Friday, April 4, 2014

INCOTERMS (Updated) April 3, 2014

If you negotiate international contracts you or your department should have a copy of the latest version of INCOTERMS or as a minimum their wall chart of the different terms. INCOTERMS is a publication of the International Chamber of Commerce that was started back in the 1930‘s and provides detailed information on the common delivery terms that may be used.

The advantages of using INCOTERMS and specifying the specific INCOTERM delivery term and date of the INCOTERM publication is:
1.In comparing quotes from different suppliers, if they quote a different delivery, you should take the cost differences into account in deciding who to award the business to.
2.From a contracts perspective, when you include them in you agreement you are incorporating the following by reference into the contract.
a.The responsibilities of each party from the suppliers dock to the buyers dock for all the activities involved such as loading, transport, preparation of paperwork, export, import, customs clearance, payment of duties and insurance.
b.The point at which the risk of loss for the shipment transfers from the supplier to the buyer for each of the different terms.
If you didn't use them, you would need to address all of the applicable portions of those in your agreement’s delivery section.

Each of responsibilities has a cost involved, so when you use them it's clear which party is bearing those costs. That way you know what the true cost of the purchase or sale is and who is insuring the shipment against risk of loss or damage while in transit.

I use the 2010 version. When I use them, I would do it by including language such as:
“The delivery term shall be Ex-Works (as defined in INCOTERMS 2010) Supplier’s Dock in Taipei, Taiwan”.

Like anything else, if a specific INCOTERM does not match your exact needs, you can still incorporate it and then modify it to meet your needs. For example:
“The delivery term shall be Ex-Works (as defined in INCOTERMS 2010 except as modified below) Supplier’s Dock in Taipei, Taiwan. The modifications to INCOTERMS 2010 shall be ......”