INCOTERMS®: Transportation, Importation and Logistics Management
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In the international sale of goods, there is a customary usage of special trade terms.
The problem with these terms is that they end up having different meaning in different countries with respect to obligation of the seller and the buyer.
In an effort to help avoid misunderstanding between the parties to these contracts as well as promote uniformity in law, the International Chamber of Commerce (ICC) has published INCOTERMS®.
Contracts for the international sale of goods should indicate the terms of sale, preferable with one of the 11 incoterms.
Remember incoterms are only applicable in contracts of international sale of goods if the parties have incorporated then into their contracts.
Sales contracts involving goods that are not shipped under negotiable marine bill of lading should also specify when (time and place) and/or how ownership passes from seller to buyer
Is it possible to conduct international transactions without all these?
- Often international transactions are conducted without the benefit of an international sales contract
- What happens is, the seller provides a quotation (which can be in the form of pro-forma invoice), the buyer responds to this with a purchase order
- In most cases this is sufficient to end up with repeat sales between the parties who are well acquainted and have developed a basis for their dealings
- The problem with this arrangement is that when problems in the form of unanticipated disputes occur, the parties get stuck. Hence the need for incoterms
By the end of the course the learner will be able to know
- What international commercial terms are
- Why incoterms
- What incoterms rules don’t do
- How to you use incoterms rules
- Duties of the parties involved etc
An overview of how buyers and sellers relate on international set up
We introduce incoterms... you get to know what they do or don't do
This write up helps you with some of the summaries that may be missing in video. Download it and use it with the video lessons
With this rule the seller fulfills his/her obligation when he/she delivers the goods at the disposal of the buyer at the seller’s premise, that is, works, factory warehouse etc. unless otherwise agreed the seller has no obligation to load the goods on the vehicle provided by the buyer or for clearing the goods for export.
The term “free carrier” means that the seller is to deliver the goods to the carrier, or some person nominated by the buyer, at the seller’s premise or another place.
Carriage paid to (CPT) is an international trade term which means that the seller delivers the goods at their own expense to a carrier or another person nominated by the seller.
Carriage and insurance paid to (CIP) means that in addition to the seller delivering the goods to a carrier he/she (the seller) has contracted to get the goods to the agreed destination, the seller also contracts for insurance cover against the buyer’s risk of loss or damage to goods during the carriage.
Delivery at Terminal (DAT) is where the seller is responsible for clearing the goods for export and delivering them unloaded at a named terminal at the end destination. The goods must be unloaded at the terminal
“Delivery at place” means that the seller delivers the goods, ready for unloading, at the place of destination in the buyer’s country or a named place.The major difference between this and delivery at terminal (DAT) is that in DAT the seller is responsible for unloading the goods
The seller is responsible for delivering the goods at the named place in country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes.
“Free alongside ship” means that the seller delivers when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment.
“Free on board” means that the seller delivers the goods by placing on board the ship named by the buyer in the port of shipment.
Cost and Freight means that the seller delivers the goods on board the vessel which in this case they, they seller, have contracted to bring the goods to the named port of destination.
Cost insurance and Freight means that the seller arranges and pays for transport to a named port. Seller delivers goods, cleared for export, loaded on board the vessel.