When offering goods for export there are several ways in which the price can be constructed. The main criteria are the division of costs and responsibilities which costs will be paid by the exporter (seller) and which by the importer (buyer)? At what point does the exporter discharge his responsibilities? An offer to a prospective buyer means little unless it is clear who is responsible for the various costs within
the export chain. The most basic offer would show only the selling price of the goods at the sellers premises. However, before the goods reach the buyer, the following costs are also incurred:
- documentation;
- export packing;
- inland freight (to depot, port or airport);
- charges at port/airport of departure;
- international freight (sea, air, rail, truck or post);
- cargo insurance;
- charges at port/airport of discharge;
- customs clearance;
- payment of import duties and taxes;
- inland freight to buyers premises.
When quoting it must be quite clear to the prospective buyer which of the above charges are included in the quoted price. To facilitate this, the International Chamber of Commerce has established a set of terms which are called INCO TERMS and are used to qualify a price, and indicate:
- which costs are included in the price;
- at which point the seller has discharged his responsibility;
- at which point risk (insurance) passes from seller to buyer (see Chapter 11, Transit insurance);
- the overall responsibilities of seller and buyer;
- who will make the transport arrangements.
These terms are called Incoterms. Each term is abbreviated to three letters. The latest version,Incoterms 2000, is available from the Irish Exporters Association.
