The International Chamber of Commerce has released the ICC Incoterms 2020 update of their international trade terms for the sale of goods on September 10, 2019. Incoterms defines the responsibilities of sellers (exporters) and buyers (importers) engaged in cross-border trade regarding the delivery of tradable goods. These are the standards regarding the delivery methods created by the International Chamber of Commerce “ICC”.

There are 11 delivery terms available under the Incoterms 2020 rules. Who will organize the shipment? Who will pay for the costs incurred in the various stages of the shipment? Who owns the insurance liability? Who will do the customs clearance? You will find answers to all these questions and in our article. But first, we’ll talk about the changes.

What are the key changes in Incoterms?

We have listed the main differences between incoterms® 2020 and incoterms 2010 under basic headings:

Free Carrier (FCA) Key Changes & Updates:

The most crucial change in Incoterms 2020 rules relates to FCA. FCA delivery term is divided into two subgroups for sea and road freight. The reason for this was the problems experienced in ship loading, especially in sales with letters of credit, although there were no problems in truck loading. The seller’s responsibility ended when the freight was delivered at the port, but banks request a bill of lading with an on-board notation.

The seller does not control shipments under the FCA term, so the carrier has no obligation to the seller. With Incoterms 2020, the buyer company will be able to add a condition to a contract with the seller that “the shipping company will deliver the bill of lading to the seller company. Shipment charges and all risks belong to the buyer, but the bill of lading will be given to the buyer. Finally, the buyer sends the BL with the document set to the bank by the buyer.

In Incoterms 2010 and earlier versions, the main problem with FCA was that, in multi-shipments and especially in maritime transport, before loading the export cargo on the ship, for example, the delivery obligation of the seller was completed at the port entrance. For example, if a letter of credit was made, the bank requested the bill of lading from the exporter and held responsible for the details that should be written on the bill of lading.

However, the seller was liable for the document that he was not responsible for when his relationship with the shipping company was completed. This problem was resolved with the revision made in Incoterms 2020. FCA has changed to allow the buyer and seller to agree that the seller will get an on-board bill of lading.

Changes Regarding CIF and CIP

In Incoterms 2010, insurance policies on CIF and CIP shipments were prepared with a minimum level of coverage. Within the scope of Incoterms 2020, it has been decided that the “Clauses (C) of the LMA / IUA Institute Cargo Clauses” which is currently valid for CIF will be insured at the minimum insurance level.

For CIP shipments, “Clauses (A) of the Institute Cargo Clauses”, ie insurance including all risks, is mandatory. Therefore, the degree of insurance liability in CIF and CIP shipments, which we can separate as port delivery in the importer’s country and delivery to the importer’s address, has changed.

DAT changed to DPU

The rule is known as DAT (Delivered At Terminal) under Incoterms 2010 has been renamed DPU. DAT was renamed DPU (Delivered at Place Unloaded) to emphasize that the address to which the goods will be delivered can be anywhere, not just a terminal. At this point, if the delivery address is not a terminal, i.e. a customs point, it should be a suitable place to unload the goods.

sydney international freight

Arranging For Carriage With Seller’s Or Buyer’s Own Truck

Incoterms 2010 was created assuming that international transportation will be carried out by a third company other than the buyer and seller company, namely a shipping company. With Incoterms 2020, it is stated that the exporter or importer company can now carry out international transportation with its own vehicle. We see that its effect the delivery terms FCA, DAP, DPU and DDP.

The obligation of the Insurance Declaration in DAP, DDP, DPU

The DPU has begun to replace the DAT delivery term. In Incoterms 2020, for DAP and DPU delivery methods, it was not clearly stated whether the insurance belongs to the exporter or the importer, this was not clear in previous versions. Unless specified by a special clause in the sales contract or proforma invoice between the parties, the exporter company organizes the shipment without insurance. In this case, the importer company must take out insurance for the safety of the cargo and compensation for possible damage.

Incoterms 2020 more clearly reveals the costs incurred in the export and import stages. Clearer listing of costs: All costs associated with relevant Incoterms® are now listed under A9 / B9 “Allocation of Costs” to provide a single list of costs.

In Terms of Customs Transactions: Export, Import & Transit Trade

Incoterms 2020 more clearly classifies the responsibilities of exporters and importers at the customs clearance stage. The problems experienced so far have been studied, and the role of the seller and the buyer in customs transactions has been clarified, taking into account the costs and risks for exporters and importers, taking into account these experiences. In addition, the transactions included in transit goods were mentioned in Incoterms 2020.

Sydney-International-Freight

Incoterms 2020 Basic Classification

In the previous versions of Incoterms, we see that a distinction is made according to the delivery types starting with the letter E, F, C and D, or classification has been made according to sea freight and multimodal transport types. While organizing Incoterms 2020, mainly the responsibilities and risks of the companies were taken into consideration, and the decisive point was the stages of the shipment and the determination of the parties undertaking the transportation risk.

