOCABULARY USED IN Incoterms ARTICLES
– A QUICK UNDERSTANDING 18
K. BRIEF ON GLOBAL TRADE AND LEGAL PRINCIPLE OF DELIVERY 24
L. FCA & DPU – THE CHANGES 24
M. BRIEF UNDERSTANDING OF THE INTERNATIONAL CONTRACT OF SALE 24
N. THE DANGERS OF NOT BEING TRAINED CORRECTLY 26
O. ICC Incoterms Q & A 26

Disclaimer the Johannesburg Chamber of Commerce and Industry
from whom copies of the ICC’s Incoterms® 2020 and
The “Incoterms” or “International Commercial terms” are associated ICC publications can be obtained.
a series of 11 pre-defined commercial terms published Incoterms® 2020 publications can also be obtained from
and trademarked by the International Chamber of ICC-accredited trainers.
Commerce (ICC).
Copyright ©
The intention of this booklet is to provide a basic
understanding of the new Incoterms® 2020 rules. It No part of this publication may be reproduced,
should not be regarded as a comprehensive statement stored in a retrieval system, or transmitted in any
of law, and no liability can be accepted for errors and form or means, mechanical, electronic, recording or
omissions. otherwise without the express written permission of
For a comprehensive explanation and understanding the publisher.
of Incoterms® 2020, contact the ICC (Paris, France), or

Copyright © Freight & Trading Weekly 2020
1

FTW Guide to International Commercial Terms

A Foreword By ICC Secretary General

The ICC Incoterms rules on the use of domestic John W.H. Denton
and international trade terms address this risk by AO, ICC Secretary General
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.
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.

Foreword By Director of ICCSA

Incoterms®2020 publication, the eighth edition Patrick Corbin
since 1936, is more widely applicable and easily Director of ICC - South Africa
understood. The 11 articles to the 11 terms more
prominently position the place of delivery and the
risk of transfer point.

European trade, ports and terminal procedures
function differently from Africa and this difference
has had a strong influence on the structure of the
Incoterms® rules. Substantial disagreement on the
use of the Incoterms® rules flows from regional traders’
written and verbal input to the drafting committee
over 15 years not being considered.

ICCSA regularly receives enquiries for views on
Incoterms® transactions where potential costs, arising
from traders’ exposure, particularly on the passing
of risk, can arise. The complex commitments on
entering into a buyer-seller transaction require both
parties to fully understand the agreed Incoterms®
as they greatly favour the seller.

Copyright © Freight & Trading Weekly 2020
2

All goes

ATTENTION Incoterms®2
organisatio
IMPORTANT Ensure you
INFORMATION avoid co

In-House & Val

FTW8862 Thinking ahead – Incoterms® 2020 is going t
risks, costs and obligations for many years. Con

ICC Accredited Trainers

well until it does NOT!!!

2020 Rules are complex, and your
on may face risks on many levels
u receive the correct training to
ostly mistakes and disputes!!!

lue Discounted Packages Available!!!

o impact your international trading business,
ntact us at [email protected] to book your course.

FTW Guide to International Commercial Terms

B Introduction to the impact and potential legal
application of the new version

01 January 2020 saw the official introduction • whether there is a contact of sale at all;
of the eighth iteration of the International
Chamber of Commerce (ICC) Incoterms® 2020 • change of ownership;
rules. The first launch of Incoterms® rules took
place in 1936 with six trade terms for the carriage • the specifications of the goods sold;
by sea. In 1953, the second iteration saw the
introduction of three non-marine terms. Since • the time, place method or currency of payment
1980, the Incoterms® rules have been published of the price;
every decade.
• the remedies which can be sought for breach
The ICC’s 11 Incoterms® 2020 rules reflect the of the contract of sale;
business-to-business practice for contracts for the
sale and the purchase of goods. The Incoterms® • most consequences of delay and other
2020 rules essentially articulate three aspects for breaches in the performance of contractual
sellers and buyers - obligations, risk, and costs. obligations;

Obligations are concerned with which of • the effect of sanctions;
contracting parties is responsible for arranging
the carriage, insurance, shipping documents, • the imposition of tariffs;
import licences, and export licences. Risk is
concerned with the point where the risk transfers • export or import prohibitions;
between the contracting parties, where and
when the seller ‘delivers’ the goods. • force majeure or hardship;

