Customer-Centric Approach to Incoterms
The main purpose of Incoterms (International Commercial Terms) is to provide a uniform, constant and authentic interpretation regarding the delivery terms of commercial agreements. Accordingly, the selected terms of delivery must comply with the conditions agreed between the seller and the buyer.
Thanks to Incoterms, operators from different countries, with different legislations, can rely on uniform and authentic interpretive sources for properly and fairly sharing the costs and the risks arising from the delivery of goods.
Both parties of a sales contract have to agree in advance on Incoterms by specifically mentioning it in the contract. The terms can be completed with further definitions as agreed by both parties.
The scope and function of Incoterms are identified through the acknowledgement of four “moments”:
- Who pays for the transportation costs?
- Where does the delivery take place?
- At what point is the risk transferred from the Seller to the Buyer?
- What is the share of obligations arising from the delivery?
Why Algol Chemicals has chosen to use certain predefined international contract terms when selling goods
Good customer relations are at the heart of our business. Accordingly, Algol Chemicals has also chosen to favour Incoterms that support long-term relations with our customers. After a short conversation with Algol Chemicals’ Logistics Manager Anssi Kiviniemi, one realises that Incoterms is not so much about the expenses and which party is to carry them, but rather about how to maintain and nurture the mutual trust and good feeling between the parties.
“Incoterms are often considered a part of logistics, although they are as crucial to the commercial agreement as the price and payment terms”, explains Kiviniemi and continues: “Logistics is the part of business that operates according to the agreed contract and cannot affect the agreed terms anymore after the contract has been signed. Too often, the parties agreeing on the commercial agreement do not fully understand the content and the differences between the different contract terms, and this causes unpleasant situations when something goes wrong.”
There are many Incoterms that sound similar to the uninitiated. A good example is Incoterms CPT (carriage paid to) and DAP (delivery at place), both of which are paid and arranged by the seller to the place agreed in the contract. However, there is a major difference between these two when it comes to the transfer of risk and obligations. DAP is far more favourable and clearer for the buyer when something unexpected happens.
We at Algol Chemicals have 125 years of experience in handling and storing chemicals, as well as arranging deliveries all over the world. With us, you can trust that your interest is our first priority. We believe in long-term relationships with our customers and also the carriers we choose to work with.