#INCOTERMS-2020

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SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler.
He is an International-Corporate Trainer, Mentor & Author – PMP Trainer
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles; More than 60 YouTube
Presentations & More than 70 SlideShares
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion
Also a Certified Lean Six Sigma Green Belt from Exemplar Global
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India Organization)
ZED Consultant – Certified by QCI – MSME (Govt of India Organization)
Member Board of Studies, IIMM
Co-Chairman, Indirect Tax Committee, FTAPCCI
Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad

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The Incoterm Rules or International Commercial Terms are a series of pre-defined commercial terms
published by the International Chamber of Commerce (ICC) (@iccwbo) widely used in international
commercial transactions. With the Intension to institutionalize best Practice of using Uniform Set of Rules in the
International Transactions, International Chamber of Commerce, First published in 1936 a set of Three (3)
Letter Acronyms to describe Delivery Terms. From 1980 onwards INCOTERMs are Revised once in every
10 Years.
The Incoterms® 2020 Rules, the 9th revision are
comes into effective from 1st January, 2020.
Incoterms® are Adopted by over 120 countries.
A series of Three-letter Trade Terms of Incoterms Rules are
intended primarily as a uniform set of rules to clearly clarify &
communicate the Obligations : Responsibilities, Costs and
Risks associated with the Transportation and Delivery of
Goods. .
Because they address issues relating to import and
export by buyers and sellers in international commercial
transactions, Incoterms® rules are most appropriate for
use in Sales Contracts & International Shipping.
Costs Risks
INCOTERMs ®
SN Panigrahi

SN Panigrahi 4
History of
INCOTERMs
New INCOTERMs 2020
Announced in Sep’2019
come into force on
1st January 2020.
First Version of
INCOTERMs

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STANDARDIZE
DEFINE
RESPONSIBILITY
OUTLINE COSTS
DETERMINE DELIVERY
POINT & TRANSFER RISKS
REVEAL GAPS
Three (3) Letter Acronyms Representing Trade Terms Commonly used for International Sales
Transactions :
Standardize Global Trade Terms that provide uniform compliance of all
parties, buyer and seller for all types of international sales transactions
They determine responsibilities of Parties Involved – Buyer & Seller for the
goods delivery and up to what point
Determines who bears the Costs Associated with Transportation and other
Related Costs like Loading & Unloading, Insurance, Customs Clearance, Duty
Payments etc
Determines Up to what point do you want your responsibility to end? What
risks are involved in the delivery of goods from the Seller to the Buyer
What is not specified in the terms? SN Panigrahi

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Right use of INCOTERMs® ensure smooth Sales Transaction Across Boarders and avoid Potentially Costly
mistakes. Incoterms define the Responsibilities, Costs and Risks to be borne by buyers and sellers
for the sale of goods in International Transactions. The terms are structured to increase incrementally the
obligations (control, risk and cost) on one party while decreasing the obligations of the other, depending on the
specific term chosen.
INCOTERMs® Used
To Estimate Costs, Quote the Prices, Negotiate & Finalize Contracts, To Select & Finalize Forwarders &
Sipping Lines, For Preparing Documents like Invoice, B/L etc., Working out Cash Out-Flows, Finalize
Payment Terms, Export Shipping Credits & Bank Transactions, Understand the Risks etc
Seller
Exporter
Buyer
Importer
INCOTERMs® Used
To Estimate Costs, Quote the Prices, Negotiate & Finalize
Contracts, To Select & Finalize Forwarders & Sipping Lines, For
Preparing Documents like Invoice, B/L etc., Working out Cash
Out-Flows, Finalize Payment Terms, Export Shipping Credits &
Bank Transactions, Understand the Risks
SN Panigrahi

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Responsibilities, Transfer of Risks and allocation of Costs in connection to delivery of a consignment
from seller to buyer.
➢Up to which place the risks are borne by seller.
➢Up to which place the costs are borne by seller.
➢Which responsibilities are borne by the seller.
➢Which responsibilities are borne by the buyer.
SN Panigrahi