Whilst, costs, relevant to an international transaction, • intellectual property rights; or
relate to the responsibility for the payment for,
amongst other, transport, packaging, loading, • the method, venue, or law of dispute resolution
customs formalities, unloading cost, checking, in case of such breach.
and security, the ICC Publication also deals with
risks and obligations. A few pertinent legal questions may arise from
global traders and the like; Does this mean
Important: Incoterms® 2020 rules are not a that all deliveries that take place after the
substitute for the contract of sale, and according 1st of January 2020, will be subject to the
to the ICC’s Incoterms® 2020 publication, the Incoterms ®2020 rules? Or must we change
Incoterms® 2020 rules do NOT deal with the the version as stated in our contract of sale?
following matters:
The succinct response is that:

1. I f you do not amend your Incoterms version
on existing contracts, then the 2010 (or earlier
version as applicable) legal articles will be of
application in the event of a dispute.

2. I f you wish to continue to utilise a 2010
version in future contracts, you may do so,

Copyright © Freight & Trading Weekly 2020
4

Incoterms® 2020

Source – Permission for print granted by ICC 17 Dec 2019

Copyright © Freight & Trading Weekly 2020
5

FTW Guide to International Commercial Terms

and in the event of a dispute, the legal articles 6. The Contract of Sale and the Incoterms version
of Incoterms® 2010, will apply accordingly. and rule incorporated therein give rise to other
contracts with third parties and one should
3. Y ou may amend the Incoterms version if your ensure that the terms of those agreements,
seller or buyer, as the case may be, is in agreement. or in fact other clauses within the contract
of sale, do not contradict each other.
4. Bear in mind, once an Incoterms rule is
incorporated correctly into your contract 7. A fter training and guidance in the use of the
of sale, that the specific rules, articles and new Incoterms® 2020 version according to
version will be binding. the ICC Standards, you may wish to review
all contracts and amend terms to suitability
5. When you accept a pro forma invoice and/or for the future shipments.
quote without entering into a formal contract
of sale, you have in fact by acceptance of 8. According to “The Global Negotiator, Incoterms
same, via an order, (Offer and Acceptance are private law rules and are not underpinned
principle) have a binding agreement, yet by the laws of any country or by a supranational
be in danger due to the limitations of what organisation. They are a set of rules by
was only contained on that initial offer. Best businesses (exporters and importers) within
practice to understand Contracts of Sale and the International Chamber of Commerce,
ensure they are in place. to regulate some aspects of foreign trade
operations.

DID YOU KNOW? 9. T he Incoterms do not have the force of law and
therefore there is no obligation to use these
The ICC offers Dispute terms in international trade operations; their
Resolution Services. use will be conditioned on the acceptance of
the parties (seller and buyer) in the contract
Download the of sale. The effectiveness of the Incoterms is
ICC DRS App TODAY! that its rules are widely known and used by
different parties in foreign trade (exporters,
Use these please importers, carriers, freight forwarders, customs
brokers, banks, and insurance companies
etc.) Therefore, the Incoterms rules are very
useful for sellers and buyers to agree on the
terms of delivery of the goods and that the
agreement corresponds with rules that are
universally known and accepted.

10. T he new Incoterms® 2020 version has
now been published and it is interesting
to note the history of the various
publications as reflected in the diagram.
(provided courtesy of ICC).

Copyright © Freight & Trading Weekly 2020
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FTW Guide to International Commercial Terms

C The critical changes between the 2010
and 2020 versions

The ICC, in their Incoterms® 2020 publication, • D ifferent levels of the 2010 revised Institute
has numerous changes, some of which resonate Cargo Clauses for marine insurance cover
with the changes in the 2010 version: in the CIF Incoterms® 2020 rule and CIP
Incoterms® 2020 rule. Formally both Institute
• NB!! The ICC recommends that you Cargo Clauses C in 2010 version. 2020 now
incorporate the rules correctly into the shows CIF still as Cargo clause C, and CIP
contract of sale. Specify your named now as Clause A – Both Still at 110%;
place, point, or port precisely;
• The Inclusion of security-related requirements
Remember that Incoterms rules do not give with carriage obligations, information sharing,
you a complete contract of sale, they are and related costs was introduced in 2010
only a term within it; and now further accentuated in 2020;

