International Procurement: Highlights on some essential incoterms - Schain24.Com

International Procurement: Highlights on some essential incoterms

What are the incoterms?

Incoterms are nothing but some
International Commercial terms published by International Chamber of Commerce
to clearly communicate the associated risks,costs,tasks etc. evolved with
international procurement and logistics. Which are widely accepted by legal
authorities, governments and involved parties with the commercial  transactions .

Incoterms usually help to reduce
uncertainties and for that reason are incorporated in Letter of Credit, Sales
Contract etc. in the whole world. Incoterms are last amended/published by ICC
on January 01, 2013.Some essential incoterms are highlighted below:

Ex Works (Named place)

The incoterm EXW can be defined as
an agreement between a buyer and a seller that after production completed and
left warehouse of the seller, seller is not responsible for cost and liability
for the product.

Incoterms FOB and EXW can be used
interchangeably while consider terms and agreement between buyer and seller. Buyer
responsibilities include loading, transport, import and export, unloading and
insurance of the goods. In case among buyer and seller, one may get advantage
of concentrating on production, another may get advantage on transportation.

Seller is not responsible for loading
the goods unless specified otherwise and buyer is responsible for doing
insurance for EXW shipments under the buyer’s Ocean Cargo Policy. The insurance
Policy covers warehouse to warehouse. When purchasing goods under EXW buyer
should seek an insurer that will give coverage during this situation.

Bangladesh Export Projection FY10

FCA: Free Carrier (Named place)

While using the incoterm FCA , the
Seller agrees to give delivery of the goods into the custody of the forwarder,
freight forwarder etc. who are usually
nominated by Buyer.The Sales Contract or Letter of Credit must state
clearly the place or to which people the cargo would be dlivered.

After hand over the cargo to that
place or people buyer is responsible for loss or damage of the goods. Under the
buyer’s Ocean Cargo Insurance Policy, insurance would cover as the goods are
delivered to the carrier. It is in the buyer’s interest to review the insurer’s
country exposure.

FOB : Free on Board(Named port of shipment)

The incoterm FOB is from the point
of delivery of goods and transfer of risk, it starts with the goods pass the
ship’s rail at the named port of shipment. Responsibility of goods transferred
to the Buyer from the Seller when goods cross the rail of the ship.

Except  CIP and CIF , incoterms do not have any
obligation on the Seller and Buyer to provide insurance. But at some point,
either Buyer or Seller bears the responsibility for loss to the goods during

In context of Bangladesh Exporters,
Bangladesh Bank has ordered the enlisted banks and foreign currency handling
institutions to use Incoterm FCA instead of FOB while they had over cargo to
buyer nominated forwarder/carrier. Bangladesh Garments Manufacturers andExporters Association have advised its members to comply with the Bangladesh
Bank advice by a circular dated January 01, 2013.

They hope that it will help
Exporters/Sellers in Bangladesh Garment industries to get coverage of Insurance
Policy of Buyers. And they do not pay additional charges, such as Terminal
Handling Charges.

Bengali Version:

If required, please see the Bengali Version article from the same author from the below  link :


Comments 1

Leave a Reply

Your email address will not be published. Required fields are marked *