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@exo.ap ¿En dónde entregas la mercancía al hacer una exportación? #incoterms #negociosinternacionales #exportacion ♬ The Great Gig in the Sky - Pink Floyd
In 1936, the International Chamber of Commerce ICC created the Incoterms (International Commercial Terms) as a set of rules and guidelines to facilitate agreements between international buyers and sellers. Thus, since that year, these terms have been updated every ten years in order to adapt to changes in commercial practices.
¿What are incoterms?
Incoterms are defined as a set of terms that determine the costs, risks and responsibilities to be assumed by the parties involved in an international trade operation,generally, these are stipulated in the sales contract indicating the established incoterm plus the destination of the goods, for example:
FOB (Free On Board) Shanghai, China.
These terms are characterized by being expressed in abbreviations, each with a different and precise meaning for the goods to be traded.
It is worth mentioning that the latest edition of the incoterms is from 2020, with a total of 11 terms, of which 4 are exclusive for maritime transportation.
In the following, we introduce you to the 2020 Incoterms:
Incoterms for any mode of transport
EXW (Ex-works)
This Incoterm is used when the seller delivers the goods at his facilities.
- The seller delivers the goods already packed at its facilities.
- The buyer assumes all costs and risks from the moment the goods cross the facilities.
FCA (Free Carrier)
- The seller assumes the costs and risks until delivery of the goods at an agreed point, including export clearance, except if the named place is the seller's facilities, where the goods are only delivered loaded on the means of transport assigned by the buyer.
- The buyer assumes the costs from loading on board to unloading.
CPT (Carriage Paid to)
- The seller assumes the costs until delivery of the goods at the agreed point, including origin costs, export clearance, main freight and destination costs.
- The buyer only handles import formalities.
CIP (Carriage and Insurance Paid to))
This Incoterm is like the CPT, except that it includes goods insurance.
- The seller assumes the costs until delivery at the agreed place of destination, including insurance, which is mandatory.
- The importer is in charge of import formalities and delivery to destination.
DAP (Delivered At Place)
- The seller assumes all costs and risks of the operation, with the exception of import clearance and unloading at destination.
- The buyer handles import clearance and unloading.
DPU (Delivered At Place Unloaded)
This incoterm is new in this edition, replacing the DAT, so that delivery can now be made at any agreed point.
- The seller assumes the costs and risks from origin such as packing, loading, export clearance, freight, unloading at destination and delivery at the agreed point.
- The buyer only handles import clearance formalities.
DDP (Delivered Duty Paid)
- The seller assumes all costs and risks from packing to delivery at final destination, including export and import clearance.
- The buyer has no obligation, other than to receive the goods.
Incoterms for maritime and inland waterways transport
FAS (Free Alongside Ship)
- The seller delivers the goods to the loading bay of the port of origin and assumes the costs until delivery, as well as the customs export formalities.
- The buyer manages on-board loading, stowage, freight and other expenses until delivery at destination, including import clearance.
FOB (Free On Board)
This Incoterm is one of the most widely used in international trade, since costs and risks are more shared.
- The seller assumes the costs until the goods are taken on board, at which time it also transfers the risks, as well as the export clearance and costs at origin.
- The buyer takes care of freight costs, unloading, import formalities and delivery at destination.
CFR (Cost and Freight)
- The seller takes care of all costs such as export clearance, freight and unloading charges until the goods arrive at the port of destination.
- The buyer takes care of import formalities and transportation to destination.
CIF (Cost,Insurance and Freight)
This Incoterm presents the same responsibilities as the CFR, except that it includes insurance assumed by the seller.
- The seller assumes all costs until arrival at the port of destination, including insurance.
- The buyer is the one who assumes the import and transportation costs up to destination.
How to choose the appropriate Incoterm?
In international operations, the selection of the incoterm will depend on the degree of knowledge in international operations, as well as the trust between buyer and seller.
The EXW Incoterm is ideal for companies with little experience in the international arena, and can also be used when there is a low degree of trust with the buyer.
Likewise FCA, FAS and FOB incoterms represent an advantage for the buyer, since his responsibility ends with the delivery of the goods at the agreed point and the export clearance, leaving the entry formalities to the seller.
In recurrent operations or if you want to control the logistic chain of the goods, Group C Incoterms (CIP,CIF, CFR, CPT) are a good option since they allow the control of freight and insurance until the arrival of the goods in the destination country.
The Incoterms DAP, DPU and DDP are the least used by sellers, as they are terms where they must assume all responsibility until delivery at destination, and may result in additional costs and delivery complications if the customs complexities of the destination country are unknown.
Conclusion
As mentioned above, incoterms are a tool that, although not mandatory, is recommended to define the obligations shared between the seller and the buyer.
Likewise, there may be negotiations between both parties to agree on the best incoterm and share the obligations at their best convenience, which are not necessarily stipulated in each incoterm.
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