• There are 11 rules in two distinct classes • Explanatory Notes have replaced Guidance
– Rules for “Any Mode” and rules for “Sea notes of the 2010 version and may be found
and Inland Waterway” transport; at the beginning of each of the 11 Incoterms
within the ICC publication Incoterms ®2020
• “ Incoterms® 2020 also offers a simpler and by the ICC.
clearer presentation of all the rules, featuring
revised language, an expanded introduction • I n 2010 DAT and DAP replaces DAF, DES,
and explanatory notes, and articles recorded DEQ and DDU. In 2020 DAT is replaced by
to better reflect the logic of a sale transaction. DPU and DPU now comes after DAP in the
Incoterms® 2020 is also the first version of rules order;
ICC’s Incoterms® rules to include a ‘horizontal’
presentation found in the reverse of the • 2 010 introduced Domestic sale delivery
publication, grouping all like articles together application and this is still applicable to
and allowing users to clearly see differences 2020 version;
in treatment of particular issues across the 11
Incoterms® rules.” • N B!! A1/B1 Electronic Communication
must be agreed;
• Bills of Lading with an on-board notation, if
agreed, and the FCA Incoterms® 2020 rule. • Terminal Handling Charges – In 2010 clarified
FCA delivery points A2 and the catering for under A6/B6 and in 2020 under A9/B9;
“On Board” B/L A6/B6;
• String sales still applicable;
• Carriers may be the Buyer or Seller when
utilisation of their own transport takes place • V ariants introduced in 2010 are still applicable
for delivery; but BEWARE! When you use them;

• C osts, where they are listed now Article A 9; • T he order of the articles within the rules
are substantially different from 2010 to the
2020 version.

Copyright © Freight & Trading Weekly 2020
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Incoterms® 2020

• As related to customs, the inclusion of service for protection to the buyer according
“formalities” and not just payment of duties to the applicable rules utilised.
and taxes as costs, but also customs is more
precisely explained as to which party, seller or • What is meant by “On Board”? See Useful
buyer, is responsible for carrying out customs terms and explanations in this publication.
formalities and clearance and assuming the
costs and risks thereof, and also the release • Arranging for Carriage with Seller or Buyer
of goods in transit is included for the first own means of transport.
time. For the later, the rule which is used
that assigns the responsibility of the risk of • V GM costs are not covered under the
transport, is the party responsible. (Extract Incoterms® 2020 version.
Global Negotiator)
Remember: For a comprehensive explanation
• Delivery points and carrier contracts. 2020 and understanding of Incoterms® 2020,
requires that the seller must contract for contact the ICC from whom copies of the ICC’s
the full multimodal / combined transport Incoterms® 2020 and associated publications
can be obtained.

D Incoterms® 2020 Insight / Comparison Table

Since the ICC does not provide any tables Incoterms® in either E, F, C and D terms.
in their Incoterms® 2020 rules publication, it The table overleaf is in the format of the
might be of value to consider the structure of Incoterms®2010 rules, and highlights instances
the Incoterms® 2020 rules. In Incoterms®2010 of similarity. The Incoterms® 2020 version of
rules the ICC deviated from grouping the classes follows the 2010 version format.

E Rules for modes for transport – maritime
and multimodal

The ICC distinguished between two categories There are seven (7) rules relating to any mode
of transport, namely: or modes of transport, and four (4) rules for
sea and inland waterway transport.
• Rules for any Mode or Modes of
Transport; and

• Rules for Sea and Inland Waterway
Transport.

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FTW Guide to International Commercial Terms

F Quick reference table

Overview of Costs, Ris

Any Transport Mode Sea & Inland Waterway

EXW FCA FAS FOB CFR

Ex Works Free Free Free on Cost &
Carrier Alongside Board Freight

Ship

Transfer of Risk At Buyer’s On Buyer’s Alongside On Board On Board
Disposal Transport Ship Vessel Vessel

Charges/Fee

Packaging Seller Seller Seller Seller Seller

Loading Charges Buyer Seller Seller Seller Seller

Delivery to Port/Place Buyer Seller Seller Seller Seller

Export Duty, Taxes & Buyer Seller Seller Seller Seller
Security Clearance

Origin Terminal Charges Buyer Buyer Seller Seller Seller

Loading on Carriage Buyer Buyer Buyer Seller Seller

Carriage Charges Buyer Buyer Buyer Buyer Seller

Insurance

Destination Terminal Buyer Buyer Buyer Buyer Buyer
Charges

Delivery to Destination Buyer Buyer Buyer Buyer Buyer

Import Duty, Taxes & Buyer Buyer Buyer Buyer Buyer
Security Clearance

(Courtesy of GMLS)

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10

Incoterms® 2020

Quick reference table

ks & Responsibilities

Transport Any Transport Mode

CIF CPT CIP DAP DPU DDP
Delivered
Cost In- Carriage Paid Carriage Delivered at Delivered at Duty Paid
surance & To Insurance Place Place Unload At Named

