The international terms in foreign trade, known by their acronym in English as INCOTERMS, are rules established by the International Chamber of Commerce (ICC) to define the responsibilities of the buyer and seller, as well as to determine who bears the risks during the shipment of goods.
There are four aspects that regulate incoterms: 1. Delivery of goods: The physical point where delivery is made or control of the goods is transferred from the exporter to the importer. 2. Risk: When and where the transfer of risks from the exporter to the importer occurs, although this does not include the delivery of the property. 3. Expenses: How the distribution of expenses is carried out between the exporter and the importer. 4. Procedures with Customs: Who has the obligation to carry out what customs procedures as well as the issuance of the relevant documents for correct export and import.
Since 1936, the International Chamber of Commerce has been responsible for reviewing and updating the Incoterms rules. Since 1980, this process has been carried out every decade. In this way, Incoterms updates have occurred in 1990, 2000, 2010 and the last one, in 2020.
There are Incoterms rules for any means of transport, although it includes specific terms for maritime transport. In this way, Incoterms updates have occurred in 1990, 2000, 2010 and the last one, in 2020.
The Incoterms for maritime transport and inland waterways are: FOB, FAS, CIF and CFR.
There are a total of seven Multimodal Transport Incoterms: EXW, FCA, CPT, CIP, DPU, DAP and DDP.
Are INCOTERMS required by law?
The Incoterms rules are not mandatory by law, rather it is a voluntary acceptance by the parties involved (Generally Exporter and Importer) in the midst of the sale of goods and their use has become widespread due to the good results they have given in clarifying the responsibilities of each party and has set a standard at an international level, since being in Mexico we can deal with any company anywhere in the world and even if they do not speak our language through incoterms we will perfectly understand the scope and responsibilities of each party. , hence the rapid acceptance it has had worldwide. Finally, as we have said, Incoterms are not legally mandatory, but it is recommended that the conditions of the Incoterm used should be reflected in the purchase-sale contract as follows:
It should be placed as follows:
«[The selected Incoterm® rule] [Port, place or designated point] Incoterms® 2020»
Example: “CIF Shanghai Incoterms® 2020” or “DAP 10 Downing Street, London, Great Britain Incoterms® 2020”
If no year appears in the Incoterms®, the following rule will apply:
Until December 31, 2019, Incoterms® 2010 will apply and from January 1, 2020, Incoterms® 2020 will apply. If a different year is indicated, for example, Incoterms® 1980, the corresponding terms will apply, this means that the INCOTERMS that do not appear in the 2020 version have not disappeared and even less have been repealed, simply because they are of lesser use or are clearly out of use, they are no longer considered in the new versions, however, if 2 companies consider that an Incoterm from 2010 or 2000 or earlier versions suit your needs, you can use it and to clarify any situation that could happen (theft, accident, loss, etc.) you must enter the year of the version of this Incoterm.
Below you can find the Incoterms rules, version 2020.
·The seller/exporter makes the merchandise available to the buyer in its own warehouses, and only takes care of its packaging. ·The buyer/importer, therefore, is the one who assumes all expenses and responsibilities from the moment the merchandise crosses the warehouse, before loading it. Insurance is not mandatory, but if contracted it would be assumed by the buyer since they are the one who assumes the risk. This incoterm should not be used if the seller delivers the goods to a place other than his premises.
· The seller delivers the goods to an agreed point and assumes costs and risks until the goods are delivered to that agreed point, including the costs of export clearance. Thus, the seller takes care of internal transport and export customs procedures, except if the designated place is the seller's facilities (FCA warehouse), in which case the merchandise is delivered to said point loaded on the means of transport. arranged by the buyer, assuming the cost of the buyer. · The buyer assumes the costs from loading on board to unloading, including insurance if contracted as he/she assumes the risk when the merchandise is loaded on the first means of transport. · The novelty of the FCA with respect to the 2010 incoterms is that when it comes to maritime transport, the buyer can instruct his carrier to issue a B/L (Bill of Landing/ Bill of Lading) to the seller with the specification "on board". » (on board), as proof of delivery of the merchandise to facilitate the operation of documentary credits and that the credit is paid to the seller as a guarantee from the Bank but who is not a party to the transport contract).
