|
Fundamental requirement in any kind of communication is that
speaker and audience must understand each other clearly and unambiguously.
This is vital in trade and commerce where any vague and unclear understanding
may lead to financial loss and/or costly legal battle. Given the nature
of International trade where buyer and seller come from different country,
culture and language - it is imperative that buyer and seller understand
precisely the nature of transaction - most important who is responsible
for what.
Using standard vocabulary or glossary for export, import,
logistics, finance etc. make sure that there is less scope for ambiguity.
There are quite a few glossaries for exim terms but the most important
and widely accepted one is the INCOTERM published by International Chamber
of Commerce (ICC).
WHY INCOTERM ?
In any international transaction, Incoterm can answer questions
like:
-
Who pays port charge ?
-
Who is responsible for export clearance
-
Who arranges transportation?
-
Who has a right to shipping documents?
-
Who insures, for how much, at what level of coverage?
etc. etc.
So, if your foreign trading partner is using these sales
terms in their purchase orders, quotations and invoices, you better know
what they mean. Remember, courts and international organizations like
United Nations Commission on International Trade Law (UNCITRAL) have endorsed
Incoterm.
WHAT IS INCOTERM ?
INCOTERM provides a set of international rules for the interpretation
of the most commonly used trade terms. It clearly defines the role and
responsibility of seller and buyer in the trade term so that there is
no scope for ambiguity or misinterpretation.
Among the best known INCOTERMS are EXW (Ex works), FOB (Free
on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid),
and CPT (Carriage Paid To).
ICC introduced the first version of Incoterms - short for
"International Commercial Terms" - in 1936. Since then, ICC expert lawyers
and trade practitioners have updated them six times to keep pace with
the development of international trade. The latest version is INCOTERM
2000, so all sales contracts made after January 1' 2000 will refer to
INCOTERM 2000 unless there is any special agreement between seller and
buyer.
Correct use of Incoterms goes a long way to providing the
legal certainty upon which mutual confidence between business partners
must be based. To be sure of using them correctly, trade practitioners
need to consult the full ICC texts, and to beware of the many unauthorized
summaries and approximate versions that abound on the web.
IMPORTANT POINTS TO REMEMBER ABOUT INCOTERM
-
revised in 2000 (sixth time). Use the latest version
only from ICC Website (please see ref. below).
-
is widely used throughout the world
-
divides transaction costs and responsibilities between
buyer and seller
-
reflects state of the art transportation practices
-
is available in most major trading languages
-
closely corresponds to the U.N. Convention on Contracts
for the International Sale of Goods
-
runs like a thread through all foreign trade disciplines.
MORE INFORMATION
-
-
-
-
-
Related Links:
Source: FAIDA
- Newsletter on Business Opportunties from India and Abroad
Vol: 3, Issue 2 April
11' 2002
Author :
Dr. Amit K. Chatterjee
(Amit worked in blue-chip Indian and MNCs for 15 years in various
capacities like Research and Information Analysis, Market Development,
MIS, R&D Information Systems etc. before starting his e-commerce
venture in 1997. The views expressed in this columns are of his own.
He may be reached at amit@infobanc.com
) |
|
Copyright © All Rights Reserved. Limited permission is granted
to publish this article in a web-site or printed in a journal/ newspaper/
magazine provided the publisher takes prior permission from author,
do not make any change in the article (i.e. keep it exactly same as
displayed above) and cite the Source of this article as The Great Indian
Bazaar with a link to this page.
|
|
