Incoterms provide security and transparency in international trade

Carrying out a purchase and sale operation leads to a real need for the parties to establish clear rules for the negotiation, this in order to avoid inconveniences within the process, under this premise Incoterms are born.

Incoterms are nothing more than the most used international legal instrument in the world when performing a purchase or sale negotiation. It’s established by the International Chamber of Commerce and its use is generalized and accepted for sale contracts throughout the world.

It is important to have in mind that, as all legal regulations, their misinterpretation or application have often led to conflicts or litigation between the parties, that is why understanding their rules and adhering to them is essential when performing a contract.

Today rather than learning how to interpret them, we will talk about their importance in international trade and their latest updates.

What are Incoterms?

It’s the acronym for International Commercial Terms, a concept that groups together 11 international rules created, managed and control by the International Chamber of Commerce. The first date from 1936 and have suffered changes and updates.

Its main objective is both to facilitate the operation of international trade transactions and to establish a set of terms and rules that define the rights and obligations of both the seller and buyer.

Some of the Incoterms that are established in a sale contract are the following:

•          Free Alongside Ship

•          Cost and Freight

•          Carriage and Insurance Paid To

•          Delivered Duty Paid

Since January 1 of this year, the new rules of Incoterms 2020 came into effect.

One of the points that were improved in the Incoterms was a market need in relation to the bill of shipment.

The different levels of insurance coverage in Cost, Insurance, Freight or Transportation.

Includes arrangements for transportation with own means, delivered duty paid or delivery at terminal.

Includes the requirements for Cost, Insurance and Freight, among others

With the correct use of Incoterms, companies have confidence in the interpretation of the terms of negotiation between the buyer and the seller, since international rules are applied which help to define in detail the distribution of obligations between the parties, making a direct reference to the transport that is used and to the place where the documentation is delivered, as well as the procedures, expenses and payments that must be sent.