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Why a good understanding of Incoterms® is a must-have in a post-Brexit world?
November 14, 2020
Incoterms®2020 knowledge is essential for anyone who wants to trade between the UK and the EU...
Why a good understanding of Incoterms® is a must-have in a post-Brexit world?
Incoterms®
reflects business-to-business practices in sales contracts and purchase of goods. It is a collection of eleven commonly used three-letter trade terms, e.g. DAP, FOB, etc.
Incoterms describe the following rules:
Responsibilities – who does what between the seller and the buyer, for example, who arranges the shipment or insurance of the goods or who obtains the shipping documents and the export or import license.
Risk - Where and when the seller "delivers" the goods, in other words, when the risk shifts from the seller to the buyer.
Costs - which party is responsible for what costs, e.g. costs of transport, packing, loading, or unloading, cost of control or security.
Incoterms®
rules do NOT apply regardless of whether there is a sales contract, specifications of the goods sold, the time, place, currency of payment, prices, effects of sanctions, tariffs, etc.
The Incoterms® rules do not define the law applicable to the contract.
Bearing in mind the above, it is not surprising that Incoterms 2020 are an expression of systematic monitoring of changes in the relevant markets and a reaction to the circumstances revealed in everyday trading practice.
International Chamber of Commerce (ICC) offers entrepreneurs the following distinction:
Rules for any mode or modes of transport
EXW | Ex Works
FCA | Free Carrier
CPT | Carriage Paid To
CIP | Carriage and Insurance Paid To
DAP | Delivered at Place
DPU | Delivered at Place Unloaded
DDP | Delivered Duty Paid
Rules of sea and inland waterway transport
FAS | Free Alongside Ship
FOB | Free On Board
CFR | Cost and Freight
CIF | Cost Insurance and Freight
As per above the order of the rules proposed by the ICC has changed. DAT was transformed into abbreviation DPU. The changes also affected the FCA (Free Carrier), where the buyer is obliged to instruct the carrier to issue a transport document to the seller stating that the goods have been loaded (bill of lading with the note "on board"), if this is agreed by the parties. Incoterms 2020 perform modification of the above-described principles and generally adopt a different way to determine the primary current level of insurance.
Impact of January 2021
Goods bought or sold from the EU from 1 January 2021 will be subject to import and export procedures.
This includes responsibility for customs clearance. Details of each Incoterms® include information about who is responsible for customs clearance and payment of duties. Many terms also include an obligation on one party to assist the other in obtaining certification, security, and customs clearance.
From January 1, Incoterm®
will define your duties and obligations of the organizations which you trade with. You need to know the details, so do not wait until January 2021, find out now!
You will know at least in advance who should arrange customs procedures for the goods you plan to import or export to / from the UK and plan the process accordingly.
At INTL Network Logistics, we have specialists who are always ready to help and provide guidance on international trade management.
Contact us to find out how we can help.
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