ABSTRACT
INCOTERMS rules are prepared by The International Chamber of Commerce in order to unify the terms of international commerce and in result, to simplify international commerce. INCOTERMS rules are being updated by The International Chamber of Commerce with the goal of adapting the rules to the changing circumstances at global scale in particular periods of time. In regard, International Chamber of Commerce has published the newest version of INCOTERMS (2020) in January 2020.
II. DELIVERY TYPES OF INCOTERMS 2020
INCOTERMS rules are being used very often and are pretty practical in international commerce. By the agreement of the parties upon one of the INCOTERMS rules, they simply accept the provisions of that rule (such as, which one of the parties is going make the transportation agreement or the importation/exportation transaction) to be applied on their contract. However, in practise, it is also observed that the parties are changing the content of the rule which they agreed upon under the contractual relationship between them.
In this article, the newest version of INCOTERMS (which is INCOTERMS 2020) will be analyzed and it’s differences from the INCOTERMS 2010 will be examined. The systematic of this article is the same with the original INCOTERMS 2020 and the rules will be analyzed with the rules which includes all transportation types under two seperate topics about sea and inland water transportation. While the analyze is being made, the differences of each rule between version 2010 and 2020 will be set out.
A. RULES WHICH GOVERN ALL TRANSPORTATION TYPES
1. Ex Works (EXW – Delivery at Factory
a. General Explanation
Ex Works (EXW) is the INCOTERMS rule which the seller has the least obligations and therefore is at the least risk1. In fact, therre is a part in the book of INCOTERMS 2020 which points out this matter and warns the buyer2. The INCOTERMS 2020 version of EXW rule is the same with the INCOTERMS 2010 version. As per the EXW rule, the seller is obliged to deliver the goods to the buyer at a spesific location where the parties have agreed upon.
It is not neccessary for the seller to load the goods to a vehicle or to do the customs clearance transactions for the delivery to take place. In addition, within the scope of this rule, there is no neccessity about using a particular vehicle. The seller is free to deliver the goods with the vehicle which he wishes to.
Under EXW, the parties must determine the delivery point, but such determination does not have to be absolute. In other words, the parties does not have to determine the exact delivery point under EXW. However, when considering the risk being transferred with delivery, to determine the exact delivery point will be beneficial for the parties to prevent possible disputes. In addition to that, to determine whether the risk shall be on the seller or on the buyer while the goods are being loaded would also be beneficial for the parties.
b. Obligations of the Parties
i. Obligations of the Seller
Seller shall; (i) deliver the goods on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient for in paper or in electronic form as agreed, (iii) make insurance with demand of the buyer at buyer’s sole cost and expense, (iv) cover all the costs including the packacing until the goods are delivered to buyer depending on the customs of trade, (v) make all the notifications to buyer regarding the delivery of the goods and (vi) help the buyer regarding the customs clearance transactions.
ii. Obligations of the Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) notify the delivery date and location clearly and properly take delivery of the goods from the seller at the moment they are asked to be delivered and submit the proof regarding the delivery of goods have been executed, (iii) make the transactions regarding the transportation of goods at his sole cost and expense, (iv) maket he exportation and importation clearences at his sole cost and expense, (v) lastly, cover the costs done by seller while helping buyer.
2. Free Carrier (FCA)
a. General Explanation
Under FCA; (i) if the delivery place is determined as seller’s factory, delivery shall take place at the moment when goods are loaded to transportation vehicle and (ii) if the delivery place is determined as somewhere else but the seller’s factory, delivery shall take place at the moment when the goods arrive at the delivery point and are ready to be unloaded from the transportatin vehicle. Obviously, determining the point of delivery is also important for transfer of risk. Parties are free to pick the transportation vehicle under FCA, just like in EXW. However; unlike EXW, seller must cover the exportation clearences under FCA, but is not obliged to cover the importation clearences as well.
Also, unlike the INCOTERMS 2010, situations which the transportation of goods is not done by a third-party transporter have been regulated under INCOTERMS 2020.
b. Obligations of the Parties
i. Obligations of the Seller
Seller shall; (i) deliver the goods on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient for in paper or in electronic form as agreed, (iii) make all the transactions about insurance and transportation with demand of the buyer, (iv) submit the proof of delivery (in his sole cost and expense) to buyer, (v) do the exportation clearences in his sole cost and expense, (vi) cover all the costs including the packacing and controlling until the goods are delivered to buyer, (vii) lastly, make all the notifications to buyer (or to the person appointed by him) regarding the delivery of the goods.
ii. Obligations of the Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) notify the delivery date and location clearly and properly take delivery of the goods from the seller at the moment they are asked to be delivered, (iii) make the transactions regarding the transportation of goods at his sole cost and expense, (iv) accept the submit of proof regarding the delivery has took place, (v) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (vi) notify the date of delivery, location of delivery and the person who shall take delivery of the goods.
