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Chapter One: Incoterms 20201.1. Incoterms
Incoterms are a set of rules created by the international chamber of commerce. They make
clear (to sellers and buyers) who has to organise certain things as a result of a commercial
agreement.
1.2. Necessity of international rules
- Set of internationally recognised standardised trade terms published by the
International Chamber of Commerce.
- Define the allocation of cost, risk, tasks involved in international trade.
- Provide clarity and uniformity.
It shows who has to pay, who is at risk…
Risk: you have to rely on the seller’s credibility, you have to rely on certain papers that prove
e.g.: that the product is allowed in a certain country. Incoterms are meant to make a
transaction easier.
Tasks: plenty of things have to be organised, like shipping, insurance, customs…Someone
has to do it (seller or buyer). You must agree.
Commercial relevance of Incoterms:
- Cost calculation of contract price
- Cost of transport, documents
Operational relevance of Incoterms:
- Who does what, when, where?
- At who’s expense and risk?
There are two ways to approach the incoterms. Operational talks about who has to organise
the customs, papers, who pays, who is at risk… Commercial talks about transportation cost,
insurance cost, packaging…
Possible tasks: transport, loading, unloading, handling, checking, packaging, marking,
weighing, measuring, insurance, customs formalities.
Possible risks: packaging, conditioning (humidity, temperature…), manipulation, loading,
discharge, stuffing, transhipment, falling overboard, accidents and catastrophes, fire,
damage, vandalism, piracy, theft…
The first set of incoterms were published in 1936 (6 trade terms were defined). They are
revised every 10 years. The most recent version was from 2020 and counts 11 terms.
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, 1.3. Introduction to the Incoterms
Incoterms are not legal requirements. They are only applicable if referred to in a contract.
How to refer to Incoterms:
Incoterms should be written with a capital ‘I’. You always have to use the final ‘s’, even if you
only refer to one individual term.
Which Incoterm shall we use?
- Mode of transport: how, possible?
- Control over documents, transport?
- Risks of transport, liability?
- Position during negotiation?
- Can we arrange customs formalities?
- Are there any political risks, social risks?
- Profitable rates for carriage and insurance?
Use Incoterms 2020 to establish a clear division of costs and risks and tasks between buyer
and the seller concerning the delivery of the goods.
4 groups of Incoterms:
- E-group: sellers obligation at its minimum.
- F-group: main carriage unpaid
- C-group: main carriage paid
- D-group: delivered in port or at the place of destination
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, Multimodal terms for any kind of transport:
Unimodal terms for sea transport and inland waterways:
Delivery in Incoterms:
- Placing the goods at the disposal of the buyer OR
- Hand them over for carriage OR
- Deliver them at the destination
Depending on the Incoterm chosen
Order within Incoterms 2020:
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