Incoterms 2022
New Incoterms/shipment terms Complete Guide / New Incoterms 2022
Incoterms List / Incoterms Chart / Incoterms Diagram
New Incoterms Complete Guide
- Incoterms 2022 meaning
- Incoterms 2022 Summary
- When transfer the
risk in each incoterm 2022?
- What are Advantages
of Incoterms 2022?
- What are
disadvantages of incoterms 2022?
- How Can I
Learn about the Incoterm 2022 Rules?
- Where you can
see incoterms 2022 in letter of credit?
- Download Free
PDF Incoterms 2022 Chart
- Download Free excel
Incoterms 2022 Chart
In
international trade there should be terms that can be acceptable for both Buyer
and Seller. During this international trade we use these terms called
“INCOTERMS 2022”
Basically, these types of Incoterms 2022 are acceptable by Banks, government authorities, international trading companies and other regulated bodies. And finally became a common rule for international trade. According to this, rules, we can clearly identify what types of responsibilities (risk of consignment/goods, charges/ cost and task associated with Consignee and consigner also known as seller and buyer in incoterms 2022.
There are
various types of transportation methods (sea transport, Air Transport, Road
transportation, or may be by train). According to these types of transportation
methods, these incoterms rules can be changed. The importance of understanding
of incoterms is that incoterms can be changed based on the types of
transportation and many other factors. And there for we are going to look in
details these incoterms. The latest updated version of incoterms is incoterms
2020. These incoterms are FCA, CPT, CIP, DAP, DPU (replaces DAT), DDP, FAS,
FOB, CFR and CIF.
Following four
factors can be identified in incoterms based on their risk, responsibilities,
task and Obligations;
a)
Delivery Point
Goods to be delivered from seller to buyer and
point of delivery should be identified carefully.
b)
Transportation costs
This is very important to identify the in the
incoterms to pay the charges without confusion, freight charges can be
identified and freight prepaid and add, freight collect and allow.
c)
Export-import requirements
This is important to identify as each
responsibilities of task should be defined clearly in the incoterms and here is
the section for that.
d)
Insurance
Identification of responsibility party for
insurance is very important in international trade as this is the highest risk
part in shipment. And therefore, in the incoterms are defined clearly which
party is responsible for arranging insurance.
Incoterms 2022 Summary
1) EXW – Ex Works
ü
In these
incoterms 2022, Ex works (EXW) is a arrangement in which a seller is
responsible for the manufacturing of products and available at specific
location with export quality packaging. However, arrangement of transportation
is with the cost of buyer and buyer is
responsible for exporting, shipping, and importing the cargo to their
destination location.
ü
According to
the incoterms 2022, Once buyers have their goods, buyers are responsible for
other risks, such as loading the goods onto trucks, transporting by ocean, air,
by train or by road and custom duty clearance is with the responsibility of
buyer as per the incoterms 2022.
2)
FCA – Free Carrier
ü In these
incoterms 2022, The seller of the goods is required to deliver the goods to the
carrier, sea port, airport, terminal, ware house or another person nominated by
the buyer at the seller’s premises or another named place.
ü In
these incoterms 2022, defined the transportation cost is responsibility of
seller until goods received by carrier.
ü Once
goods are delivered to carrier or nominated place, the responsibility will be
transferred to byer at that points onward.
3)
FAS – Free Alongside
·
According to these incoterms 2022, FAS defines seller
must arrange for the goods to be delivered when the goods are placed alongside
the nominated by the buyer at the named port of shipment. Purchased goods to be
delivered next to a vessel in the port to make this ready in the waiting ship.
· Incoterms 2022 defines that seller is responsible for packing, loading, custom clearing and terminal handlining and to ensure that the goods are already cleared for export.
·
According to Incoterms 2022, the buyer is responsible for unloading, sea
transportation, arranging insurance and other formalities at destination.
·
Risk transferred to buyer when the products are
alongside the ship.
4)
FOB – Free on Board
·
Incoterms 2022 defines, the Seller delivers goods,
cleared for export purpose, loaded on board the vessel at the named port of
loading as per letter of credit if any.
