Incoterms 2020 Overview

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Questions and Answers

Which Incoterm requires the seller to deliver goods that are not yet cleared for export?

FOB

EXW (correct)

CIF

FCA

Which Incoterm requires the seller to provide insurance for the goods during transport?

CFR

CIP (correct)

CPT

DAP

In which classification of INCOTERMS is 'DAP' categorized?

D-Terms (correct)

E-Terms

C-Terms

F-Terms

Which Incoterm indicates that the seller has to pay for both freight and insurance?

CIF Signup and view all the answers

What is the main difference between CFR and CIF?

CFR does not include insurance while CIF does. Signup and view all the answers

Which Incoterm places the risk of unloading and delivery at the buyer's responsibility?

DAP Signup and view all the answers

How should a company assess its logistics capabilities before selecting an Incoterm?

By considering the type and value of goods. Signup and view all the answers

Which of the following is NOT one of the classifications of INCOTERMS?

M-Terms Signup and view all the answers

Which Incoterm is recommended for shipping rare artifacts to a museum?

DDP Signup and view all the answers

What should be done to ensure all parties understand their responsibilities regarding an Incoterm?

Educate all parties involved. Signup and view all the answers

Why is FOB (Free on Board) recommended for importing bulk raw materials?

Buyer has local knowledge and can secure better shipping rates. Signup and view all the answers

Which Incoterm allows a seller to minimize risks by being responsible for goods only at their premises?

EXW Signup and view all the answers

In which scenario would DAP (Delivered at Place) be the most suitable Incoterm?

Sending designer clothes to a high-profile fashion show. Signup and view all the answers

What is the primary responsibility of the seller under CIF (Cost, Insurance, and Freight)?

Ensure goods are insured and freighted. Signup and view all the answers

What is a key reason to document the chosen Incoterm in a sales contract?

To ensure legal certainty and clarity. Signup and view all the answers

Which Incoterm is most appropriate for a collector shipping a valuable painting to an overseas buyer?

CIF Signup and view all the answers

Study Notes

Incoterms 2020 Cheat Sheet

Incoterms (International Commercial Terms): International rules for defining the responsibilities of buyers and sellers during the sale of goods traded internationally.

List of Incoterms

EXW (Ex Works): Seller's responsibility ends when goods are ready for pickup at their premises. Buyer handles loading, transport, and import/export procedures.
FCA (Free Carrier): Seller delivers goods, cleared for export, to the carrier nominated by the buyer at a named location.
FAS (Free Alongside Ship): Seller delivers goods alongside the vessel at the named port of shipment.
FOB (Free On Board): Seller delivers goods on board the vessel nominated by the buyer at the named port of shipment.
CFR (Cost and Freight): Seller pays for transport to the named port of destination. Risk transfers to the buyer once goods are on board.
CIF (Cost, Insurance, and Freight): Seller fulfills the same obligations as in CFR, but also includes insurance until the goods reach the named destination port.
CPT (Carriage Paid To): Seller pays cost of carriage to a specified destination. Risk transfers to the buyer when goods have passed to the carrier.
CIP (Carriage and Insurance Paid To): Same as CPT but with added insurance coverage.
DAP (Delivered At Place): Seller delivers goods to a named place of destination, ready for unload. Buyer takes charge of unloading.
DPU (Delivered At Place Unloaded): Seller delivers and unloads products at a named place.
DDP (Delivered Duty Paid): Seller delivers goods, cleared for import, and pays all duties at the named destination place. Seller assumes full risk until placed at named destination.

Sea and Inland Waterway Terms

FAS: Seller delivers goods alongside vessel at named loading port, cleared for export.
FOB: Seller delivers goods on board vessel at named loading port.
CFR/CIF: Cost and/or cost, insurance, and freight paid up to a named destination port.

Classification of Incoterms

E-terms (Departure): Seller delivers goods to the carrier.
F-terms (Main Carriage Unpaid): Seller delivers to the carrier at a stated location.
C-terms (Main Carriage Paid): Seller pays for the main carriage of goods.
D-terms (Arrival): Seller delivers goods to the buyer at the destination.
Terms:
- Seller obligations
- Buyer obligations
- Risk Transfer

Tips and Best Practices

Know your strengths: Assess company logistics for matched Incoterm selection.
Evaluate goods: Consider types, values, and needed transport methods.
Check regulations: Understand export/import rules.
Assess risk tolerance: Choose terms that fit your strategy.
Consult experts: Seek professional advice.
Educate parties: Ensure all parties understand their responsibilities.
Review regularly: Monitor and adapt as needed.
Document everything: Maintain clarity and legal certainty.

Commonly Used Incoterms

EXW, DDP, FOB, CIF are frequently used for clarity and cost efficiency.

Significant Changes from Incoterms 2010 to Incoterms 2020

DPU (Delivered at Place Unloaded): Replaced DAT.
Insurance Coverage in CIF/CIP: CIP improved insurance coverage.
Enhanced Transportation Security: Regulations to accommodate contemporary shipping safety.
Buyer's Own Transport: Added provision for buyers using their transport under FCA.

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Description

Explore the key details of Incoterms 2020, the international rules that define the responsibilities of buyers and sellers in global trade. Understand various terms such as EXW, FCA, and FOB, and learn how they affect shipping and logistics. This cheat sheet provides a concise reference for students and professionals alike.