3. Carriage Paid To (CPT)
a. General Explanation
CPT’s content is kept the same way in INCOTERMS 2020 as it was in the INCOTERMS 2010. Under CPT, parties are free to decide on transportation vehicles as they wish to and seller decides on the transporter at his sole cost and expense. Transfer of risk from seller to buyer takes place at the moment when goods are delivered to transporter.
b. Obligations of the Parties
i. Obligations of the Seller
Seller shall; (i) deliver the goods on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) make a transportation agreement which is convenient to ordinary practise, (iv) submit the proof regarding the delivery has took place and the documents of transportation to buyer at his sole cost and expense, (v) provide information in order to make an insurance contract with demand of the buyer at buyer’s sole cost and expense, (vi) do all the customs clearence regarding importation and cover the costs of them, (vii) cover all the costs including the packacing and controlling until the goods are delivered to transporter, (viii) lastly, make all the notifications to buyer regarding the goods have been delivered to transporter and fort he buyer to be able to take delivery of the goods.
ii. Obligations of the Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) notify the delivery date and location clearly and properly take delivery of the goods from the transporter at the moment they are asked to be delivered, (iii) accept the transportation/ delivery document submitted by seller if convenient to the contract, (iv) submit the proof regarding the delivery of goods have been executed, (v) help the seller about exportation transactions and also make every transaction which are demanded by the importation country at his sole cost and expense, (vi) make the notification about the decision he made (if he has the right) regarding the delivery point.
4. Carriage and Insurance Paid to (CIP)
a. General Explanation
CIP’s content is kept the same way in INCOTERMS 2020 as it was in the INCOTERMS 2010. Under CIP, parties are free to decide on transportation vehicles as they wish to and seller decides on the transporter at his sole cost and expense. Plus, unlike CPT, under CIP, seller also covers the insurance of the goods. Transfer of risk from buyer to seller takes place at the moment when goods are delivered to transporter.
b. Obligations of the Parties
i. Obligations of the Seller
Seller shall; (i) deliver the goods on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) provide a load insurance which covers the risks between the delivery and the arrival points up to 110% of the cost of the sales agreement unless agreed or trade of customs require otherwise according to the clauses of Institution Cargo Rules, (iv) make a transportation agreement at his sole cost and expense which is convenient to ordinary practise, (v) submit the proof regarding the delivery has took place and the documents of transportation to buyer at his sole cost and expense, (vi) do the custom clearences for exportation at his sole cost and expense and help buyer for importation process, (vii) cover all the costs including the packacing and controlling until the goods are delivered to transporter, (viii) lastly, make all the notifications to buyer regarding the goods have been delivered to transporter and for the buyer to be able to take delivery of the goods.
ii. Obligations of the Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) notify the delivery date and location clearly and properly take delivery of the goods from the seller at the moment they are asked to be delivered, (iii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iv) accept the submit of proof regarding the delivery has took place, (v) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (vi) notify the delivery location if he has the right to determine it.
5. Delivered at Place (DAP)
a. General Explanation
The content of DAP in INCOTERMS 2010 is partially modified in INCOTERMS 2020. Under DAP, seller delivers the goods in buyer’s country and at the location they have determined together without unloading the goods from the transportation vehicle. In other words, under this rule, seller is obliged to transport the goods from a certain point to another, but is not liable from the safe unloading of goods. Unlike the version 2010, in version 2020, parties are allowed to do the transportation by the vehicles of their own. Under DAP, the transfer of risk takes place at the moment when the goods arrive at the determined point or are unloaded at a certain point.
b. Obligations of the Parties
i. Obligations of Seller
Seller shall; (i) deliver the goods on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) make a transportation agreement at his sole cost and expense which is convenient to ordinary practise and deliver the goods himself personally, (iv) provide all the neccessary documents and make all the notifications for buyer to take delivery of the goods, (v) do the custom clearences for exportation at his sole cost and expense and help buyer for importation process, (vi) cover all the costs including the packacing and controlling until the goods are delivered to transporter.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iii) accept the submit of proof regarding the delivery has took place, (iv) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (v) notify the delivery location if he has the right to determine it.
6. Delivered at Place Unloaded (DPU)
a. General Explanation
“DAT” (Deliverred at Terminal) rule is modified as “DPU” in the INCOTERMS 2020. In 2010 version of DPU, the delivery was taking place at terminal when seller unloads the goods from the transportation vehicle. In 2020 version of DPU, delivery location is not limited with terminal only, but also anywhere else may be determined by the parties as the delivery location.