· Risk of damage and loss will be transferred to buyer when the goods have been loaded on board.
· According to incoterms 2022, loading will be added to the FAS to become FOB. And once, goods are on board, buyer is responsible for all cost and charges.
· Who will bear the insurance for FOB incoterm - Insurance can be negotiated either buyer or seller. Usually, buyer is responsible for insurance under FOB incoterms
5)
CFR – Cost and Freight / C&F
·
According to the incoterms 2022, seller is
responsible for deliver the goods at destinated and however, seller is also
responsible for transportation cost.
·
Who will bear the insurance cost for CFR/C&F-
Insurance will be borne by buyer and however, if buyers and sellers agreed this
can be negotiate too. In common practice is the insurance is a responsibility
of buyer in CFR incoterm.
·
Risk of loss goods and damage is transferred from
seller to buyer when consignment/ goods are on board the vessel.
·
C&F is most commonly used incoterm in
international trade.
6)
CIF – Cost, Insurance and Freight
·
Incoterms 2022 defined that the CIF is the
responsibility of Seller to deliver the goods to a named port of discharge.
·
Seller is responsible for Cost, Insurance and
Freight charges as per Incoterms 2022. (this contained, cost of export packing,
cost of loading, delivery cost to a named port of loading, export clearance
taxes and custom clearance for export purpose, loading charges, and insurance
cost and Freight charges.
· Risk of damagers and losses will be transferred to buyer from seller at the time of loading on board even though the insurance and freight charges are responsibility of seller.
· According to the incoterms 2022 defines, CIF is the seller’s responsibility of arranging an insurance policy with minimum cover. However, if there is a Letter of credit involves, Bank will only allow the insurance when required conditions are fulfilled only. In that case, buyer is secured. However, if buyer decides to have more insurance protection, buyer can arrange extra cover its their own cost.
·
CIF is mostly used incoterm in international trade.
7)
CPT – Carriage Paid To
·
In this incoterm 2022, seller is responsible to
clear the goods and arrange the carriage and seller delivers the goods to the
carrier or another person nominated by the seller at an agreed place, which
means terminal handling is done by seller.
· The risk of loss and damage of the goods will be transferred to buyer from seller at the time of delivering the goods to the custody of carrier. And if there are many carriers involved, risk will be transferred when goods are delivered to the first carrier at named shipment.
· As per incoterms 2022, seller pays the freight for the carriage of the goods to the named destination
8)
CIP – Carriage and Insurance Paid To
·
As per incoterms 2022, in CIP has the same
responsibilities for the seller similar to CPT. And however, seller is
responsible for arranging the insurance @ 100% for goods in transits.
· Seller takes all risk until the goods are delivered to the first carrier at the place of shipment.
·
As per incoterms 2022, risk is transferred from the
seller to the buyer as soon as the goods are delivered to the carrier or
appointed person and if there are many carriers involved, risk will be
transferred when goods are delivered to the first carrier at named shipment.
·
Similar to CIF, seller’s responsibility of
arranging an insurance policy with minimum cover. However, if there is a Letter
of credit involves, Bank will only allow the insurance when required conditions
are fulfilled only. In that case, buyer is secured. However, if buyer decides
to have more insurance protection, buyer can arrange extra cover its their own
cost.
9)
DAP – Delivered at Place
·
This is also widely using incoterm and this can be
used for any transport mode where there is more than one transport mode also can
be used.
· As per incoterms 2022, seller is responsible for deliver the goods to a named location and make available for unloading. Which means unloading is responsible of buyer.
· Risk of damagers and losses will be transferred when goods are available for unloading at designated/ arrival of named location.
·
Seller is responsible to take all the cost until
delivery of goods to a named location. This included, export packing, loading
in origin, export taxes, custom clearance, terminal handing, other
documentation charges such as BL, COO and other legalizations, stamps, and
delivery to a named location.
10)DPU – Delivered at Place /
DAT old version
·
As per incoterms 2022, The seller is responsible to
deliver the goods to a buyer’s door step and unloading is available at the
named location.
