Dismantling instructions | Incoterms

What to know about the current Incoterms

  • The Incoterms consist of a total of eleven trade terms, seven of which can be applied to all modes of transport and four to maritime and inland waterway transport:
  • EXW, FCA, CPT, CIP, DAP, DPU and DDP for all modes of transport
  • FAS, FOB, CFR and CIF for sea freight and inland waterways transport
  • Incoterms are only legal, if they've been lawfully aggreed on.
  • To alternate them threatens legal certainty.
  • The clauses are only suitable for the B2B-business. Also in national trade, new incoterms can be applied on.
  • The Incoterm 2010 and older keep their validity, hence the details of the repectively used version is recommended
  • DDP: Instead of delivering DDP, it is recommended for a sender to deliver DAP or DPU (formerly DAT) with the addition "import clearance inclusive" or "import clearance exclusive". Why? DDP represents a maximum obligation of the sender, i.e. he bears all costs and risks up to the destination of the goods and is obliged to clear the goods for export and import, pay all duties and taxes for this and complete all customs formalities. With the item "import clearance", on the other hand, he only bears the customs clearance costs that are incurred at the border for clearance when the goods are delivered DAP or DPU.
  • For both the consignee and the consignor, it is advisable to use FCA, named place, instead of EXW: FCA protects the consignee of the goods from having to organise the loading himself and prepare the export documents, and offers better protection in the event of damage occurring during loading. If the legal requirements in the country of export only allow exporters to apply for export licences, the EXW clause is completely unsuitable from the buyer's point of view anyway. However, the consignor also benefits from the clearer regulation with regard to liability, costs and scope of duties.

Explanation of the clauses DAP, DDP and EXW

DAP

DAP (delivered at place) considers delivery to have taken place when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks connected with the transport to this place. It is therefore a rather general clause, in which the place of destination must be specified as precisely as possible.

DDP

DDP represents the maximum obligation for the seller. The seller bears all costs and risks up to the destination of the goods and is obliged to clear the goods for export and import, pay all duties for export and import and complete all customs formalities

EXW

The EXW clause represents the minimum obligation for the seller. Unlike the use of FCA, the seller has no obligation to the buyer in EXW to load the goods or clear them for export. If he does load the goods, the buyer bears the risk and costs under EXW.

(Source: L. Wackler Wwe. Nachf. GmbH)

Since 01.01.2020 the current version Incoterms 2020 is available

The main changes are:

Different levels of cover in CIF and CIP

According to Incoterms® 2020 the seller is obliged to take out transport insurance at his own expense in accordance with the clauses CIF and CIP. However, unlike the Incoterms® 2010, the two clauses now require different minimum covers. The minimum cover that has to be noted when agreeing on the CIF clause remains unchanged. The transport insurance that has to be taken out by the seller up to the named port of destination must continue to be at least equivalent to the cover under Clause (C) of the Institute Cargo Clauses or similar clauses (named risk insurance). However, if the CIP clause is agreed, the seller must now cover the insurance cover corresponding to clauses (A) of the Institute Cargo Clauses (all risks cover) up to named port of destination. However, when both the CIF and CIP clauses are used, the contracting parties are free to agree on a different insurance cover.

Renaming from DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded)

According to clause DAT of Incoterms® 2010, the seller had delivered the goods as soon as they were unloaded from the means of transport at a "terminal". It is true that according to the application instructions for the Incoterms® 2010 the term "terminal" was explicitly not to be understood in technical terms, but any place of unloading was meant. However, this was often misunderstood. This circumstance was taken into account in the Incoterms® 2020 by renaming the previous clause DAT to DPU (Delivered at Place Unloaded) for clarification.

Inclusion of safety related requirements

Safety related requirements for the transport of goods have been included in rules A 4 and A 7 of each clause of Incoterms® 2020. As in relation to the other clauses of the Incoterms®, it should be noted that these are directly applicable only to the parties to the contract of sale and are not the subject of the contract of carriage.

These are the three most important innovations. Other changes concern the bills of lading with an onboard note under the FCA clause, the organisation of transport with the seller's or buyer's own means of transport in FCA, DAP, DPU and DDP, the non-consideration of VGM (Verified Gross Mass) and the warning against the use of the DDP and EXW clauses in cross-border trade.

(Source: Speditions - und Logistikverband Hessen/Rheinland-Pfalz e.v.)

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