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Each INCOTERM clarifies which party (either Buyer or Seller) is Responsible for:
Packaging, Marking, Labelling
Warehousing
Loading & Unloading
Inland freight (transportation within the origination country)
Terminal Charges
Freight Forwarder Selection & their Fee
Export Clearance
Carrier Selection and Scheduling
International Freight - Ocean / Air Freight / by Road or Rail
Insurance
Import Clearance
Import Duties & Taxes
Delivery at Specified Place
Security Clearances etc
Delivery occurs (and risk of loss transfers) at the point designated by the term selected.
Transfer of title is NOT covered by any of the Incoterms® 2010 Rules and must be separately specified
by the parties.
SN Panigrahi

SN Panigrahi 9
What are the main changes in INCOTERMs ® 2020?
There are seven (7) keys changes to the 2010 Incoterms, specifically:
➢DAT (Delivered-at-terminal) Incoterm changed to DPU (Delivery at
Place Unloaded)
➢Change of insurance in CIP/CIF
➢Costs are clarified
➢Security in relation to transport is now clearly detailed
➢Provisions to allow for own transport rather than assuming 3rd party
transport
➢FCA, FOB and Bills of Lading
➢Presentation and design is much more user friendly
SN Panigrahi

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1. DAT Incoterm changed to DPU (Delivery at Place Unloaded)
Following on from several rounds of consultation, the Drafting Group made the choice of removing the
word ’terminal’ as it often caused confusion.
DAT (Delivered-at-terminal) is replaced by DPU (Delivery-at-Place Unloaded), which means that the
seller is responsible for delivering goods, and passes the risk to the buyer once the goods are
unloaded at the place of delivery agreed upon. DPU is quite similar to DAP with the addition of the
unloading. to broadly cover ‘any place, whether covered or not’.
2. Insurance Cover Differs between CIF and CIP
Under CIF (Cost-Insurance-Freight) and CIP (Carriage and Insurance Paid to), the seller buys
insurance for the buyer. In Incoterms® 2010, insurance is required under clause C, but in Incoterms®
2020, CIP requires an increased level of insurance complying with Institute Cargo Clause (A)
whereas CIF will have the same insurance requirements (Clause C).
Why? Because Clause A covers a more comprehensive higher level of insurance (e.g. for the
manufactured goods), whereas a lower level of cover from Clause C would probably apply to the
commodities world.
SN Panigrahi
Changes in INCOTERMs ® 2020

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3. The Listing of Costs
All costs are now listed in the ‘Allocation of Costs’ sections for each rule, to avoid confusions. Because the
ordering of articles within the Incoterms 2020 rules have also changed, these now appear in the A9/B9
section of each rule.
Costs were a big issue in the 2010 Incoterms®. Carriers often changed their pricing structure to deal with
add ons and sellers were often surprised by being back charged terminal handling charges. The A9 sections
in the Incoterms rules guide now collects together the costs, with the principle aim of clearly stating the
costs to each party.
4. Security Requirements
In the area of transport-security obligations, as the mandatory screening of containers is becoming more
common, those requirements are to be included in carriage costs. Incoterms 2010 did touch on
responsibility for security requirements and their costs, but Incoterms 2020 makes security obligations
more noticeable.
Cargo security has been particularly important since 9/11, and the 2020 rules now address many of the
security-related requirements that became so prevalent in the early part of this century.
From a carriage requirements perspective, security related allocations have been added to A4 and A7 of
each Incoterms rule, and the necessary costs associated have been added to A9/B9 (see 3).
SN Panigrahi

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5. Seller/buyer utilizing their own transportation
Parties can use their own transportation for FCA, DPU, delivered at place
(DAP) and delivered duty paid (DDP) deliveries. Incoterms 2010 assumed
that the transportation of goods between a seller and buyer would be moved
out by a third-party carrier. It did not deal with where the transport is provided
by the seller or buyer (e.g. the seller’s own truck).
Incoterms 2020 now clarifies the position. For example, the buyer in FCA
Incoterms 2020 is obliged to “contract or arrange at its own cost for the
carriage of the goods from the designated place of delivery”.
SN Panigrahi