Freight Paid to Place

On Board At Carrier At Carrier At Named At Named
Vessel Place Unloaded

Seller Seller Seller Seller Seller Seller
Seller Seller Seller Seller Seller Seller
Seller Seller Seller Seller Seller Seller
Seller Seller Seller Seller
Seller Seller Seller Seller Seller Seller
Seller Seller Seller Seller
Seller Seller Seller Seller Seller Seller
Seller Seller
Seller Seller Seller Seller Seller Seller
Seller Buyer Seller Buyer Buyer Seller
Buyer Buyer Buyer Seller
Buyer Seller

Buyer Buyer

Buyer Buyer

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FTW Guide to International Commercial Terms

G Icc Incoterms® 2020 – Brief Overview & Insight

The publication “Incoterms® 2020 by the Each of the Incoterms® 2020 rules are divided
International Chamber of Commerce (ICC) into two categories, referred to as the Articles
– ICC Rules for the Use of Domestic and or legal text. The headings of the Articles are
International Trade Terms”, should be your referred to as:
definitive guide on the Incoterms® 2020 rules
on the use of domestic and international trade • THE SELLER’S COSTS, RISKS & OBLIGATIONS; and
terms when addressing the risk and facilitating
the conduct of global trade. • THE BUYER’S costs, risks & OLIGATIIONS.

The ICC Incoterms® 2020 publication deals “THE SELLER’S COSTS, RISKS & OBLIGATIONS” are
with the 11 Incoterms® rules in its two allotted divided into:
categories.
• General obligations;
The ICC publication addressed six important • Delivery;
points and provides “EXPLANATORY NOTES • Transfer of risks;
FOR USERS”: • Carriage;
• Insurance;
• Delivery and risk; • Delivery/transport document;
• Export/import clearance;
• Mode of transport; • Checking/packaging/marking;
• Allocation of costs; and
• Place or precise point of delivery; • Notices.

• A note of caution to buyers;

• Loading risks; and

• Export clearance.

BEWARE OF “THE BUYER’S COSTS, RISKS & OBLIGATIONS”
UNTRUSTWORTHY SOURCES are divided into:

According to the ICC, there is a • General obligations;
significant amount of misleading • Taking delivery;
information concerning the Incoterms • Transfer of risks;
rules on the Internet. Users should be • Carriage;
aware of the existence of incomplete, • Insurance;
inaccurate, and unofficial information. • Proof of delivery;
Unless sourced directly from ICC or ICC • Export/import clearance;
regional offices (known as ICC national • Checking/packaging/marking;
committees), these Incoterms® 2020 • Allocation of costs; and
materials should not be trusted as they • Notices.
may result in contractual mistakes and

ensuing disputes.

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EFFECTIVE 01 JANUARY 2020

Familiarise yourself with the latest The Chamber is an independent, non-
Incoterms® rules to ensure you can provide political, subscription-based association
your customers/suppliers with the best dedicated to promoting a business-friendly
advice and minimise trade disputes and environment. Our members are drawn
expensive litigation. from every sector of the economy, and
range from independent entrepreneurs to
Incoterms® rules, which define the the large corporate.
responsibilities of buyers and sellers in the
international trade system, facilitate trillions We are a key player in the promotion and
of dollars of global trade each year. facilitation of international trade and an
impartial third party which enables us to
The JCCI Global Trade, Customs and negotiate contracts and secure funding
Logistics Training Academy offer training for projects that benefit its membership.
courses in the use of the new Incoterms® We promote enterprise development,
rules and has copies of the new Incoterms® skills development training and business
books available to purchase. advisory services.

For further information on the courses and services we offer,
please contact Anthea Booysen

T: +27 11 726 5300 | E: [email protected] | W: www.jcci.co.za

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H The Incoterms® 2020 Rules – Brief Explanations

In approaching your selection of the most “Free Carrier” means that the seller delivers the
appropriate Incoterms® 2020 Rule, the ‘General goods to the buyer in one or other of two ways:
Obligations’ for Incoterms® 2020 are:
• First, when the named place is the seller’s
• S eller’s - Must, in conformance with the contract premises, the goods are considered delivered
of sale provide the goods, and the documentation
(in paper or electronic form). when they are loaded on the means of transport
arranged by the buyer.
• B uyer’s - In conformance with the contract
of sale, and the documentation (in paper or • Second, when the named place is another place,
electronic form.) the goods are considered delivered

