Page 42 - Banking Finance June 2021

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of all the import regulations of the buyer's country. So,
selection of DDP in such situations may prove complicated
or may lead to mistakes.

4. Going the easy way by using EXW:
Mistakes can happen even when the simplest of the
Incoterms® Ex-Works is used. This is possible when this
Incoterms® is accepted by the buyer without knowledge
about the export formalities / regulations of the exporter's
country. This may even prove costly to the buyer.

5. Using Incoterms® without correct address:
Using Incoterms® without correct address and named place
of delivery can lead to a misunderstanding and sometimes
Therefore provisions have been made to the Incoterms® may lead to additional cost also.
2020 to state that the buyer must instruct the carrier to
issue a transport document stating that the goods have
been loaded - i.e a Bill of Lading with an 'on board' notation. 6. Terminal Handling Charges:
In the past carriers have frequently refused to issue a Bill of Payment of Terminal handling charges should normally be
Lading with a notation to the seller if they have received discussed separately and agreed upon in the sale contract.
the goods from an intermediary transport (such as a truck), Since failure to pay the terminal handling fees on time may
instead of directly from the seller. lead to demurrage which may further spoil the spirit of the
trade. This will also help to avoid future confusions.
Misconceptions in the usage of
Conclusion:
Incoterms®:
It is not always easy to determine our rights and obligations
The usage of Incoterms® helps avoid misconceptions on the in an international sale contract. That is just what makes
part of buyers and sellers. Still, some common mistakes that Incoterms® so valuable. They allow us to resolve the doubts
are committed in their usage or selection are as follows:
we might have about the delivery and the transport of the
goods. Also, they are indispensible when it comes to security
1. Confusing ownership and risk: and developing a successful relationship with the
Incoterms® do not regulate the passing of the title of the counterparty.
goods from the seller to the buyer. They only refer to the
risk which is a standard during delivery times and to help If we use Incoterms® to define the terms, we can
divide the costs of the delivery accordingly. undoubtedly remove or, at least, reduce the uncertainties
that may lead to a misunderstanding. In addition, both
2. Using Wrong Incoterms®: parties will also know exactly their role in each part of the

Sometimes usage / selection of a wrong Incoterms® may delivery. This in turn will help the business in avoiding further
represent a risk to the seller. The selection of Incoterms® expenses, thus making the sale contract a success.
should mainly be based on the type of goods and the type
of transport involved in the trade. Using a wrong Incoterm References:
may require the seller to fulfill some additional responsibility Y "United Nations Convention on Contracts for the
which may alter the risk and also may involve additional cost. International Sale of Goods" Published by the United
Nations Commission on International trade Law in 2010.
3. Using DDP without knowing the import Y "Incoterms® 2020" by the International Chamber of
regulations: Commerce.
Not all sellers in the international trade have full knowledge Y Websites: iccwbo.org. T

42 | 2021 | JUNE | BANKING FINANCE