8 incoterms consisting of EXW, FCA, FAS, FOB, CPT, CFR, CIP and CIP are delivery methods in which the shipping responsibility belongs to the buyer wholly or partially. DAP, DPU and DDP, where the responsibility and risk of transportation are on the seller, were accepted as the second category.

Classification of Incoterms by Transport Type
Category Incoterms
Multimodal (air / sea / road / railway) EXW,  FCA,  CPT, CIP, DPU, DAP, DDP
Sea and River  FAS,   FOB,  CFR,  CIF

 

Sydney International Freight

Choosing the optimal freight services according to various delivery terms requires to analyze and understanding of liabilities and costs. , Our freight shipping experts, will guide you to help you determine the best freight shipping options according to your needs and budget.

Sydney International Freight offer options between Australia and all ports, airports and customs points on all over the world. Every year, thousands of companies deliver their cargo to us without any questions about the shipment process. We specialize in the international transportation of cargo. We provide both “FCL” & “LCL” overseas services plus export & import cargo services with 40 years experience.

Logistics, in its simplest definition, is defined as the transportation of a product or a good from one point to another. If you need to ship to another country, you should choose the safest, most economical and, if possible, fastest option for shipping your personal effects (household goods), shipping your personal car, or shipping your commercial cargo.

Many factors that need to be managed such as the structure of the product, the budget allocated for the logistics of the product, the location of the product and the location where the product should be delivered, duration, process and climatic conditions come into play in the planning of this transportation. Here, the expertise of your logistics service provider shows itself at the points where these elements are handled with all visible and invisible components and managed and directed correctly.

Modes of Transportation

Air Transportation

Airfreight offers numerous advantages for international trade, depending on your needs. In general, it is not preferred to transport cargo with large sizes and many parcels by air.

By air, it may be preferable to transport small-sized partial household items and personal equipment such as clothing, instruments, and electronic products. In terms of commercial loads, we see that freight with deadlines, shipments made with small packages such as samples, and aircraft are preferred for the shipment of industrial products.

Road Transportation

Road transport is a suitable option for international shipments that are bordering each other or can be reached by crossing several countries by road. However, as the distance increases, costs and risks increase exponentially.

Although road transport is the first and most common form of transportation in logistics, it is both costly and risky. The rate of goods damaged during road shipment is more than five times that of the shipments made by aircraft and dye. Road transport is not an option for overseas loads.

Multimodal (Intermodal) Transportation

Intermodal transportation provides the fastest and most economical shipment possible by using more than one transportation vehicle. If an overseas shipment is required to be delivered in an inland area far from the sea, multimodal transportation enables address delivery. e.g. container loaded from Sydney. It is transported to the port of Rotterdam by ship. Then, after travelling 280 miles, it is transported by truck to the address in Frankfurt.

Maritime Transportation

For transporting household goods, the container is the most suitable option. Especially with FCL Container, sea transportation is the most economical and the container is the safest shipping method as the risk of damage and loss of your packaged goods in the container will be minimized. There are weight and length limitations for airfreight packages. So even if you accept the high cost, personal effects that can be transported by plane are limited.

The variable costs of maritime transport are very low, and it is seven times cheaper than road and three times cheaper than rail. While road and rail transport is only possible on the mainland, maritime transport can be done all over the world. The Multimodal option offers a complex solution that involves the transfer of the cargo unloaded at the port to landlocked cities by road.

Shipping by sea is very fast due to the advanced loading and unloading techniques applied in modern ships and ports that travel continuously for 24 hours.

Specialised-project-and-logistics-services

Interesting Facts About Maritime Transportation:

  • Maritime transport is the most popular method of shipping on our planet 3/3 covered by seas. 83% of the world trade is carried out by sea transportation.
  • A large container ship makes three-quarters of the distance between the earth and the moon in 1 year. It is considering that the average service period of cargo ships is 15 years. During the time a cargo ship is in service, it travels ten times to the moon.
  • What if we wanted to load all the containers that can be loaded on an 11,000 TEU freighter on a train. This train should have been 44 miles long.
  • Maritime transport is an environmentally friendly option with low emission rates. With 1 ton of cargo, a freighter travels 7,935 miles between Port Melbourne, Australia and Long Beach Port in the USA. The resulting emission rate evolves to 1442 miles if 1 ton of cargo is transported by a truck.

From Australia to all over the World

Choosing between the different types of freight services with different expectations needs an expert guide. Sydney International Freight, our freight shipping experts, will guide you to help you determine the best freight shipping options according to your needs and budget.

We offer options between Australia and all ports, airports and customs points in the world. Sydney International Freight is at your service for your FCL (full container load) and LCL (less than container load or groupage) loads with seaway, airline and multimodal loading options.