In the world of international trade, understanding Incoterms rules is fundamental for successful business operations. GLOBAL AF LOGISTICS, with its extensive experience in logistics, presents a detailed analysis of the updated Incoterms 2020 rules that define the obligations of buyers and sellers in international transactions.
What are Incoterms and Why are They Important?
Incoterms (International Commercial Terms) are standardized trade terms developed by the International Chamber of Commerce (ICC). These rules define who bears responsibility for goods delivery, insurance, customs procedures, and other logistics processes. The 2020 version introduced important changes that every international trade participant should know.
At GLOBAL AF LOGISTICS, we apply this knowledge daily in practice, helping our clients choose the most suitable delivery terms for their specific needs.
Key Changes in Incoterms 2020
1. New FCA (Free Carrier) Structure
One of the significant innovations was the possibility for the seller to obtain a bill of lading with "on board" notation under FCA terms when goods are delivered to a port. This solves a long-standing problem of document circulation in letter of credit operations.
2. Different Insurance Coverage Levels in CIP and CIF
- CIF: minimum coverage (Institute Cargo Clauses C)
- CIP: extended coverage (Institute Cargo Clauses A)
This differentiation reflects different risk levels in maritime and other types of transport.
3. New Rules for DPU (Delivered at Place Unloaded)
The DPU term replaced DAT (Delivered at Terminal), expanding delivery location possibilities not only to terminals but to any other places.
Detailed Analysis of Main Incoterms 2020 Terms
Group E - Departure
EXW (Ex Works) — minimum seller obligations. Goods are handed over at the seller's premises. GLOBAL AF LOGISTICS recommends using this term only with an experienced importer capable of organizing the complete logistics chain.
Group F - Main Carriage Unpaid
FCA (Free Carrier) — one of the most versatile terms. The seller delivers goods to the carrier at the specified location. Our specialists often recommend FCA as the optimal balance between parties' responsibilities.
FAS (Free Alongside Ship) — applies only to maritime transport. Goods are placed alongside the ship.
FOB (Free on Board) — classic maritime term. The seller bears all costs until goods are loaded on the vessel.
Group C - Main Carriage Paid
CFR (Cost and Freight) — seller pays for maritime transport, but risk passes to buyer upon loading.
CIF (Cost, Insurance and Freight) — similar to CFR but with addition of marine insurance.
CPT (Carriage Paid To) — universal term for all transport types.
CIP (Carriage and Insurance Paid To) — CPT plus cargo insurance.
Group D - Arrival
DAP (Delivered at Place) — goods are delivered to the specified place, ready for unloading.
DPU (Delivered at Place Unloaded) — goods are delivered and unloaded at the specified place.
DDP (Delivered Duty Paid) — maximum seller obligations, including duty payments.
Practical Recommendations from GLOBAL AF LOGISTICS
Choosing the Optimal Term
When selecting the appropriate Incoterms term, our experts recommend considering:
- International trade experience — beginners should start with FCA or DAP
- Transport type — maritime terms (FAS, FOB, CFR, CIF) only for water transport
- Financial capabilities — who can better organize and pay for logistics
- Country-specific features — some countries have restrictions on import/export services
Mistakes to Avoid
- Using maritime terms for containerized transport
- Inaccurate specification of goods handover location
- Ignoring insurance requirements
- Not considering customs legislation peculiarities
Digitalization and the Future of Incoterms
GLOBAL AF LOGISTICS actively implements digital solutions for working with Incoterms. The use of blockchain technologies, electronic document flow, and IoT devices is changing approaches to executing trade terms.
Conclusion
Correct application of Incoterms 2020 is the key to successful international transactions. The GLOBAL AF LOGISTICS team possesses deep knowledge and practical experience working with all delivery terms. We help our clients not only choose optimal conditions but also execute them competently, minimizing risks and optimizing costs.
Contact GLOBAL AF LOGISTICS professionals — we will make your international trade efficient and secure.