Under DPU rule, seller is obliged to unload the goads at the delivery location which the parties agreed on before. The transfer of risk from seller to buyer takes place at the moment when the goods are completely unloaded at delivery location.
b. Obligations of the Parties
i. Obligations of Seller
Seller shall; (i) unload the goods at delivery location on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) make a transportation agreement at his sole cost and expense which is convenient to ordinary practise and deliver the goods himself personally, (iv) provide all the neccessary documents and make all the notifications for buyer to take delivery of the goods, (v) do the custom clearences for exportation at his sole cost and expense and help buyer for importation process, (vi) cover all the costs including the packacing and controlling until the goods are delivered to transporter.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iii) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (iv) notify the delivery location if he has the right to determine it.
7. Delivered Duty Paid (DDP)
a. General Explanation
Under DDP rule, seller is obliged to deliver the goods at the delivery location in buyer’s (who is also the importer) country. According to DDP, seller conducts all the exportation and importation clearences and covers the cost and expense at his sole. In INCOTERMS 2020, transportation is allowed to be done by the seller or buyer’s transportation vehicles. The transfer of risk from seller to buyer takes place at the moment when the goods arrive at the determined point or are unloaded at a certain point.
b. Obligations of the Parties
i. Obligations of Seller
Seller shall; (i) get the goods ready to be unloaded at delivery location on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) make a transportation agreement at his sole cost and expense which is convenient to ordinary practise or deliver the goods himself personally, (iv) provide all the neccessary documents and make all the notifications for buyer to take delivery of the goods, (v) do the custom clearences for both exportation and importation at his sole cost and expense, (vi) cover all the costs including the packacing and controlling until the goods are delivered to transporter.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iii) help the seller about both exportation and importation transactions, (iv) notify the delivery location if he has the right to determine it.
B. SPECIFIC RULES REGARDING THE SEA AND INLAND WATER TRANSPORTATION
1. Free Alongside Ship (FAS)
a. General Explanation
Term “FAS” which is only used at sea and inland water transportation refers the rule where the seller delivers the goods by placing them parallel alongside the ship which is determined by the buyer at the loading port or procures the goods which are delivered this way and delivers them himself. The term “procurement” refers to need in chainment sales which are arising from multiple sales of goods. Transfer of risk takes place at the moment when the goods are delivered to buyer alongside the ship and from them on, all the costs and expenses shall be on buyer’s sole. Because of it’s importance by determining the moment of transfer of risk, it is adviced to determine the loading point as clear as possible.
b. Obligations of Parties
i. Obligations of Seller
Seller shall; (i) deliver the goods alongside the ship on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) help buyer about making a transportation agreement by providing him all kinds of information he needs and if agreed so, make a transportation agreement which is convenient to ordinary practise and is at buyer’s sole by the means of cost and risk, (iv) provide and submit the document regarding the delivery has took place to buyer and make the notifications regarding this matter at his sole cost and expense, (v) do the custom clearences for exportation at his sole cost and expense and help buyer for importation process, (vi) cover all the costs including the packacing and controlling until the goods are delivered to transporter.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract and take delivery of them if they are properly asked to be delivered, (ii) make the transportation agreements which are about the transportation of goods from the loading port at his sole cost and expense, (iii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iv) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (v) notify the seller about the loading location, the ship’s name which the goods are going to be placed alongside, date of delivery and matters of security.
2. Free on Board (FOB)
a. General Explanation
Term “FOB” which is used only at sea and inland water transportation refers the rule which seller delivers the goods to buyer on the ship (determined by the buyer) at the loading point or procures the goods which are delivered this way and delivers them by himself. The term “procurement” refers to need in chainment sales which are arising from multiple sales of goods. The moment when the goods pass the ship’s rail, transfer of risk from seller to buyer takes places and from them on, all the cost and expenses are at buyer’s sole.
b. Obligations of the Parties
ii. Obligations of Seller
Seller shall; (i) deliver the goods at the ship’s rail on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) help buyer about making a transportation agreement by providing him all kinds of information he needs and if agreed so, make a transportation agreement which is convenient to ordinary practise and is at buyer’s sole by the means of cost and risk, (iv) provide the information he has for the buyer to make an insurance agreement, (v) provide and submit the document regarding the delivery has took place to buyer and make the notifications regarding this matter at his sole cost and expense, (vi) do the custom clearences for exportation at his sole cost and expense and help buyer for importation process, (vii) cover all the costs including the packacing and controlling until the goods are delivered to transporter.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract and take delivery of them if they are properly asked to be delivered, (ii) make the transportation agreements which are about the transportation of goods from the loading port at his sole cost and expense, (iii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iv) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (v) lastly, notify the seller about the loading location, the ship’s name which the goods are going to be placed, date of delivery and matters of security.