What follows is the ICC’s headline definition of the  when, having been loaded on the seller’s
Incoterms® 2020 rules and a brief explanation of means of transport,
each rule, which should be further considered in
terms of the 10 “Seller’s Obligations” categories, and they reach the named other place and
the 10 “Buyer’s Obligations” categories.
a re ready for uploading from that seller’s
The EXW Incoterms® 2020 – Brief means of transport and
Explanation
p laced at the disposal of the carrier or of
EXW - Ex Works (insert named place of delivery) another person nominated by the buyer.
Incoterms® 2020
The FAS Incoterms® 2020 – Brief
“Ex Works” means that the seller delivers the Explanation
goods to the buyer:
FAS - Free Alongside Ship (insert named port of
• when it places the goods at the disposal of shipment) Incoterms® 2020
the buyer at a named placed (like a factory or
warehouse or procures such goods), and “Free Alongside Ship” means that the seller delivers
the goods to the buyer
• that named place may or may not be the seller’s
premises. • when the goods are placed alongside the ship
(e.g. on a quay or a barge)
For delivery to occur, the seller does not need to
load the goods on any collecting vehicle, nor does • nominated by the buyer
it need to clear the goods for export, where such • at the named port of shipment
clearance is or export authority may be applicable. • or when the seller procures goods already so

The FCA Incoterms® 2020 – Brief delivered.
Explanation • Subject to the Buyers Notice

FCA - Free Carrier (insert named place of delivery) The risk of loss of or damage to the goods transfers
Incoterms® 2020 when the goods are alongside the ship, and the
buyer bears all costs from that moment onwards.

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FTW Guide to International Commercial Terms

The FOB Incoterms® 2020 – Brief “Cost Insurance and Freight” means that the seller
Explanation delivers the goods to the buyer

FOB - Free on Board (insert named port of shipment) • on board the vessel
Incoterms® 2020
• or procures the goods already so delivered.
“Free on Board” means the seller delivers the goods
to the buyer The risk of loss of or damage to the goods transfers
when the goods are on board the vessel, such that
• on board the vessel the seller is taken to have performed its obligation to
• nominated by the buyer deliver the goods, whether or not the goods actually
• at the named port of shipment arrive at their destination in sound condition, in the
• or procures the goods already so delivered. stated quantity or, indeed, at all.
• Subject to the Buyers Notice
The CPT Incoterms® 2020 – Brief
The risk of loss of or damage to the goods transfers Explanation
when the goods are on board the vessel, and the
buyer bears all cost from that moment onwards. CPT - Carriage Paid To (insert named place of
destination) Incoterms® 2020
The CFR Incoterms® 2020 – Brief
Explanation “Carriage Paid To” means that the seller delivers the
goods – and transfers the risk – to the buyer
CFR - Cost and Freight (insert named port of
destination) Incoterms® 2020 • by handling them over to the carrier

“Cost and Freight” means that the seller delivers the • contracted by the seller
goods to the buyer
• on board the vessel • or by procuring the goods so delivered.
• or procures the goods already so delivered.
• The seller may do so by giving the carrier physical
The risk of loss of or damage to the goods transfers possession of the goods in the manner and at the
when the goods are on board the vessel, such that place appropriate to the means of transport used.
the seller is taken to have performed its obligation to
deliver the goods, whether or not the goods actually Once the goods have been delivered to the buyer
arrived at their destination in sound condition, in the in this way, the seller does not guarantee that the
stated quantity or, indeed, at all. In CFR, the seller goods will reach the place of destination in sound
owes no obligation to the buyer to purchase marine condition, in the stated quantity or indeed at all.
insurance cover: the buyer would be well-advised
therefore to procure such cover. This is because risk transfers for seller to buyer when
the goods are delivered to the buyer by handing
The CIF Incoterms® 2020 – Brief them over to the carrier; the seller must nonetheless
Explanation contract for the carriage of the goods from delivery
to the agreed destination.
CIF - Cost, Insurance and Freight (insert named port
of destination) Incoterms® 2020 Thus, for example, goods are handed over to a
carrier in Las Vegas (which is not a port) for carriage
to Southampton (a port) to Winchester (which is

Copyright © Freight & Trading Weekly 2020
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Incoterms® 2020

not a port). In either case, delivery transferring “Delivered at Place” means that the seller delivers
risk to the buyer happens in Las Vegas, and the the goods - and transfer risk - to the buyer
seller must make a contract of carriage to either
Southampton to Winchester. • when the goods are placed at the disposable
of the buyer
The CIP Incoterms® 2020 – Brief Explanation
• on the arriving means of transport ready for
CIP - Carriage and Insurance Paid To (insert named unloading
place of destination) Incoterms® 2020
• at the named place of destination or
“Carriage and Insurance Paid To” means that the • at the agreed point within that place, if any such
seller delivers the goods – and transfers the risk – to
the buyer point is agreed.

