Incoterms terms of delivery define the obligations between the parties to sales contracts in relation to the delivery of goods in international trade. As part of the sales contract, the terms of delivery determine the division of responsibilities and obligations between the seller and the buyer. Inclusion of the relevant incoterms delivery terms is crucial to ensuring efficient trade.
Incoterms address the following questions, among others:
- Who bears the risk of loss of or damage to goods?
- Who is responsible for the costs related to the delivery of goods?
- Who is responsible for acquiring the documents related to the delivery of goods?
- Who is responsible for taking out insurance?
Incoterms is a collection of globally recognised and used terms of delivery or rules by the International Chamber of Commerce.
The only terms of delivery that include an insurance obligation are CIF and CIP. Because the liability of the carrier of the goods is limited, the risk of possible loss or damage to the goods lies with the buyer or seller. The parties to the sales contract should be aware of their responsibilities and obtain the necessary insurance.
Incoterms 2020 introduced significant updates to the previous version, Incoterms 2010.
For example, the name of the rule DAT (Delivered at Terminal) was changed to DPU (Delivered at Place Unloaded) to emphasise that the place of delivery may also be somewhere other than a terminal. The rule FCA (Free Carrier) provides that the bill of consignment or the bill of lading can now be prepared only after the goods have been loaded on board. In addition, the CIP rule includes the seller’s responsibility to insure the delivery under the Institute Cargo Clauses (A).