International Trade contracts and Incoterms

International Trade contracts and Incoterms

Different countries have different business cultures and languages. It’s a good idea to make sure you have a clear written contract to minimise the risk of misunderstandings. The Incoterms rules or International Commercial terms are a series of pre-defined commercial terms widely used in international commercial transactions.

The contract should set out where the goods are being delivered. It should cover who is responsible for every stage of the journey, including customs clearance, and what insurance is required. It should also make it clear who pays for each different cost.

To avoid confusion, internationally agreed Incoterms should be used to spell out exactly what delivery terms are being agreed, such as:

  • where the goods will be delivered
  • who arranges transport
  • who is responsible for insuring the goods, and who pays for insurance
  • who handles customs procedures, and who pays any duties and taxes

For example, an exporter might agree to deliver goods, at the exporter’s expense, to a port in the customer’s country. The customer might then take over responsibility, arranging and paying for customs clearance and delivery to their premises. The exporter might also be responsible for arranging insurance for the goods until they reach the port, but pass this cost on to the customer. See the guide on International Commercial Contracts – Incoterms.

As well as including delivery details, the contract should cover payment. This should include what currency payment will be made in, how much will be paid, when payment is due and what payment method will be used.

To find our more regarding Incoterms and how they affect your business contact Logicom Hub or sign up for our next Incoterms training class.

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