• by handling them over to the carrier The seller bears all risks involved in bringing the
goods to the named place of destination or to the
• contracted by the seller agreed point within that place. In this Incoterms®
rule, therefore, delivery and arrival at destination
• or by procuring the goods so delivered. are the same.

• The seller may do so by giving the carrier physical The DPU Incoterms® 2020 – Brief
possession of the goods in the manner and at the Explanation
place appropriate to the means of transport used.
DPU - Delivered at Place Unloaded (insert named
Once the goods have been delivered to the buyer place of destination) Incoterms® 2020
in this way, the seller does not guarantee that the
goods will reach the place of destination in sound “Delivered at Place Unloaded” means that the
condition, in the stated quantity or indeed at all. This seller delivers the goods - and transfers risk - to
is because risk transfers for seller to buyer when the the buyer:
goods are delivered to the buyer by handing them
over to the carrier; the seller must nonetheless • when the goods,
contract for the carriage of the goods from delivery • once unloaded from the arriving means of
to the agreed destination.
transport,
Thus, for example, goods are handed over to a • are placed at the disposal or the buyer,
carrier in Las Vegas (which is not a port) for carriage • at a named place of destination or,
to Southampton (a port) to Winchester (which is not • at the agreed point within that place, if any such
a port). In either case, delivery transferring risk to the
buyer happens in Las Vegas, and the seller must point is agreed.
make a contract of carriage to either Southampton
to Winchester. The seller bears all risks involved in bringing the
goods to and unloading them at the named place
The DAP Incoterms® 2020 – Brief of destination. In this Incoterms® rule, therefore,
Explanation the delivery and arrival at destination are the same.

DAP - Delivered at Place (insert named place of DPU is the only Incoterms® rule that requires the
destination) Incoterms® 2020 seller to unload goods at destination.

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FTW Guide to International Commercial Terms

The seller should therefore ensure that it is in a • when the goods are placed at the disposal of the
position to organise unloading at the named place. buyer,
Should the parties intend the seller not to bear the
risk and cost of unloading, the DPU rule should • cleared for import,
be avoided and DAP (Delivered at Place) should
be used instead. As mentioned DPU replaced DAT • on the arriving means of transport,
and the order changed whereby DPU comes after
DAP and the only difference is that the seller pays • ready for unloading,
for unloading of the goods.
• at the named place of destination or at the agreed
The DDP Incoterms® 2020 – Brief point within that place, if any such point is agreed.
Explanation
The seller bears all the risks involved in bringing the
DDP - Delivered Duty Paid (insert named place of goods to the named place of destination or to the
destination) Incoterms® 2020 agreed point within that place. In this Incoterms®
rule, therefore, delivery and arrival at destination
are the same.

“Delivered Duty Paid” means that the seller delivers
the goods to the buyer

I The purpose of the articles (legal interpretation)

Within each rule, the seller’s and buyer’s obligations an A and the buyer’s matching obligations are on
have been shown in a column for each. These are the right commencing with a B. These are the
still shown as ten articles for each rule, and are legal content as opposed to the Explanatory notes
in a parallel format, however the order has been preceding each rule in the official publication.
changed from the previous 2010 publication. The The understanding and cross reference to the
articles therefore fall more or less in the same order respective articles is the skill desired for the correct
as they are experienced in practice. Reference choice and interpretation of the respective rules.
to costs is still included wherever relevant but
also summed up in a specific article. The seller’s Source: Ronai, Robert (Bob). A Commentary on the
obligations are on the left side commencing with Incoterms® 2020 Rules. Import-Export Services Pty Ltd.
Kindle Edition. Available through Amazon.

