What are the INCOTERMS updated for this 2020? (article 2 w-1)

In our Spectrum Worldwide team we always have the legal advice of four internal lawyers, two external tax offices that guarantee the fiscal health of the operations and we maintain a continuous review of compliance in coordination with the Foreign Trade area.

What are the INCOTERMS updated for this 2020? (article 2 w-1)

In our Spectrum Worldwide team we always have the legal advice of four internal lawyers, two external tax offices that guarantee the fiscal health of the operations and we maintain a continuous review of compliance in coordination with the Foreign Trade area.

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Updating the laws and regulations is essential to achieve the objectives of international trade operations.

Being informed of changes, transitory and definitive adjustments allows us to be more effective and efficient in each step we take.

In our Spectrum Worldwide team we always have the legal advice of four internal lawyers, two external tax offices that guarantee the fiscal health of the operations and we maintain a continuous review of compliance in coordination with the Foreign Trade area. Which identifies us as a customs agent with the ability to ensure that your operations have zero incidents, taking into account that we can anticipate any situation with the design and execution of each import and / or export plan.

INCOTERMS are a vital aspect of international trade and it is extremely important to be aware of their changes and updates. These changes are in charge of the ICC International Chamber of Commerce since 1936.

INCOTERMS are the acronyms used for “International Commercial Terms” in English or “International Trade Terms” in Spanish. They are a series of internationally accepted norms that establish the rights and obligations of buyers and sellers, in commercial exchanges that indicate the conditions of sale.

There are basically eleven terms that establish the rules and uses in international trade, with the aim of agreeing on the responsibilities of the importer and the exporter, regarding:

  • Delivery conditions
  • The risks assumed by each of the parties
  • Cost sharing
  • Customs formalities
  • Transport
  • Insurance

Through a purchase-sale contract.

These terms affect all the actors involved in the operation and therefore it is very necessary that each one knows them.

  • Buyer
  • Seller
  • Producer
  • Carrier
  • customs
  • Customs agents
  • And everyone involved in the process.

These rules or terms are not included or specified in any of our laws, but are used internationally, are standardized and are recognized by the legislation of many countries. In Mexico they are recognized. And they are typified and stipulated in article 9 of the Vienna Convention on international contracts for the purchase and sale of merchandise.

Knowing exactly the terms will allow you to establish the negotiation conditions and you will also be able to understand those proposed by the counterpart, whether it is an import or export.

That is the magic of INCOTERMS that tell each of the parties what their responsibilities are in relation to the operation and they have stipulated that for the conclusion of contracts, the seller and the buyer should have had knowledge about them.

These terms have been used since 1936, some and they have been changing to adapt to the reality of modernity and changes in International Trade. These updates have been carried out every 10 years since 1980 and in September 2019 the changes were published in the INCOTERMS that became effective as of January 1, 2020.

Here we tell you which have been the main modifications that were made:

FCA – FREE CARRIER which means delivered the merchandise to a carrier. Although it has been applied since previous versions, it underwent an important modification in which it now allows a maritime transport document to be presented with the merchandise being placed on board, as proof or evidence of delivery, which was not considered in previous versions.

With CIF – COST, INSURANCE AND FREIGHT the minimum coverage is maintained because it is an INCOTERM that is used mainly for commercial transactions where commodities and raw materials are involved, and the objective is not to make the merchandise more expensive. The novelty in 2020 is that it refers to the insurance coverage that the seller must contract, which must be the same provided by Clauses C of the Institute Cargo Clauses, that is, that the insurance must cover the merchandise until it reaches the port of destination.

The change in the CIP Incoterm – CARRIAGE AND INSURANCE PAID, is also related to insurance coverage, in this case, the insurance is mandatory and must also contain the same coverage as those provided by Clauses A of the Institute Cargo Clause, is say that the merchandise must be insured until delivery to the carrier at destination.

The INCOTERM DAT – DELIVER AT TERMINAL disappeared and was replaced by the INCONTERM: DPU Delivered at Place Unloaded. This INCOTERM expands the delivery options of the DAT that established the terminal delivery and with the DPU the delivery can be made in another agreed place, in addition to the terminal.

The rules as a whole also have a new structure with a clearer stratification that covers the entire process that occurs within an international commercial operation.

The goods cycle in the new INCONTERMS rules works in the following order:

  1. Sales and payment
  2. Delivery and reception
  3. Risk transfer
  4. Transport
  5. insurance
  6. customs
  7. Packing
  8. Costs

This helps each of the obligations to be given in a natural order of the process, which guarantees the successful completion and fulfillment of the terms.

Finally, the eleven INCOTERMS were classified into two categories, those that are used for multimodal transport and those that are applied for the use of maritime transport:

Incoterms used for multimodal transport:

EXW | Ex-Works

FCA | Free Carrier

CPT | Carriage Paid To

CIP | Carriage and Insurance Paid To

DAP | Delivered At Place

DPU | Delivered at Place Unloaded

DDP | Delivered Duty Paid

Incoterms used for maritime transport

FAS | Free Alongside Ship

FOB | Free On Board

CFR | Cost and Freight

CIF | Cost, Insurance, and Freight

Although this is the current update, you can continue to make contracts with INCOTERMS from past editions because that may favor negotiation, as long as the term to be used with the corresponding year is defined by the contract. This is left at the disposal of the buyer and the seller. However, ICC’s recommendation is that the most recent update be handled.

RODOLFO VILLAVERDE

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