Navigating Incoterms 2020: A Guide for Importers

• Incoterms—a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC)—are a critical component of international trade. They clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. The latest version, Incoterms 2020, introduces subtle but important changes that every importer should understand.

Key Changes in Incoterms 2020

• DAT is now DPU: The most significant change is the renaming of Delivered at Terminal (DAT) to Delivered at Place Unloaded (DPU). This new term clarifies that the destination can be any place, not just a terminal, as long as the goods can be unloaded.
• Different levels of insurance coverage in CIF and CIP: Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP) now have different minimum insurance requirements. CIP now requires a higher level of insurance (Institute Cargo Clauses A), while CIF maintains the lower requirement (Institute Cargo Clauses C).
• Arrangements for carriage with own transport: The rules for FCA (Free Carrier), DAP (Delivered at Place), and DPU now account for situations where the buyer or seller arranges for carriage using their own means of transport.

Choosing the Right Incoterm

• Selecting the right Incoterm depends heavily on your specific trade scenario, your appetite for risk, and your relationship with your supplier.

For maximum control: If you want full control over the logistics from the factory door, EXW (Ex Works) is your choice. However, you bear all the risk and cost from that point onward.

A common, balanced approach: FOB (Free on Board) is one of the most popular Incoterms. The seller is responsible for getting the goods onto the vessel nominated by the buyer. From that point, the risk and cost transfer to the buyer. This is a good balance for many importers.

For minimal responsibility: If you want your supplier to handle almost everything, DDP (Delivered Duty Paid) places the maximum obligation on the seller. They are responsible for delivering the goods to the named destination in the buyer's country, including paying all import duties and taxes.