J Terms and vocabulary used in incoterms articles –
a quick understanding

Within the articles of the respective rules words or “On Board”
wording will be found that may, from a cautionary “At the Disposal of”
point of view, need to be checked for exact clarification “The Usual”
and interpretation between buyers and sellers. The Extracts from respective ICC publications are as
following words as example;

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FTW Guide to International Commercial Terms

such provided hereunder, which should give some be met in order to comply with any applicable
guidance in interpretation and to the extent, where customs regulations and may include documentary,
absolute clarity may be required to be obtained, security, information, or physical inspection
before settling on a rule and all related obligations, obligations. (Incoterms® 2010 pg. 10)
risks and costs.
Delivery: this concept has multiple meanings
Incoterms® 2010 Book in trade law and practice, but in the Incoterms®
2010 rules, it is used to indicate where the risk
Incoterms® rules: explain a set of three-letter of loss or damage to the goods passed from
terms reflecting business-to-business practice in the seller to the buyer. (Incoterms® 2010 pg. 10)
contracts for the goods of sale. (Incoterms 2010 pg. 5)
Delivery document: a document used to
Named place is the place where delivery takes prove that delivery has occurred. (Incoterms®
place and where risk passes from seller to the 2010 pg. 11)
buyer, or, named place is the place of destination
to which carriage is paid. (Incoterms 2010 pg. 5-6) Electronic record or procedure: a set of
information constituted of one or more electronic
Guidance note: explain the fundamentals on each messages and, where applicable, being functionally
Incoterms rule, such as when it should be used, equivalent with the corresponding paper
when risk passed, and how costs are allocated document. (Incoterms® 2010 pg. 11)
between seller and buyer. (Incoterms 2010 pg. 8)
Packaging: This word is used for different
Electronic communication: has the same effect purposes:
as paper communication, as long as the parties so
agree or where customary. (Incoterms 2010 pg. 8) 1) p ackaging of the goods to comply with any
requirements under the contract of sale
International sale contracts: where goods pass
across national borders. (Incoterms 2010 pg. 8) 2) the packaging of the goods so that they are
fit for transportation.
String sales: In the sale of commodities, as
opposed to the sale of manufactured goods, 3) T he stowage of the packed goods within
cargo is frequently sold several times during transit a container or other means of transport.
“down a string”. When this happens a seller in (Incoterms® 2010 pg. 11)
the middle of the string therefore performs its
obligations towards its buyer not by shipping the Incoterm 2010 Q & A Publication
goods, but by “procuring” the goods that have
been shipped. (Incoterms 2010 pg. 9) Contract of Sale: The incoterms® are embedded
in this contract, and agreement between the
Carrier: for the purpose of the Incoterms® 2010 seller and the buyer.
rules, the carrier is the party with whom the
carriage is contracted with. (Incoterms® 2010 pg. 10) Contract of Carriage: The contract is between
the shipper and the carrier (or the carrier’s agent).
Customs formalities: These are requirements to Depending on the contract of sale the shipper
may be either the seller or the buyer
(Incoterms 2010 Q & A pg. 10)

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FTW Guide to International Commercial Terms

Stowing and trimming are operations that Cost: which party is responsible for which cost,
must be performed upon bulk commodities after for example transport, packaging, loading, or
they are loaded into a ship’s hold. (Incoterms 2010 unloading costs, and checking or security related
Q & A pg. 30) costs. (Incoterms® 2020 pg. 2)

A “usual” transport document follows usually On-board: In the F and C rules, placing the goods,
from the relevant transport legislation and from for example, on board the vessel or handing them
the practice of the trade. over to, or placing them at the disposal of, the
carrier marks the point at which the goods are
Generally speaking, transport documents represent “delivered” by the seller to the buyer. Therefore,
receipts and proof that the goods are taken in this is the point at which risk transfers from the
the charge of the carrier and they evidence the seller to the buyer. (Incoterms® 2020 pg. 6)
contract of carriage by containing or referring
to the transport conditions. (Incoterms 2010 Q Carrier: Given those two important consequences,
& A pg. 58) it becomes essential to identify who the carrier is
when there is more than one carrier, each carrying
A shipper can be a contractual shipper, who out a separate leg of transport, for instance by
has contracted with the carrier, or an actual road, rail, air or sea.
shipper simply handing over the goods to the
carrier, or both. (Incoterms 2010 Q & A pg. 84) Where the seller has taken the far more prudent
course of making one contract of carriage with
“placing” the goods “on board”: one carrier taking responsibility for the entire
carriage chain, in a so-called “through” contract
 Delivery must be completed “in the manner of carriage, the problem does of course, not arise
customary at the port”, (Incoterms® 2020 pg. 6)