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6. FCA and Bills of lading
According to FCA, part B4, ‘The buyer must contract or arrange at its own cost for the carriage of
the goods’.
There is a gap in delivery between FCA and FOB. If you’re selling FCA, your delivery point is
different to FOB. The difference between FCA and FOB to the seller is a significant cost and risk.
In the 2010 Incoterms rules, exporters of goods in containers were encouraged to use FCA, which
seemed best for both parties. However, many people were using FOB when they should’ve really
been using FCA.
Why? Even sophisticated sellers said they wanted to use FOB, because a standard Letter of
Credit requires an onboard Bill of Lading to be presented. Therefore the sellers were often taking
the risk and using FOB instead, because they wanted to get paid under the LC.
SN Panigrahi

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6. FCA and Bills of lading
This term has changed the most in the Incoterms 2020 rules. Previously, problems occurred with this term
when the seller was responsible for loading the goods on a truck or some other transport hired by the buyer
and not directly on the international carrier. If the seller and buyer had agreed on using a letter of credit as
the payment method for this transaction, banks often require the seller to present a bill of lading with an on-
board notation before they can get paid.
An international carrier won't typically provide a seller who did not present the goods directly to them with
such a bill of lading. Under the new Incoterms 2020 rules, FCA allows the parties to agree in the sales
contract that the buyer should instruct its carrier to issue a bill of lading with the on-board notation
to the seller.
The Incoterms® 2020 FCA extra provision now states that if the parties have so agreed, the buyer
must instruct the carrier to issue to the seller, at the buyers cost and risk, a transport document
stating that the goods have been loaded (such as a Bill of Lading with an on board notation)’.
OBL option added to FCA
In deliveries under the FCA (Free Carrier) Incoterms rule, the buyer and seller can agree that an
on-board bill of lading will be presented after goods have been loaded onto a vessel.
SN Panigrahi
Cont….

SN Panigrahi 15
7. Presentation and Design
Incoterms® 2020 rules have much more extensive explanatory notes, with
better diagrams, a different structure for users and a reordering of rules to
make delivery and risk more obvious. Maritime related rules still haven’t
changed and remain at the back of the rule book as they still might be used
for bulk commodities.

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EXW - Ex Works (insert place of delivery)
FCA - Free Carrier (Insert named place of delivery)
FAS - Free Alongside Ship (insert name of port of loading)
FOB - Free on Board (insert named port of loading)
CFR - Cost and Freight (insert named port of destination)
CIF - Cost Insurance and Freight (insert named port of destination)
CPT - Carriage Paid to (insert place of destination)
CIP - Carriage and Insurance Paid To (insert place of destination)
DAP - Delivered at Place (insert named place of destination)
DPU - Delivered at Place Unloaded (insert of place of destination)
DDP - Delivered Duty Paid (Insert place of destination).

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INCOTERMs ®
2020
“E”
Terms
EXW
Seller Informs the Buyer
when and where the
goods will be available.
Buyer Arranges all
carriers. Executes all
logistics and export
documents, Customs
Clearance.
“F”
Terms
FCA, FOB, FAS
Main carriage and all
logistics is contracted by
the buyer.
Less responsibility for
seller, more control for
the buyer
“C”
Terms
CFR, CIF, CPT, CIP
logistics is controlled by
the seller.
More responsibility and
control for the seller.
“D”
Terms
DPU, DAP, DDP
logistics is controlled by
the seller.
The Seller bears all risks
involved in bringing the
goods to the
named place.
SN Panigrahi

Incoterms
® 2020
Multi-modal
(available for multiple forms of
transport, including land, rail, air
and waterway transportation)
Seven Incoterms
EXW, FCA, CPT, CIP,
DPU, DAP, DDP
Marine Only Mode
(applicable only to sea & inland
waterway transportation)
Four Incoterms
FAS, FOB,CFR & CIF
SN Panigrahi