3. Cost and Freight (CFR)
a. General Explanation
Term “CFR” which is used only at sea and inland water transportation refers the rule which seller delivers the goods to buyer on the ship (determined by the buyer) at the loading point or procures the goods which are delivered this way and delivers them by himself. The term “procurement” refers to need in chainment sales which are arising from multiple sales of goods. This rule simply states that the seller shall deliver the goods on the ship and cover the expenses of transportation. The moment when the goods are loaded to the ship, transfer of risk from seller to buyer takes places.
b. Obligations of the Parties
ii. Obligations of Seller
Seller shall; (i) deliver the goods at the ship on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) make a transportation agreement which is convenient to ordinary practise for the goods to be transported from the loading location to the port of arrival at his sole cost and expense, (iv) submit the proof regarding the delivery has took place and the documents of transportation to buyer at his sole cost and expense, (v) provide the information he has for the buyer to make an insurance agreement, (vi) do the cusTom clearences for exportation at his sole cost and expense and help buyer for importation process, (vii) cover all the costs including the packacing and controlling until the goods are delivered to transporter, (viii) finally, make all the notifications to buyer regarding the goods have been delivered to transporter and for the buyer to be able to take delivery of the goods.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) take delivery of the goods from the transporter at the port of arrival, (iii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iv) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (v) finally, notify the seller about the delivery location if he has the right to determine it.
4. Cost, Insurance and Freight (CIF)
a. General Explanation
Term “CIF” which is used only at sea and inland water transportation refers the rule which seller delivers the goods to buyer on the ship (determined by the buyer) at the loading point or procures the goods which are delivered this way and delivers them by himself. From this point, there are no differences between CFR and CIF rules. The term “procurement” refers to need in chainment sales which are arising from multiple sales of goods. This rule simply states that the seller shall deliver the goods on the ship and cover the expenses of transportation. The moment when the goods are loaded to the ship, transfer of risk from seller to buyer takes places.
b. Obligations of the Parties
i. Obligations of Seller
Seller shall; (i) deliver the goods at the ship on the agreed date and at agreed conditions and cover the expenses, (ii) issue the invoice which is convenient to customs of trade in paper or in electronic form as agreed, (iii) make a transportation agreement which is convenient to ordinary practise for the goods to be transported from the loading location to the port of arrival at his sole cost and expense, (iv) submit the proof regarding the delivery has took place and the documents of transportation to buyer at his sole cost and expense, (v) provide the information he has for the buyer to make an insurance agreement, (vi) do the custom clearences for exportation at his sole cost and expense and help buyer for importation process, (vii) cover all the costs including the packacing and controlling until the goods are delivered to transporter, (viii) cover the expenses under the transportation agreement regarding the unloading of the goods, (ix) provide a load insurance which covers the risks between the delivery and the arrival points up to 110% of the cost of the sales agreement unless agreed or trade of customs require otherwise according to the clauses of Institution Cargo Rules, (x) finally, make all the notifications to buyer regarding the goods have been delivered to transporter and for the buyer to be able to take delivery of the goods.
ii. Obligations of Buyer
Buyer shall; (i) pay the cost of the goods as determined in the sales contract, (ii) take delivery of the goods from the transporter at the port of arrival, (iii) if convenient to the contract, accept the transportation/delivery document submitted by seller, (iv) help the seller about exportation transactions and also to make every transaction which are demanded by the importation country at his sole cost and expense, (v) finally, notify the seller about the delivery location if he has the right to determine it, (vi) provide any kind of information regarding the additional insurances with are going to be done by the seller.
III. CONCLUSION
INCOTERMS is a set of rules which was first publised in 1936 in order to unify the terms of international commerce. INCOTERMS 2020 has kept the spirit of INCOTERMS 2010 at a high rate. The differences between the version 2010 and version 2020 are: Modification of “DAT” into “DPU”, contents of insurances under CIF and CIP rules and modifications in FCA, DAP, DPU and DPU rules regarding the allowence of transportation to be done with both the seller and buyer’s transportation vehicles. Apart from these, there are no big modifications between the two versions.
BIBLIOGRAPHY
HALE EZEL, Uluslararası Ticarette Teslim Şekilleri (INCOTERMS). Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü, unpublished LLM Dissertation, İzmir, 2013.
INCOTERMS 2020, Paris: Milletlerarası Ticaret Odası, 2019.
M. İLYASOV, Milletlerarası Ticarette Teslim Şekilleri INCOTERMS 2010 Kuralları, Seçkin Publication Ankara, 2019.
DİPNOT
1 Milletlerarası Ticarette Teslim Şekilleri: INCOTERMS 2010 Kuralları, 2019, İlyasov, s. 42-43.
2 INCOTERMS 2020 s.21.
