David Chapter 06 mod

David Chapter 06 mod - Chapter 6 T ERMS OF T RADE OR I...

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Unformatted text preview: Chapter 6 T ERMS OF T RADE OR I NCOTERMS LEARNING OBJECTIVES At the end of this chapter, the student should: 1 Understand how Incoterms are used to split the responsibilities of the exporter and the responsibilities of the importer. 2 Be able to identify the varied terms of international trade, or Incoterms. 3 Understand how Incoterms can be used for strategic advantage. 4 Have a basic understanding of the concept of electronic data interchange (EDI). PREVIEW Since 1936 a set of standardized Terms of Trade has been offered by the International Chamber of Commerce. Using part of the Chambers name, they are known as Incoterms and have gone through some revisions over the years. This is a highly technical chapter, and there are no shortcuts to examining each of the Incoterms and their relationship to the obligations of exporters and importers in shipping products. There is a handy summary of Incoterms in Table 6-1, p. 101 of the text, and reproduced at the end of this outline. 6-2 Chapter 6 Terms of Trade or Incoterms CHAPTER OUTLINE 6-1 Introduction 6-2 Understanding Incoterms I. Incoterms determine which tasks will be performed by the exporter and by the importer. II. Incoterms determine which activities will be paid for by the exporter and by the importer. III. Incoterms determine when the transfer of responsibility will take place. a. Different from transfer of title, which usually is when the exporter gets paid b. Transfer of responsibility is usually earlier than transfer of title. 6-3 Incoterm Strategy I. Incoterm is determined by strategy of exporting firm. Also constrained by: a. Type of product sold b. Method of shipment c. Ability of either party to perform tasks involved in shipment i. Exporter may facilitate sale by assisting importer in the shipment. ii. Importer may get price break if it agrees to perform all or most tasks of shipment. iii. Importer in effect always pays for transportation either as an add-on or by it being reflected in the exporters price. d. Trust parties have toward one another II. Choice of Incoterm is almost always exporters decision. a. It is usually based upon its strategy instead of on conditions of making a specific sale. b. Since it involves strategy, it is a critical decision for the exporter. 6-4 Ex-Works (EXW) I. Used with any merchandise II. Used with any form of transportation III. Syntax: EXW Poughkeepsie, New-York, USA, Incoterms 2000 = Poughkeepsie is town in which exporter will hold merchandise for importer (usually in the exporting country). IV. Easiest Incoterm for exporter, most difficult for importer V. Basically, exporter says: Here is product, come get it VI. Variant is EXW loaded a. Exporter will load goods b. Syntax: EXW Poughkeepsie, New-York, USA, Incoterms 2000, loaded VII. EXW term makes exporter vulnerable to competitors who may offer more importer-friendly terms of trade. Chapter 6 Terms of Trade or Incoterms 6-3 6-4a Delivery under EXW I. Nothing specific regarding delivery...
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This note was uploaded on 04/15/2011 for the course LSCM 4360 taught by Professor Staff during the Spring '08 term at North Texas.

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David Chapter 06 mod - Chapter 6 T ERMS OF T RADE OR I...

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