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What are the INCOTERM?

Incoterms (International Commercial Terms) are commonly used in international contracts and clearly set out the obligations, risks and costs associated with the commercial transaction up to the moment of delivery of the goods at the named 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 2020 are incorporated into the contract of sale, they prevent both the buyer and the seller from having to include detailed information – in excess – on the conditions of delivery of the goods.

Furthermore, it is necessary to point out that Incoterms 2020 are not mandatory under international law. Their validity is granted by the contracting parties at the time they agree to them.

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

What do Incoterms 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 undertakes the main carriage, and secondary carriage?
➔ Insurance: Who assumes the obligation to insure the goods?
➔ Customs clearance for export and import: Who is responsible for this?

Which term is best suited to 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(s) of transport.

The first group comprises seven modal-neutral terms, i.e. they can be used with any mode of transport, including sea, or with 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 waterway; 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.

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