What are Incoterms 2020?

Incoterms 2020 are international trade rules published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international transactions.

Why are Incoterms important for importers and exporters?

Incoterms help importers and exporters understand who is responsible for shipping, insurance, customs duties, and risk transfer, reducing confusion and legal disputes.

What is the difference between FOB and CIF?

FOB (Free on Board) means the buyer takes responsibility once the goods are loaded on the ship. CIF (Cost, Insurance, and Freight) means the seller covers those costs until the goods arrive at the destination port.

What does DDP mean in Incoterms?

DDP (Delivered Duty Paid) means the seller is responsible for delivering the goods to the buyer's location, including paying for all duties, taxes, and customs clearance.

Are Incoterms 2020 legally binding?

Incoterms are not laws but internationally recognized standard terms. They become binding only when both parties agree to use them in a contract.

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Incoterms 2020 Explained: Your Easy Guide to International Trade Terms

If you’re new to international trade or even just looking to brush up on your shipping knowledge, you’ve probably heard about Incoterms. But what exactly are Incoterms 2020, and why do they matter for your business? In this easy guide, we’ll break down everything you need to know about these essential shipping terms and how they help buyers and sellers worldwide.

What Are Incoterms?

Simply put, Incoterms are a set of international rules that explain the responsibilities of buyers and sellers during the shipment of goods. Created by the International Chamber of Commerce (ICC), these international trade terms define who pays for shipping, who handles insurance, and at what point the risk transfers from seller to buyer.

Think of Incoterms as a universal language that clears up confusion in global trade — so your shipments go smoothly and without surprises.

Why Are Incoterms 2020 Important?

The latest version, Incoterms 2020, came into effect in January 2020 and brought some important updates to make international shipping even clearer. Whether you’re an importer, exporter, or freight forwarder, understanding these rules is key to avoiding costly mistakes.

Some highlights include:

DPU (Delivered at Place Unloaded) replaced the old DAT (Delivered at Terminal) term, making it clear delivery can happen anywhere, not just a terminal.
Sellers now have new responsibilities under FCA (Free Carrier) when it comes to documents like bills of lading, especially useful for shipments using letters of credit.
Increased insurance requirements under CIP (Carriage and Insurance Paid To) to better protect buyers.
Clearer rules on security obligations during transport and customs clearance.

Common Incoterms You Should Know

Here are a few of the most common Incoterms you’ll see in contracts:

EXW (Ex Works): The seller makes the goods available, and the buyer handles the rest, including shipping and customs.
FOB (Free On Board): The seller loads the goods onto the ship, and the buyer takes over from there.
CIF (Cost, Insurance, and Freight): The seller pays for shipping and insurance to the port of destination.
DAP (Delivered At Place): The seller delivers the goods to the buyer’s location, but unloading is the buyer’s responsibility.
DDP (Delivered Duty Paid): The seller takes care of everything — shipping, duties, and unloading.

How to Choose the Right Incoterm for Your Shipment

Choosing the right Incoterms depends on your specific trade needs:

What kind of transportation will you use? (Sea, air, road, or multimodal)
Who will handle customs and insurance?
How much control or risk are you comfortable taking on?

Final Tips: Mastering Incoterms for Smooth Shipping

Mastering Incoterms 2020 will help you avoid misunderstandings and keep your international shipments on track. Always specify the exact Incoterm in your sales agreements — and if you’re unsure, consult with your logistics provider or trade expert.

Incoterm	Who Pays Freight?	Who Arranges Insurance?	Risk Transfer Point
EXW	Buyer	Buyer	Seller’s Factory
FOB	Buyer	Buyer	At Port (on ship)
CFR	Seller	Buyer	On Ship
CIF	Seller	Seller	On Ship
DDP	Seller	Seller	Buyer's Address

Incoterm	Who Pays Freight?	Who Arranges Insurance?	Risk Transfer Point
EXW	Buyer	Buyer	Seller’s Factory
FOB	Buyer	Buyer	At Port (on ship)
CFR	Seller	Buyer	On Ship
CIF	Seller	Seller	On Ship
DDP	Seller	Seller	Buyer's Address

More on CPT Incoterms 2020 – Carriage Paid To

What is transshipment ? Reasons for transshipment.

There are many ports in the world. But all ports are not directly connected with each other. In this reason transshipments occurs. It helps shipping business to connect ports for global business. It’s also a very economical as compared to direct shipments. If you do not use transshipments, you may lease containers for direct shipment to final destination for your goods.

What is transshipment?

Transshipments or trans-shipment means unloading cargo from one vessel and reloading it into another to reach the final destination. During the process of transshipment, the containers are unloaded at the site or port, reloaded onto a different vessel, and transported to the landing place or final destination.

Thus transshipment hub means any intermediate location where containers are shipped on new vessel for next journey. Read Also: Will Matarbari Port in Bangladesh be a regional transshipment hub?

Famous transshipment ports are Port of Busan, Port of Hong Kong, Port of Singapore, Port of Shanghai, Port of Shenzhen, Port of Rotterdam, Port of Tianjin,Port of Guangzhou etc.

Further readings: Transshipment & Freight Costs: How Exporters Can Save Money

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DEFINITION OF A CUSTOMER IN THE COMMERCIAL BANK

The term 'customer' of a bank is not defined by law. Ordinarily, a person who has an account in a bank is considered its customer. Banking experts and the legal judgements in the past, however, used to qualify this statement by laying emphasis on the period for which such account had actually been maintained with the bank. In Sir John Paget's view "to constitute a customer there must be some recognisable course or habit of dealing in the nature of regular banking business." This definition of a customer of a bank lays emphasis on the duration of the dealings between the banker and the customer and is, therefore, called the 'duration theory'. Accord- ing to this viewpoint a person does not become a customer of the banker on the opening of an account, he must have been accustomed to deal with the banker before he is designated as a customer.

The above-mentioned emphasis on the duration of the bank account is now discarded. According to Dr. Hart, "a customer is one who has an account with a banker or for whom a banker habitually undertakes to act as such."

"Broadly speaking, a customer is a person who has the habit of resorting to the same place or person to do business. So far as banking transactions are concerned he is a person whose money has been accepted on the footing that the banker will honour up to the amount standing to his credit, irrespective of his connection being of short or long standing."