Keeping up to date with laws and regulations is essential to achieving the objectives of international trade operations.
Being informed about changes and about temporary and permanent adjustments allows us to be more effective and more efficient in every step we take.
At Spectrum Worldwide we always have the legal advice of four in-house lawyers and two external tax firms that guarantee the tax health of operations, and we maintain a continuous compliance review in coordination with the Foreign Trade area. This is what identifies us as a customs broker able to ensure that your operations have zero incidents, since we can anticipate any situation through 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 keep up with their changes and updates. These changes have been the responsibility of the ICC, the International Chamber of Commerce, since 1936.
INCOTERMS is the abbreviation of "International Commercial Terms" ("Términos de Comercio Internacional" in Spanish). They are a set of internationally accepted rules that establish the rights and obligations of buyers and sellers in commercial exchanges, indicating the terms of sale.
They are basically eleven terms that establish the rules and practices of international trade, with the aim of agreeing on the responsibilities of the importer and the exporter with regard to:
Through a purchase and sale contract.
These terms affect all the parties involved in the operation, which is why it is very necessary for each of them to know them.
These rules or terms are not included or specified in any of our laws, but they are used internationally, are standardized and are recognized by the legislation of many countries. They are recognized in Mexico, and they are defined and stipulated in Article 9 of the Vienna Convention on Contracts for the International Sale of Goods.
Knowing the terms precisely will allow you to set the negotiation conditions and also to understand those proposed by the other party, whether it is an import or an export.
That is the magic of INCOTERMS: they tell each party what its responsibilities are in relation to the operation, and they establish that, for contracts to be concluded, the seller and the buyer must have been aware of them.
Some of these terms have been used since 1936 and have been changing to adapt to the reality of modern times and to changes in international trade. These updates have been made every 10 years since 1980, and in September 2019 the changes to the INCOTERMS were published, which came into force on January 1, 2020.
Here are the main changes that were made
FCA – FREE CARRIER, which means the goods are delivered to a carrier. Although it has been applied since earlier versions, it underwent an important change: it now allows a sea transport document showing that the goods have been loaded on board to be presented as proof or evidence of delivery, which was not considered in previous versions.
With CIF – COST, INSURANCE AND FREIGHT, minimum coverage is maintained, because it is an INCOTERM used mainly for commercial transactions involving commodities and raw materials, and the aim is not to make the goods more expensive. The novelty in 2020 is that it refers to the insurance coverage the seller must take out, which must be the same as that provided by Clauses C of the Institute Cargo Clauses; in other words, the insurance must cover the goods until they reach the port of destination.
The change in the CIP – CARRIAGE AND INSURANCE PAID Incoterm is also related to insurance coverage; in this case, insurance is mandatory and must also include the same coverage as that provided by Clauses A of the Institute Cargo Clauses, meaning the goods must be insured until delivery to the carrier at destination.
The DAT – DELIVERED AT TERMINAL INCOTERM disappeared and was replaced by the DPU – Delivered at Place Unloaded INCOTERM. This INCOTERM broadens the delivery options of DAT, which established delivery at a terminal; with DPU, delivery can take place at 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 takes place within an international commercial operation.
The cycle of goods under the new INCOTERMS rules works in the following order:
This helps each of the obligations to take place in the natural order of the process, guaranteeing the successful completion and fulfillment of the terms.
Finally, the eleven INCOTERMS were classified into two categories: those used for multimodal transport and those that apply to sea transport:
Incoterms used for multimodal transport
Incoterms used for sea transport
Although this is the update currently in force, contracts can continue to be made with INCOTERMS from previous editions, because that may favor the negotiation, as long as the contract defines the term to be used with the corresponding year. This is left to the buyer and the seller. However, the ICC recommends using the most recent update.