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Incoterms®
2010
Freight Collect
Terms
Four Incoterms
EXW, FCA,
FAS, FOB
Freight Pre-
Paid
CFR, CIF,
CPT, CIP,
DPU, DAP,
DDP
SN Panigrahi

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Incoterms DO NOT define
All Conditions of Sales Contract
Address all the conditions of a sale
Goods & Price
Identify the goods being sold nor list the contract price;
Transfer of Ownership / Title of Goods
when title, or ownership of the goods, passes from the seller
to the buyer;
Specify Documents Required for Customs Clearance /
Financing
specify which documents must be provided by the seller to
the buyer to facilitate the customs clearance process at the
buyer’s country; and
Terms of Payment & Credit Terms - Financing
Reference the Method nor Timing of Payment Negotiated
between the Seller or Buyer; Determine Financing (You Want
How Many Days to Pay?)
Breach of Contract or Remedies
address liability for the failure to provide the goods in
conformity with the contract of sale, delayed delivery, dispute
resolution mechanisms.
Liability and Warranty
Replacement Delivery
Court of Jurisdiction and Applicable Law; Copyrights etc
Date of Delivery Contract of Insurance
Incoterms : Do not protect parties from their own risk of loss; Do not cover goods before or after delivery
Incoterms Do not Apply for Services & for Intangible Goods

SN Panigrahi 22
Which Incoterms® rule an organization chooses for a trade
transaction will depend on a number of factors.
For example, if a buyer has facilities in the destination country and
can arrange cost-effective transportation, then a good choice might
be EXW or one of the F terms (in which the buyer takes
responsibility for the goods after they are delivered to a carrier,
alongside a ship or on board a ship).
If a seller is dealing with a buyer that is new to international trade
and unsure about how to arrange transportation, then one of the C
or D terms would be appropriate because the buyer would not be
able to arrange efficient export clearance and transportation.

SN Panigrahi 23
Negotiating Incoterms® rules
When negotiating contract terms, organizations should consider whether the buyer or the seller would be
able to obtain a cost advantage for transportation and warehousing, e.g. because they ship large
quantities annually.
Sellers may also add a surcharge to freight costs for the “value-added service”.
When a buyer takes control of the supply chain, they are in control of carriers used and can access
shipment details for tracking and tracing purposes without having to rely on a third party.
Sellers should consider the risk of goods sold for export remaining in the seller’s country. Under an EXW
term, the buyer takes possession in the seller’s country and could actually resell the goods to the original
seller’s clients.
However, provisions in contracts could be included to avoid such cases. It is important to note that with
Incoterms® rules, there is an understanding that sellers and buyers will assist and exchange information
for clearing export and/or import customs and for obtaining cargo insurance.
As well, sellers and buyers notify each other of delivery and collection arrival and departure times, in
advance to ensure proper preparations can be made and to avoid issues and extra costs.

SN Panigrahi 24
Selecting Incoterms® rules
Organizations must ensure their selection of an Incoterms® rule is appropriate for the type of goods, the means
of transport, and that it is suitable for the intended payment transaction.
For example, FOB is appropriate to transport everyday items, but not to transport urgently required medical
supplies. Despite the long-standing use of Incoterms® rules, organizations still use them incorrectly. It’s
recommended that sellers and buyers consult with international trade experts and legal counsel for an
explanation or a professional opinion on international sales contracts. Using the wrong Incoterms® rule means
that the contract between the buyer and seller might not be adhered to, which could result in delivery and
payment problems, and unanticipated costs and disputes.
It might also mean that customs declarations are incorrect, which can have some serious legal ramifications. It is
important to ensure that the Incoterms® rule selected will provide the documentation required to complete the
transaction, for example, to claim the goods from the carrier, to take delivery or pick up goods, to obtain cargo
insurance, and most importantly, to get paid. Variations to any of the rules must be clearly stipulated in the
contract of sale and must consider the effects, i.e. if there will also be a variation in the transfer of risk and
assumption of costs. This is very important for those terms where the buyer may wish to obtain additional
insurance coverage (CIF and CIP) or where the carrier for the transfer of risk may not be the seller’s first carrier, or
where the loading or unloading of the goods varies. If there are too many variations, sellers and buyers may need
to select a different Incoterms® rule that better meets their needs.