· The seller delivers the merchandise to the loading dock of the port of origin and assumes the costs until delivery, as well as the export customs procedures. · The buyer manages the cargo on board, stowage, freight and other expenses until delivery at destination, including import clearance and insurance if contracted since it is not mandatory. Additionally, it assumes the risks once the merchandise is at the loading dock before being loaded onto the ship. · This incoterm is only valid for maritime transport and is generally used for special merchandise that has particular loading needs; it is not common for palletized cargo or containers.
· The seller assumes the expenses until the merchandise is loaded on board, at which time he also transfers the risks, as well as the export clearance and expenses at origin. He is also in charge of hiring the transportation, although this is the responsibility of the buyer. · The buyer is responsible for the costs of freight, unloading, import procedures and delivery to destination, as well as the insurance if they wish to contract it. The transfer of risk takes place when the merchandise is on board. · This incoterm is only used for maritime transport and should not be used for goods in containers since the responsibility is transferred when the goods are loaded on board the ship (the goods are physically touching the floor of the ship), but the containers are not loaded as soon as they arrive at the terminal, therefore, if the merchandise suffered any damage while it is in the container, it would be very difficult to establish when it happened.
· The seller is responsible for all costs until the merchandise reaches the port of destination, including export clearance, costs at origin, freight and generally unloading costs. · The buyer takes care of the import procedures and transportation to the destination. He also assumes the risk at the time the merchandise is on board, so although it is not mandatory, he usually takes out insurance. · This incoterm is only used in maritime transport.
· The seller assumes, as in CFR, all expenses until arrival at the port of destination, including export clearance, expenses at origin, freight and generally unloading, but must also originally take out insurance, although the risk is transferred to the buyer once the merchandise is loaded. on board. · The buyer is the one who assumes the import costs and transportation to destination. · The novelty of this incoterm in the 2020 version refers to the insurance coverage that the seller must contract, pointing out that they must be the same as those provided by Clauses C of the Institute Cargo Clauses, that is, the insurance must cover until arrival at port of destination. It is an incoterm that is only used for maritime transport. It is a widely used incoterm since it determines the customs value.
· The seller assumes the expenses until the merchandise is delivered to the agreed place, that is, it is responsible for all expenses at origin, export clearance, main transportation and generally, expenses at destination. · The buyer assumes the import procedures, the insurance if he contracts it, since it is not mandatory. The risk passes to the buyer once the merchandise is loaded onto the first means of transportation contracted by the seller. · This incoterm is valid for any means of transport.
· The seller bears the costs until delivery to the agreed destination, that is, the costs at origin, export clearance, freight and, in addition, insurance, which is mandatory. · The importer is in charge of the import procedures and delivery to the destination and assumes the risk when the merchandise is loaded on the first means of transport. · The novelty in this incoterm with respect to the 2010 incoterms lies again in the insurance coverage, in this case, the insurance, in addition to being mandatory, must contain the same coverage as those provided by Clauses A of the Institute Cargo Clause, the merchandise It must be insured until delivery to the carrier at destination.
· The seller assumes the costs and risks arising from origin, packaging, loading, export clearance, freight, unloading at destination and delivery at the agreed point. · The buyer assumes the import clearance procedures. · This incoterm is newly created and replaces DAT, in reality what it does is expand the delivery options since DAT indicated that delivery had to be made at the terminal, now with DPU the entry can be made at another agreed place in addition to the terminal.
· The seller assumes all expenses and risks of the operation except for the import clearance and unloading at destination, that is, all expenses at origin, freight and internal transportation. · The buyer only has to deal with import clearance and unloading. · This incoterm is valid for all means of transport, insurance is not mandatory, but if the costs are contracted, they would be assumed by the seller.
- The seller assumes all expenses and risks from packaging and verification in its warehouses to delivery at the final destination, including export and import shipments, freight and insurance if contracted. - The buyer only has to receive the merchandise and generally unload it, although the seller can also take care of it. - This incoterm is just the opposite of EXW, the seller assumes all expenses and risks.
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