Incoterms® 2020 and the value for duty

Incoterms®, a contraction of the English term "International Commercial Terms", is a codified set of standard contractual provisions relating to the transport of goods. The new version, which came into force on January 1, 2020, is made up of 11 Incoterms®, still classified into two groups according to the mode of transport of the goods.

Defined by the International Chamber of Commerce (ICC), Incoterms® are revised every 10 years to reflect the evolution of international trade practices. These rules of practice define in a codified manner the conditions of delivery of goods in the context of a sales contract. More specifically, Incoterms® determine the reciprocal obligations of the seller and the buyer, the allocation of transport costs, as well as the place of delivery, which represents the point of transfer of risk from the seller to the buyer.

The Incoterm®, a determining element of the customs value

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Transportation and insurance costs, as well as loading and handling costs associated with the transportation of imported goods, are part of the price components to be added to the customs value. Thus, the transportation costs incurred by the buyer for bringing the goods to the place of introduction into the Union, which are not already included in the price paid or payable, are to be added to the customs value.

Special case of insurance: depending on the Incoterm® chosen, the insurance relating to the transport of goods is not always included in the price invoiced. In this case, only the insurance relating to the main transport must be added to the price paid (art 71 of the CDU). On the other hand, if the seller includes the insurance relating to the intra-Community transport in the price invoiced for the goods, these insurance costs cannot be deducted from the price invoiced (because they are not included in article 72 a) of the CDU).

The multimodal Incoterms®.

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The 7 so-called "multimodal" Incoterms® can also be used when the contract covers several modes of transport, which is notably the case when the goods are transported by container.

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The Incoterms® EXW and FCA

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EXW - Ex Works
The rule that imposes the least obligations on the seller, whose sole responsibility is to pack the goods and make them available to the buyer at his own premises. Under this rule, the buyer bears all costs and risks involved in loading and transporting the goods to their destination. As the buyer is responsible for customs formalities on export, he may encounter difficulties in the seller's country in obtaining the necessary proof of exit of the goods. For this reason, ICC recommends reserving this rule for national or regional trade not involving the export of the goods and preferring the FCA rule, under which the formalities and costs of customs clearance are the responsibility of the seller.

FCA - Free Carrier
Two options are possible for this Incoterms® depending on the delivery location:

at the seller's premises, where the seller loads the goods onto the buyer's means of transport (FCA "seller's premises");
at any other place: the seller arranges for the goods to be transported to the place of shipment, where they are made available to the carrier ready for unloading (FCA "other named place").
Under this rule, the buyer pays for most of the transport, but allows the buyer to be exempted from the formalities in the country of export, which are the responsibility of the seller.

Incoterms® CPT and CIP

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CPT - Carriage Paid To
The seller bears the cost of transportation to the destination but is no longer responsible for the goods, which travel at the buyer's risk. The transfer of risk occurs at the time of delivery, as soon as the goods are handed over to the carrier, while the transfer of costs to the buyer takes place when the goods arrive at their destination.

CIP - Carriage and Insurance Paid to
The seller bears the cost of transportation to the Incoterms® destination.
A frequently used rule, especially for containerized transport, CIP allows control over the routing of goods to a given point. As with CPT, the costs of unloading at the agreed destination are only payable by the seller if the contract of carriage so provides. However, unlike CPT, the seller is obliged to take out insurance to cover the risks associated with the transport of the goods to the place of destination.

Incoterms® DAP, DPU and DDP

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With regard to the Incoterms® D rules, since delivery is made in the country of destination, the transfer of risk takes place there. Under these so-called "sale on arrival" Incoterms®, the goods travel at the risk of the seller, who assumes all risks and costs associated with the transportation of the goods to the place of destination.

DAP - Delivered At Place
This Incoterms® means that the goods are considered delivered when they are made available to the buyer at destination on the incoming means of transport, without being unloaded. Under this rule, the seller is responsible for transporting the goods to the agreed delivery point in the country of destination.
Thus, unless the contract of carriage provides otherwise, the buyer is responsible for customs formalities, payment of import duties and taxes, and unloading the goods at destination.

DPU - Delivered at Place Unloaded
DPU replaces DAT 2010 and becomes a new rule in Incoterms® 2020.
This rule means that goods are considered delivered, once they are unloaded from the means of transport and placed at the disposal of the buyer at the agreed destination (terminal or other). Under this Incoterms® rule, delivery and arrival at destination occur at the same point. The seller therefore assumes all risks and costs associated with the transportation of the goods and their unloading at the named place.
The DPU is the only Incoterms® rule that obliges the seller to unload the goods at destination.

DDP - Delivered Duty Paid
Incoterms® rule that places the maximum level of obligation on the seller, who assumes all risks and costs, including customs clearance, to the named place. Thus, under this Incoterms®, goods are delivered customs cleared, ready to be unloaded at the place of destination. Only the costs of insurance and unloading at destination are to be borne by the buyer.

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The maritime Incoterms®.

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The 4 Incoterms® are referred to as "maritime" because they are intended to be used when the seller places the goods on board (or in the case of FAS, in the vicinity of) a ship, at a sea or river port. It is at this location that the seller is deemed to have delivered the goods to the buyer. In practice, the maritime Incoterms® are reserved for the carriage of goods in bulk and conventional maritime transport, with containerized transport being specifically governed by the multimodal Incoterms®.

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Incoterms® FAS and FOB

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FAS - Free Alongside Ship
Costs (and risks) are transferred to the buyer when the goods are placed alongside the ship (e.g. on a quay) at the designated shipping port. The buyer thus bears all costs relating to the goods from the moment they are delivered (loading, shipping and unloading of the vessel).

FOB - Free On Board
The transfer of costs (and risks) takes place as soon as the goods are loaded on board the vessel designated by the buyer at the agreed port of shipment. Thus, unlike FAS, the loading of the vessel is the responsibility of the seller.

Incoterms® CFR and CIF

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CFR - Cost and Freight
Like the multimodal C rules, the transfer of risk and cost is unbundled. Risk is transferred to the buyer at the port of departure when the goods are delivered on board the vessel, while costs are borne by the seller under the contract of carriage until the goods arrive at the agreed port of destination, not including discharge. Thus, as a matter of principle, the costs of discharging the vessel are the responsibility of the buyer, as well as the resulting handling charges, except where the contract of carriage provides otherwise.

CIF - Cost Insurance and Freight
The equivalent of the multimodal CIP, the maritime CIF differs from the CIP in that it requires a more limited level of insurance coverage than the all-risk CIP. Nevertheless, the insurance must cover at least the price of the goods plus 10%.

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^{Sources: douane.gouv.fr, ACTE International, international-pratiques.com}‍