·
In DDU except import duly and charges all are bears
by seller and seller takes all risk and responsibilities towards delivery of
goods at named location.
· In DDU, Risk is transferred to a buyer once goods are delivered to a named location as per incoterms 2022.
·
As per incoterms 2022, DAT is replaced to DDU.
11)DDP – Delivered Duty Paid
·
As per incoterms 2022, seller is responsible to
deliver the goods/ confinement to at the named place of destination and make
available for unloading. Unloading is the responsible of Buyer.
· The seller bears all the costs and risks involved in bringing the goods to the place of destination which included, loading, freight charges, import and export tax, customs clearance of goods, shipping cost, land delivery cost, documentation cost and insurance cost in incoterms 2022.
·
DDP
is mostly used incoterms 2022. in local delivery.
When transfer the risk in each New incoterm 2022
|
Incoterms 2020 |
Incoterms 2020 in
details |
When
transfer the Risk from seller to Buyer of each incoterms |
|
EXW |
EX-WORK |
At Buyers Disposal |
|
FCA |
FREE CARRIER |
On buyers Transport |
|
FAS |
FREE ALONGSIDE |
Alongside ship |
|
FOB |
FREE ON BOARD |
On Board/Ship |
|
CFR |
COST & FREIGHT |
On Board/Ship |
|
CIF |
COST INSURANCE & FREIGHT |
On Board/Ship |
|
CPT |
CARRIAGE PAID TO |
At Carrier |
|
CIP |
CARRIAGE & INSURNACE PAID TO |
At Carrier |
|
DAP |
DELIVERED AT PLACE |
At agreed place |
|
DPU |
DELIVERED AT PLACE UNLOADED |
At agreed place |
|
DDP |
DELIVERED DUTY PAID |
At agreed place |
What are the Advantages of Incoterms 2022
We
need to understand the importance of the using of incoterms in international
trade transactions in details. Below has been summarized for your convenience.
·
Incoterms are published by the International
Chamber of Commerce (ICC) which relate to International trade. These
incoterms rules are accepted in internationally in trade and commercial
transaction.
· Definitions and rules of interpretation for most common and able to
understand for various nation for the trade terms used in contracts for the
sale of goods.
· Define the set of rules and responsibilities. That includes, cost of transactions in each stage of shipments, time
of risk transfer, arrangement of vessel and custom clearance. Etc
· Convenance to choose the correct incoterm. Depend on the sales agreement with seller and buyer, appropriate
incoterms 2020 can be used.
· Convenance for the letter of credit. Under description of goods, correct incoterms should be mention when issuing an LC. There fore identification of incoterms in very important as the documentations are depend on the incoterms. Example, if you select DDP, commercial invoice and delivery note is sufficient for the transactions. And however, if you select CFR, Commercial invoice, Bill of lading, certificate of origin, shipment advice, insurance, packing list and many more documents are involved in incoterms 2020.
· Avoid confusion in trade transaction. Standardized terminologies are used in incoterms 2020 and all
companies can understand easily their responsibilities.
What are the Disadvantages of New Incoterms 2022
Similar
to advantages, we need to understand the disadvantages of using incoterms 2022.
However, comparatively disadvantages are less in using incoterms 2022.
· Cost sharing can be
more sometime for buyer and in some cases for seller as per the incoterms 2022.
· In some cases, eg.
DDP, DDU buyer has minimal risk of transactions where as seller takes higher risk
of trade transaction.
· In EX work
transactions, buyer has the full risk as the export packing are finished, all
the risk are with buyer.
How Can I Learn about the New Incoterm 2022 Rules?
Incoterms are published
by the International Chamber of Commerce (ICC) which relate to
International trade. These incoterms rules are accepted in
internationally in trade and commercial transaction in world wide. Please click
below ICC official website for more information about incoterms transactions.
Where you can see incoterms in letter of credit?
Download Free PDF Incoterms Chart
Download Free excel Incoterms Chart
Click below link to free download the incoterms 2022 chart in xls, incoterms list xls, incoterms diagram xls
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