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Why Incoterms® Matter When Shipping Agricultural Commodities

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Without Incoterms® shipping agricultural commodities abroad could result in the buyer, seller or the shipper misunderstanding the original contract. Incoterms® are defined by the International Chamber of Commerce (ICC) and work as a set of rules for all parties involved in the global trade of goods, including agricultural commodities such as grains, livestock, and eggs.

Incoterms and agricultural commodities

Ship loaded with agricultural commodities - Source: pexels.com 

What Are Incoterms®?

Incoterms® are terms of trade used by buyers, sellers and shipping handlers when the goods go from point A to point B. There are currently 11 Incoterms in the newest edition of the Incoterms 2020. These rules apply to all levels of fulfilling an order, including purchase, preparation for the goods to leave the warehouse, transport arrangements and ensuring a legal certificate of entry into port is obtained. Incoterms® are essential to provide individuals with the information and assistance they need to contribute to global trade.

Who Uses Incoterms®?

Incoterms and agricultural commodities

Ship loaded with agricultural commodities - Source: pexels.com 

Whether you are importing or exporting goods, such as agricultural commodities, you will use Incoterms®. For example, when you purchase cocoa or coffee from our online wholesale marketplace, both the buyer and the FoodPorty seller will engage in practices aligned with the Incoterms®. Using these guidelines ensures a smooth transaction process and minimal headaches when getting your food shipped.

 

In addition, Incoterms® are accepted by almost all governments worldwide. There are a couple of exceptions, such as India and South Africa, but they are universal accepted contract terms for the most part.

Why Are Incoterms® Important?

  • Incoterms® set clear expectations for each party. For example, Incoterms® states who takes responsibility for the goods at what stage, where the costs associated with the order will fall, and the risks each party accepts when goods are transported internationally. This reduces the chance of surprise costs or unexpected responsibilities after an order is placed.
  • Incoterms® save time. Using these predefined contract terms makes it faster and, therefore, more cost-effective to write contracts when participating in the sale or purchase of agricultural commodities.
  • Incoterms® can result in a smoother transaction process, as everyone is more likely to be on the same page when it comes to the contract. Not only does this save time and costs, but it can also save you work down the line as information should be more explicit from the get-go.

 

How This Relates To Shipping Agricultural Commodities

Incoterms and agricultural commodities

Random commodities - Source: pexels.com

 

For example, when you purchase an agricultural commodity such as the robusta roasted coffee beans from our wholesale marketplace, FoodPorty sellers will be responsible for the beans up until a certain point in transit. Once they reach a predefined stage in the transport process, the responsibility for the coffee beans will then turn to the buyer. This makes it clearer to know who is liable for the goods at specific times of the trade and which party needs to consider whether to insure the goods.

How To Find The 2020 Incoterms® Rules

As Incoterms have been in use for over 100 years, they are updated on a 10-year basis. You read over the newest addition of the Incoterms® through the official ICC website.

Summary

The International Chamber of Commerce (ICC) defines the 11 Incoterms® rules used by all parties involved in the global trade of goods, such as food. Incoterms® set clear expectations, save time and can result in a smoother transaction process.

 

However, although Incoterms® do aid the process of drawing up a suitable contact, please note that they are not a replacement for legal contracts. Therefore, it is always best to seek professional guidance and familiarise yourself with the 11 different Incoterms® on the ICC website and how they will affect your purchase and sale.