What are INCOTERMS 2020?
The INCOTERMS are commercial clauses established by the International Chamber of Commerce to facilitate transactions in the international arena. These provisions have wide acceptance and is used extensively in contracts of sale to the global level. A precise interpretation of these clauses is essential to avoid conflicts and economic losses between buyers and sellers, to clearly establish the rights and responsibilities of both parties. To understand these rules, apply them in a correct way and know how to interpret each obligation can mitigate risks in the contracts and to define the distribution of responsibilities between the parties involved.
What are the types of INCOTERMS?
– Group E: In the terms of E, the only seller must make the goods available to the buyer at their facilities. Within this category is a single INCOTERM: EXW, that corresponds to the acronym of Ex Works, in English, that means “at the factory, place agreed upon.”
– EXW – Ex Works
– Group F: The terms F are characterized because the seller must deliver the goods in the country of origin to the main carrier, whose costs are borne by the buyer.
– FCA – Free Carrier free carrier named place”
– FAS – Free Alongside Ship “free alongside ship”
– FOB – Free On Board fob shipping port agreed”
– Group C: In terms of C, the seller contracts and assumes the costs of transport and main, but not the risk of loss or damage, responsibility lies with the buyer after delivery to the first carrier in the country of origin.
– CFR – Cost and Freight “Cost and freight”
– CIF – Cost, Insurance, and Freight “Cost, insurance and freight”
– CPT – Carriage Paid To “Carriage paid to”
– CIP – Carriage and Insurance Paid To “Carriage and insurance paid to”
– Group D: The terms D are those in which the seller assumes most of the responsibility, covering the costs and risks to bring the goods to the point of destination agreed upon. These terms are the only ones that delivery from the seller to the buyer is carried out in the country of destination.
– DPU – Delivered at Place Unloaded “Delivered at place unloaded”
– DAP – Delivered At Place Delivered at place”
– DDP – Delivered Duty Paid “Delivered duty paid”
Another important aspect when considering the INCOTERMS is to evaluate the modes of transport, which can be distinguished in two categories:
– MULTIMODAL: EXW, FCA, CPT, CIP, DAP, DPU, DDP
– MARITIME AND WATERWAYS: FAS, FOB, CFR, CIF
What is the function of the INCOTERMS?
INCOTERMS help to arrange the logistics processes between the seller and the buyer in international operations. Define key aspects such as the place of delivery, customs clearance, transmission of risks and allocation of costs, facilitating mutual understanding and avoiding misunderstandings.
What aspects are regulated in the contract for the international sale of goods?
A contract of international sale of goods, regulates the delivery of the goods, the shipping costs, customs procedures and the transmission of risks. These aspects are essential to determining the responsibilities and obligations of both the buyer and seller in the transaction. In addition, they regulate several key aspects in an international transaction, including the place of delivery, the time of transfer of risk, the distribution of transport costs, as well as aspects related to the customs documentation.
When does convey the risks in transport?
INCOTERMS regulate the time in which the risk in the goods passes from the seller to the buyer. This event may occur in the country of origin or in the country of destination, depending on the rule INCOTERM applied in the contract.
INCOTERMS:
– EXW (ex works)
– FCA (Carrier-Free)
– CPT (Carriage Paid To)
– CIP (Carriage and Insurance Paid To)
– DAP (Delivered at Place)
– DPU (Delivered at Place Unloaded)
– DDP (Delivery duties Paid)
– FAS (Free Alongside Ship)
– FOB (Free on Board)
– CFR (Cost and Freight)
– CIF (Cost, Insurance and Freight)
- **EX-FACTORY (EXW)**: The seller delivers when it places the goods at the disposal of the buyer at its facilities or other designated location, such as a workshop or a factory, on the date or within the agreed period.
- **Free Carrier (FCA)**: The merchandise is delivered to the carrier at a place agreed upon by the buyer, assuming the buyer the risks from this point.
- **Carriage Paid To (CPT)**: (Carriage paid to) Means that the seller delivers the goods-and transfers risk-to the buyer when made available by a carrier commissioned by the seller or the seller to purchase the goods so delivered. The seller delivers the goods to the carrier and the risk passes to the buyer at the loading of the goods on the means of transport.
- **Carriage and Insurance Paid To (CIP)**: (Carriage and insurance paid to Means that the seller delivers the goods to the carrier or to the company designated by him– in a place agreed, and must hire and pay for transportation costs to the designated destination.
- **Delivered At Place (DAP)**: (Delivery point) the seller delivers the goods in transit and/or at the agreed place of destination, taking the risks to delivery.
- **Delivered at Place Unloaded (DPU)**: (Delivered at place unloaded) the seller delivers the goods unloaded at the agreed place of destination, taking the risks to the download. This term requires the seller to perform the unloading at the destination.
- **Delivered Duty Paid (DDP)**: (delivery duty paid) Means that the seller delivers the goods when the puts at the disposal of the buyer on the means of arrival transport, ready for unloading (but not downloading), and in the point designated destination, cleared for importation.
- **Free Alongside Ship (FAS)**: (Free alongside ship Means that the seller fulfills his obligation to deliver when the goods is discharged from the vessel (e.g., on a quay or a barge) at the port of discharge is agreed with the buyer or as the seller acquires goods already delivered. The risks are transferred to the buyer.
- **Free On Board (FOB)**: (Free on board) the seller delivers the goods on board the vessel at the port of departure, transferring the responsibilities to the buyer.
- **Cost and Freight (CFR)**: (Cost and freight Means that the seller delivers the goods on board the vessel and must hire and pay the costs and freight to the named port of destination.
- **Cost, Insurance, and Freight (CIF)**: (Cost, insurance and freight Means that the seller delivers the goods on board the vessel and must hire and pay the costs, insurance and freight to the named port of destination.
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