SN Panigrahi 25
Incorporating Incoterms® rules
When used properly, Incoterms® rules impose certainty on a sale contract. Incoterms® rules influence the
documentary requirements for a shipment. Using the correct Incoterms® rule is often essential for
collecting payment, especially if documentary credit is the form of payment being used.
The ICC recommends that the Incoterms® 2020 rules be referred to specifically whenever the terms are
used together with detail on location.
For example, if the Incoterms® rule is Carriage Paid To (CPT), a reference to an exact airport or seaport
should always accompany the destination; if a company had negotiated CPT to the Frankfurt Airport, the C
term should state “CPT airport Frankfurt, Germany, Incoterms® 2020”. It is important to further specify the
actual point of delivery at the terminal, port or place of destination, to avoid doubt, confusion and extra
costs (e.g. FCA Eckenheimer Landstr. 60b, 60318 Frankfurt, GERMANY).

SN Panigrahi 26
Other sales terms
Incoterms® rules have traditionally been used in international sale contracts when goods pass across national borders. In
various areas of the world, however, trade blocs like the European Union have made border formalities between
different countries less significant. Consequently, the subtitle of the Incoterms® 2020 rules formally recognizes they are
available for application to both international and domestic sale contracts. As a result, the Incoterms® 2020 rules clearly
state that the obligation to comply with export/import formalities exists only where applicable. Two developments have
persuaded the ICC that a movement in this direction is timely. First, traders commonly use Incoterms® rules for purely
domestic contracts.
The second reason is the greater willingness in the U.S. to use Incoterms® rules in domestic trade rather than the former
Uniform Commercial Code (UCC) shipment and delivery terms. UCC terms should not be used for international sales.
This can cause confusion, because the UCC terms are written the same way as Incoterms® rules, but do not have the
same meaning. It must be remembered that Incoterms® rules do not constitute a contract. They are a standardized
means of setting out obligations with respect to carriage and insurance. They do not contain provisions for delivery
times and do not regulate the issue of title. Other terms of sales contracts must be negotiated and agreed upon.
However, it is very important to include Incoterms® rules in contracts between sellers and buyers. In the past, disputes
surrounding these issues were dealt with by applying the sales law of the relevant country specified in the commercial
contract. However, the UN Convention for the International Sale of Goods (CISG), which was ratified in 1980, has come
to replace national sales laws in more and more countries. Currently, when a sales contract does not make clear which
national sales law applies, the CISG provides uniform, internationally applicable rules to govern legal questions
surrounding transactions. From the perspective of the CISG, Incoterms® rules have to take the CISG into consideration
because they supplement its provisions.

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• 4 Tips on How to use Incoterms Correctly:
▪ Choose the Right Rule
▪ Mansion Place of Delivery Immediately After the Term
▪ Refer to the Appropriate Version of the Incoterms
e.g. FOB Navasheva, India, Incoterms 2020.
▪ Incorporate them into the Contract as well as the LC,
Invoice, B/L, Customs Documents
Terminal Handling Charges Now specifically allocated so that buyer is not charged twice
(seller and terminal)
Choose the Right
Rule
Specify the Place /
Port Precisely
Refer to the
Appropriate Version
of the Incoterms
Incorporate them
into the Contract as
well as the LC,
Invoice, B/L,
Customs Documents
SN Panigrahi
It is possible to add clauses or change the wording of Incoterms.
Examples:
CFR Charleston port USA incl. THC, CUC, ISPS in
Charleston
FCA Vienna Airport loaded on aircraft
DDP Hanoi Vietnam VAT unpaid
Bear in mind that a change in the transfer of costs can
result in a changed transfer of risks.

