Incoterms

What are Incoterms?

Incoterms (International Commercial Terms) are commonly used in international contracts and clearly establish the obligations, risks and costs associated with the commercial transaction up to the moment of delivery of the goods at the designated port or place. Thus, both the seller and the buyer will always be aware of the extent of their role and responsibility in the commercial transaction.

When Incoterms 2021 are incorporated into the contract of sale, they prevent both the buyer and the seller from having to include detailed information - in excess - about the delivery conditions of the goods.

Furthermore, it is necessary to point out that Incoterms 2021 are not mandatory according to international law. Their validity is granted by the contracting parties at the moment they agree on them.

The type of Incoterm agreed must be reflected in the sales documents relating to the corresponding commercial transaction (sales invoices, proforma invoices, valued delivery notes, etc.).

What does Incoterms 2021 cover?

Incoterms indicate the distribution of obligations, risks and costs between the parties in international sales.. Thus, we can point out:

➔ Loading and unloading obligations.
➔ Transfer of risks: When are risks transferred?
➔ Delivery obligations: Where and when does delivery take place?
➔ Transport: Who is responsible for the main transport and what about secondary transport?
➔ Insurance: Who assumes the obligation to insure the goods?
➔ Customs clearance for export and import: Who is responsible for this?

Which Incoterm 2020 term is the most suitable for the characteristics of my operations?

Depending on the type of transport you use, Incoterms 2020 can be classified into two categories:

➔ Rules for any mode or modes of transport.

The first group comprises seven modal-neutral terms, i.e. they can be used with any mode of transport, including sea, or a plurality of them These are EXW, FCA, CPT, CIP, DAP, DPU and DDP.

➔ Rules for maritime transport and inland waterways.

These are terms that should only be used when the goods are transported by sea or inland waterways; or at least, when the leg of the transport operation in which the delivery is made is by sea or inland waterway. Sales in this category are FAS, FOB, CFR and CIF..