INTRODUCTION TO INCOTERMS 2020
WHAT ARE INCOTERMS 2020 AND WHAT ARE THEIR CLASSIFICATIONS?
In international trade transactions, we generally have an extensive operating cycle. The chain of responsibility in buying and selling and logistics can be very complex. This means that during the shipment-reception of the goods, many unforeseen events may occur, such as: damaged products, delays in collection or delivery, inconveniences with customs, unforeseen costs, etc. This introduction to Incoterms 2020 can help you mitigate this complexity.
In such cases, the question arises: Who is responsible for the unforeseen events that may arise during such transactions? We are talking about the person responsible for taking care of the costs, procedures and responsibilities.
The answer to this question can be found, in part, in the figure of the Incoterms 2020 (International Commercial Terms).
Incoterms 2020 are rules used in international sales contracts. These acronyms divide the responsibilities, costs, and transfer of risks between seller and buyer. They do so from the moment of delivery of the goods to the designated port or place of destination
“Incoterms do not have the force of law but they are internationally accepted rules”
Currently, the current Incoterms are the 2020 Incoterms, which are made up of 11 regulatory types. Depending on the type of transport used, the 11 Incoterms 2020 can be classified into two modalities: rules for any mode or modes of transport and rules for maritime transport and inland waterways.
“There are 2 types of Incoterms 2020”
- • The first modality contains the “Rules for any mode or modes of transport”. It is made up of seven terms that can be used with any mode of transport, including maritime, or with a plurality of them. These are the Incoterms 2020:
- EXW (Ex Works)
- FCA (Free Carrier)
- CPT (Carriage Paid To)
- CIP (Carriage And Insurance Paid)
- DAP (Delivered at Place)
- DPU (Delivered at Place Unloaded)
- DDP (Delivered Duty Paid)
- • The second modality contains the “Rules for Maritime Transport and Inland Waterways”. It is composed of four acronyms that should only be used when goods are transported by sea or inland waterways Or, at least, when the section of the transport operation in which the delivery is made is maritime or inland navigation. These are the Incoterms:
- FAS (Free Alongside Ship)
- FOB (Free on Board)
- CFR (Cost and Freight)
- CIF (Cost Insurance and Freight)
The characteristics and limitations of each of the Incoterms 2020 can be found in this blog and on our LinkedIn.
In any case, the inclusion of an Incoterms 2020 or another in a sales contract will depend on the specific case. There are many variants, and these Incoterms should be supplemented with specific annotations. In addition, they will depend, among other things, on the nature of the legal transaction to be concluded and on how the seller-buyer wants to distribute the responsibilities, the sharing of costs and the transfer of risks.
The importance of including Incoterms 2020 in sales contracts:
It is important to note that an Incoterm is an accepted standard that does not have the force of law and therefore its force comes from its inclusion in the contract of sale and not from the legislation. Therefore, if it is not included in the contract of sale, it may not be possible to sue in the event of a dispute.
Therefore, the selection of the ideal Incoterms 2020 for the international sale in question, as well as its correct inclusion in the respective contract, is very relevant to establish in advance the responsibilities of each of the contractual parties.
Therefore, if you are planning to enter into an international sale or you have concluded one and inconveniences have arisen, we encourage you to get advice from experts.
For more information:
📞 +34 611 160 613 📍 Plaça Josep Pla 4, 1-2 17001 Girona 📧 nuria@alquezaradvocats.com www.alquezaradvocats.com
Article owned by Núria Alquézar Sánchez