I n the absence of custom of the port, FAQ: Where there is more than one carrier involved
or other relevant considerations such as in the carriage of goods from seller to buyer, at
practice between the parties, the default which point in the carriage string does the handing
position is that goods may be considered over of the goods, mark the point of delivery, and
to be delivered on board the vessel when the transfer of risk as between seller and buyer?
first at rest on deck (Incoterms 2010 Q & A (Incoterms® 2020 pg. 7)
pg. 100).
The seller should make a contract if carriage to
Incoterms® 2020 Book the destination named under the contract of sale.
(Incoterms® 2020 pg. 8)
Obligations: who does what as between seller
and buyer, e.g. Who organises carriage or insurance The “usual” - as is customary.
of the goods or who obtains shipping documents
and export or import licenses;

Risk: Where and when the seller “delivers” the
goods, in other words where risk transfers from
seller to buyer; and

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K Brief on global trade and legal principle of delivery

For many Incoterms® 2020 rules, the delivery deliver, but the buyer also has an obligation
document is a transport document. However, to accept delivery.
with EXW, FCA, FAS & FOB, the delivery document
may simply be a receipt:  “delivery document” This phrase is used
as the heading to article (A6/B6) and means
 “delivery” The concept has multiple meaning a document used to prove that delivery has
in trade law and practice, but in the Incoterms® occurred. For many of the Incoterms® rules, the
2020 rules, it us used to indicate where the delivery document is a transport document or
risk of loss of or damage to the goods passes corresponding electronic record. A delivery
from the seller to the buyer. (A2/B2). Therefore, document may also have other functions, for
not only does the seller have an obligation to example, as part of the mechanism for payment.

L Fca & dpu – The changes

In the 2020 version DPU replaced DAT, thus one new by agreement, that the carrier may provide a Bill
term, and FCA was subject to fundamental changes. of Lading as an example to the seller. This would
These two thus are briefly analysed for purposes of facilitate Letter of Credit obligations for the parties
this publication. and confirm to the buyer that the goods have been
shipped.
According to the ICC Secretary General, John W.H.
Denton, “The Incoterms® 2020 rules take account of The new DPU term was introduced to replace DAT,
the increased attention to security in the movement and now falls into the position after DAP, whereas
of goods, the need for flexibility in insurance coverage DAT was previously preceding DAP. Sellers in DPU
depending on the nature of goods and transport, and contracts will wish to ensure that the buyer will
the call by banks for an “on-boarding bill of lading” in perform their customs clearance obligations as the
certain financed sales, under the FCA rule.” seller will not be in a position to complete delivery
if the buyer has not performed customs clearance.
In the FCA rule, there is a specific provision to allow,

M Brief understanding of the international
contract of sale

As you have noted, the chosen Incoterms rule and  Contract terms can be divided into “Specific
version must be correctly incorporated into the conditions” and “General Conditions”.
Contract of Sale. It is again highly recommended
that you obtain the official ICC publication titled D efinitions
“ICC Model International Sales Contracts”. Here
are some brief legal tips for securing standard T ime factors and deadlines
contractual terms, conditions, and applications;
S hipment and Delivery conditions - Incoterms
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Get in touch to see what we can do for you.

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 Applicable Law D ispute Resolutions
 Payment Conditions  Breach
P rice  Notices
O wnership and Retention of Title  Conformity of Goods
 Breach  Insurance obligations
D ocuments required
T ermination The above are important criteria to be addressed,
however they may not be all the terms to be
contained within an international contract of sale.

N The dangers of not being trained correctly

On the ICC official website, is a list of ICC Registered 2020 Registered Trainer examination. Given the
Incoterms® 2020 rules trainers, who have passed global importance of the Incoterms® rules, several
ICC’s official Incoterms® 2020 examination to companies and online publications have sought
become an ICC Registered Trainer. The registration to profit off the dissemination and sale of false
and certification are issued exclusively by the ICC information. ICC has worked in collaboration with
Academy, the International Chamber of Commerce’s the ICC Academy and ICC national committees to
e-learning platform. ensure that these trainers are fully versed in the
Incoterms® rules. If you would like seek assistance
To become an ICC Registered Trainer of the from an ICC Registered Trainer, please contact
Incoterms® rules, candidates must undergo an them directly with their local national committee
intensive selection process. First, candidates must in copy as per details on the ICC website.
be nominated by their local ICC national committee,
and then, they must pass the ICC Incoterms® https://iccwbo.org/resources-for-business/incoterms-

rules/incoterms-rules-registered-trainers/

O ICC Incoterms Q & A

The ICC previously published a book titled: It is recommended that the new version be
“Incoterms® 2010 Q&A – Questions & Expert Guidance obtained as soon as it is published.
on the 2010 rules.”

The ICC are in the process of compiling a new
publication for the Incoterms® 2020 rules, however,
the prior publication is very useful to address
various key criteria.

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