What you need to know about Incoterms® 2010

Fri 11 Sept 2015
Posted by: International Trade News

Mike Josypenko, IOE’s Director of Special Projects, talks about Incoterms® 2010, and the training offered by the Institute.

Incoterms® are one of most important features of international trade, but sadly, one of the most misunderstood: they feature regularly in the lives of a wide range of people involved in exporting or importing (sales, customer service, purchasing, accounts, freight and shipping personnel), but many do not appreciate the full significance of the terms which they are dealing with.

The tragic explosion in Tianjin in China in 2015 is a case in point; pictures of damaged shipping containers on quaysides or in container depots, tossed around like matchboxes by the explosions, will stay in the memory of many people.

Less well understood, but equally important, is the fact that for any UK exporters and importers who may have cargo loaded in any of the containers damaged by the explosion, the choice of Incoterm® for their transaction may dictate whether they will be directly affected financially by the horrific events.

Many people associate Incoterms® with freight charges; they are often used as a convenient way of confirming which party is responsible for paying the various charges associated with international transport: as such they are frequently utilised by freight forwarders and carriers when issuing freight quotations or seeking clarification of who will pay their fees. However, Incoterms® cover a much wider range of responsibilities and obligations for a seller and buyer in an international sales contract, including:

• who bears the ‘risk’ in case of any loss or damage to goods at any specific point in an international journey
• which party is responsible for loading or unloading goods, or for inspections to cargo
• who is responsible for producing documentation, submitting export and import customs entries, or arranging export and import licences, as well as a range of other contractual obligations

Using Incoterms® properly as part of a sales contract provides clarity for both parties, gives certainty over costs, and reduces the risk of disputes and disagreements with clients or suppliers. Using unsuitable Incoterms®, or using the terms without understanding the implications of your choice can lead to unexpected costs, delays or unhappy clients.

One of the most common, but misunderstood aspects of Incoterms® is the use of the term ‘Ex Works’.  This is often described by exporters as ‘the easy Incoterm®’, believing that it simplifies the export process by taking responsibilities away from them. In fact, under Incoterms® 2010 (the latest version), using Ex Works in the wrong circumstances can lead to problems and issues which can be far more dangerous and costly for the business.

The Institute’s “Effective Incoterms® ” courses are designed to provide traders with a comprehensive guide to using the latest version of Incoterms® effectively. Suitable for staff of all levels of experience, from sales, operational, procurement, or accounting functions, the course combines effective learning materials and tuition, interactive discussions, and question and answer sessions. The course looks at the background and history of Incoterms®, and examines each of the 11 current Incoterms®, from the perspective of seller and buyer, explaining all of the key features in clear detail.  The session also guides delegates through areas of particular risk for traders.

The course is designed to enable participants to:

• Understand the functions and significance of Incoterms® 2010
• Understand the features, obligations and responsibilities for each of the 11 terms within Incoterms® 2010
• Choose the most suitable Incoterm® for any transaction
• Avoid pitfalls and problems from use of unsuitable terms
• Understand when and how to Use Incoterms® 2010 effectively

To book your place or find out more click here.