“For example, all shipments for Venezuela must move on C-terms due to currency uctuations.” Incoterms provide a basic framework to allocate cost, risk, and duties to global shipments. However, the terms change, can be confusing, and only apply if both the seller and buyer agree. Shippers should review the rules periodically for changes and, when in doubt, partner with a third-party provider specializing in global shipping. n
Mulastanam shares this example: “When there was a tsunami several years ago, new cars were held at a port in Japan because conditions made it physically impossible to deliver the cars. Had the tsunami occurred while the cars were still on the vessel, rather than of oaded, cost allocation would have been different, based on Incoterms.” “The nancial instability of destination countries can in uence the use of Incoterms,” says Corbett.
WHAT GLOBALCONDITIONS IMPACT INCOTERMS? International shipping has had its share of challenges over the past few years, from port congestion to the war in Ukraine. “While global unrest can result in other challenges for global shippers, it is unlikely to impact the use of Incoterms,” notes Maren Corbett, director of operational transformation for Kuehne + Nagel.
ASKED & ANSWERED: INCOTERMS FAQs
Can Incoterms be modified by a contract? The simple answer is yes. The terms are not laws or regulations and can be modified by the seller or buyer. However, the more significantly the contract language varies from the concepts established by Incoterms, the more di cult it can become to refer to case law or precedents in the event of a claims dispute. Are Incoterms legally binding? The terms are legally binding to the degree that a sales contract is legally binding. On their own, the terms are not legally binding unless they are used in a contract or agreement between sellers and buyers. Are Incoterms required on a commercial invoice? They are not. However, Customs may use a specific term as the basis of valuation for goods being shipped internationally. By using an Incoterm for the transaction, the seller and buyer can influence the amount of the valuation and reduce valuation challenges. What Incoterms should be used for domestic shipments? There is no restriction on the use of Incoterms for domestic shipments. It is important that the sales contract clearly states which aspects of the terms do not apply to a specific transaction. Should Incoterms be used for air freight? The terms that can be applied to air cargo are: EXW, DDP, DPU, CIP, DAP, FCA, and CPT. When does title transfer occur in Incoterms? Incoterms does not address the issue of title transfer. However, the rules do address the point of delivery. Some companies use the words “title transfer” and “point of delivery” interchangeably.
Here are some common questions shippers have about Incoterms. Do Incoterms apply to services as well as goods? Primarily, Incoterms apply to goods. They are not intended for services in trade. There are some exceptions when training is included with the goods being traded. If the training materials and demonstrations are imported, Incoterms may be relevant. However, the key takeaway is that Incoterms apply to goods. How do Incoterms work? The terms provide a foundation for commonly negotiated global or cross-border trade aspects. When buyers and sellers agree to do business following these universal terms, they simplify the process of global trade because companies have a framework for negotiations. Customs authorities also use Incoterms to establish the base for import taxes. How do Incoterms aect the price of global transactions? The terms define which aspects of transportation and insurance are assigned to the buyer and the seller. For example, the seller must have shipments ready for collection by the buyer. In many cases, the goods can be collected from the seller’s warehouse or distribution center. In DDP terms, the seller must have the shipment ready for unloading at the buyer's warehouse. Any costs incurred in transporting the goods from the seller's location to the buyer’s location can increase the price of the transaction for the seller—the party responsible for delivering the goods to the buyer. What do Incoterms not cover? Many aspects of global trade are not covered by Incoterms, including title transfer, conflict resolution, the currency of payment, exchange rates, the jurisdiction of trade law, and liability on post-clearance audits.
50 Inbound Logistics • March 2023
Powered by FlippingBook