PPCC Training Manual 9 (1).doc

Similar institutions to enable a borrower to provide

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similar institutions to enable a Borrower to provide early payments after delivery of goods and services and trust in the agreed contract terms, e.g. receiving payments within the time limits after delivery and acceptance; b) In cases where contracts are signed and orders are placed by execution agencies (ILO, WHO, FAO, UNESCO), suppliers, in fact, receive payments regularly according to agreed terms. c) Normally, suppliers act in good faith when making deliveries to government agencies in developing countries. Due to competition on the World market-especially in the equipment sector- they prefer not to add additional charges for interest to compensate for late payments on ex-factory prices. If a buyer, despite available funds, is late in making payments, suppliers may not participate in future bidding. To conclude, accuracy is the key note which ensures timely withdrawal of funds, along with correct references to relevant documents and clear payment instructions. CHAPTER 12 12.0 TRADE TERMS Procurement officers must have an understanding of the trade terms that have been developed as instruments for an efficient division of cost and responsibility for making delivery arrangements between buyers and sellers in international sales transactions. 12.1 Incoterms^ In recent times it became a source of worry as to the complexities in applying different trade terms in the delivery of goods across national boundaries. The problems inherent in this form of international transaction therefore gave birth to INCOTERMS which reduced to a minimal degree the differences between International trade and national ones. Incoterms are a purely contractual devise requiring the consent of both parties for their application. In addition, these set of rules describe only the minimum obligations of the seller in those instances when the sellers obligations vary according to custom in different countries. The purpose of INCOTERMS therefore, is to provide a set of International rules for the interpretation of the most commonly used trade terms in foreign trade. 12.1.1 Categories of Trade Terms 81
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The terms have been grouped in four basic categories:- i) The only term whereby the seller makes the goods available to the buyer at the sellers own premises (the E-Term Ex works) ii) The situation where the seller is called upon to deliver the goods to a carrier appointed by the buyer (The F-term FCA, FAS and FOB) iii) The C-terms where the seller has to contract for carriage, but without assuming the of loss of or damage to the goods or additional costs, due to events occurring after shipment and dispatch (CFR,CIF,CPT and CIP) iv) Finally, the D-terms whereby the seller has to bear all cost and risks needed to bring the goods to the country of destination (DAF,DES,DEQ,DDU and DDP) 12.1.2 The 'E' Term Ex works means that the seller fulfills his obligation to deliver when he has made the goods available at his premises (ie works, factory, warehouse,) to the buyer. In particular he is not responsible for loading the goods on the vehicle provided by
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