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• The Seller’s only responsibility is to make the goods available at the Seller’s
premises. The Buyer bears full costs and risks of loading and moving the goods
from there to destination. Seller does not need to load the goods on any collecting
vehicle, nor does it need to clear the goods for export
EXW – EX WORKS
(… named place of
delivery)
• The Seller delivers the goods, cleared for export, to the carrier selected by the
Buyer. The Seller loads the goods if the carrier pickup is at the Seller’s premises.
From that point, the Buyer bears the costs and risks on moving the goods to
destination. Seller does clear goods for export; import formalities are buyer’s
responsibility. Seller may contract for carriage at buyer’s expense and risk
FCA – FREE CARRIER
(… named place of
delivery)
• The Seller pays for moving the goods to destination. From the time the goods
are transferred to the first carrier, the Buyer bears the risks of loss or damage.
CPT – CARRIAGE PAID
TO (… named place of
destination)
Used for any Mode of Transport
SN Panigrahi

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• The Seller pays for moving the goods to destination. From the time the
goods are transferred to the first carrier, the Buyer bears the risks of loss or
damage.
• The Seller, however, purchases the cargo insurance.
CIP – CARRIAGE AND
INSURANCE PAID TO
(… named place of
destination)
• Replaced previous Term DAT (DAT – DELIVERED AT TERMINAL)
• The Seller to bear All charges upto delivery to a named point, mutually
agreed between the buyer and seller, unloaded and placed at the disposal
of the buyer.
• Import Customs Duty to be Born by Buyer
DPU - Delivery At
Place Unloaded
(… named place of
destination)
• The Seller delivers when the goods are placed at the Buyer’s disposal on the
arriving means of transport ready for unloading at the named place of
destination. The Seller bears all risks involved in bringing the goods to the
named place.
DAP – DELIVERED AT
PLACE (… named
place of destination)
SN Panigrahi

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• The Seller delivers the goods -cleared for import – to the
Buyer at destination. The Seller bears all costs and risks of
moving the goods to destination, including the payment of
Customs duties and taxes.
DDP –
DELIVERED
DUTY PAID
(… named place)
SN Panigrahi

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• The Seller delivers the goods to the origin port. From that point, the
Buyer bears all costs and risks of loss or damage.
FAS – FREE
ALONGSIDE SHIP (…
named port of shipment)
• The Seller delivers the goods on board the ship and clears the
goods for export.
• From that point, the Buyer bears all costs and risks of loss or
damage.
FOB – FREE ON
BOARD (… named port
of shipment)
• The Seller clears the goods for export and pays the costs of
moving the goods to destination.
• The Buyer bears all risks of loss or damage.
CFR – COST AND
FREIGHT (… named
port of destination)
These terms do not apply to any other means of transport except Marine.
SN Panigrahi

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• The Seller clears the goods for export and pays the costs of
moving the goods to the port of destination.
• The Buyer bears all risks of loss or damage. The Seller,
however, purchases the cargo insurance.
CIF – COST
INSURANCE AND
FREIGHT (… named
port of destination)
These terms do not apply to any other means of transport except Marine.
SN Panigrahi

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➢ The use of Incoterms® that do not exist
➢ The use of Incoterms® for national sales contracts
➢ The incomplete use of the selected Incoterm®
➢ Not referring to the version of the Incoterms®
➢ Including clauses that are incompatible with those defined by the
Incoterms® selected in the sales contract
➢ The use of Incoterms® that are not envisaged for the selected
mode of transport
➢ Not evaluating the risks for the company for each of the
Incoterms®
7 common errors when using INCOTERMS®

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Can I still use Incoterms® 2010 after January 1, 2020?
Yes, all contracts using any incoterms are valid if they are agreed upon by
all parties to the transaction, and correctly identified on the export-related
documents.
Although the ICC recommends using Incoterms® 2020 beginning January
1, 2020, parties to a sales contract can agree to use any version of
Incoterms after 2020.
They need to clearly specify the chosen version of Incoterms being used
(i.e., Incoterms® 2010, Incoterms® 2020, or any earlier version).

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https://www.youtube.com/channel/UCVZ
ScNa_leR8XbYINEwTFwQ/videos
SN Panigrahi

Contact Details:
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
38

#INCOTERMS-2020

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