Lesson 2 - format of the Incoterms® 2020 book, and identical/similar articles across all 11 rules

Summary

This video, led by Bob Ronai, offers a comprehensive master class on Incoterms 2020, focusing on the format of the official book and its key articles. It explains the different groups of rules for both any mode of transport and sea or inland waterway transport. The video highlights the seller's and buyer's obligations under each rule, with a particular focus on the complexities of delivery, risk transfer, insurance, and customs formalities. Ronai, a member of the drafting group, provides insightful commentary and real-world examples to aid understanding, preparing users for practical trade scenarios.

Takeaways

• 😀 Bob Ronai is the course creator and provides a disclaimer that the content is not legal advice, but based on his extensive experience in Incoterms 2020.
• 😀 The lesson explains the structure of the *Incoterms 2020* book, starting with an introduction by Professor Charles D. Batista.
• 😀 Each rule in the *Incoterms 2020* book is prefaced by explanatory notes and includes diagrams to help users understand.
• 😀 The 11 Incoterms 2020 rules are divided into two groups: rules for any mode of transport and rules for sea or inland waterway transport.
• 😀 Seller and buyer obligations are clearly outlined for each rule, split into matching articles (A1 and B1, A2 and B2, etc.).
• 😀 Some articles are identical across rules, while others highlight the differences in obligations, particularly in terms of delivery, risk transfer, and insurance.
• 😀 In *A1 and B1*, the seller must provide goods as described in the contract and a commercial invoice, while the buyer must pay the price of the goods.
• 😀 In *A8 and B8*, the seller is responsible for packaging and marking the goods, while the buyer has no obligation in this regard.
• 😀 *A3 and B3* focus on the transfer of risk, with the seller bearing the risk until delivery, after which the buyer assumes the risk of loss or damage.
• 😀 *A4 and B4* outline the carriage obligations, where the seller is responsible for contracting carriage to the destination, while the buyer contracts for carriage from the named place of delivery.
• 😀 *A5 and B5* focus on insurance, with the seller having insurance obligations in CIP and CIF rules, while the buyer has no insurance obligations except in certain cases.
• 😀 Export and import clearance are outlined in *A7 and B7*, with export formalities typically falling to the seller and import clearance to the buyer.
• 😀 The lesson touches on the complexities of *ExW* and *DDP*, highlighting difficulties with export and import formalities in those rules.
• 😀 Future lessons will go deeper into specific Incoterms like *ExW*, focusing on delivery and transport documentation, cost allocation, and notices.

Q & A

What is the primary purpose of the video series 'Really Understanding Incoterms 2020'?

The primary purpose of the video series is to provide comprehensive master classes on Incoterms 2020, aiming to pass on the knowledge and experience of the presenter, Bob Ronai, for a better future in trade.

Who is Bob Ronai, and what is his role in the development of Incoterms 2020?

Bob Ronai is a member of the International Chamber of Commerce's Incoterms 2020 drafting group. He contributed to the creation of the rules for Incoterms 2020.

What does the disclaimer in the video clarify about the content being presented?

The disclaimer clarifies that Bob Ronai is not a lawyer and that the contents of the course are not legal advice, even though the explanations and opinions are based on his knowledge and over five decades of experience.

How is the content of the Incoterms 2020 book structured?

The Incoterms 2020 book starts with an introduction by Professor Charles D. Batista, followed by comprehensive explanatory notes for each rule, diagrams for better understanding, and then the articles themselves. The rules are divided into two groups: those for any mode or modes of transport and those for sea or inland waterway transport.

What are the two distinct groups of rules in Incoterms 2020?

The two distinct groups are: (1) rules for any mode or modes of transport (e.g., EXW, FCA, CPT, CIP) and (2) rules for sea or inland waterway transport (e.g., FAS, FOB, CFR, CIF).

What is the format of the obligations in each Incoterm rule?

Each Incoterm rule is split into two sets of obligations: A (the seller's obligations) and B (the buyer's obligations). These are presented on facing pages, with the seller's obligations on the left and the buyer's obligations on the right.

What are some examples of similarities and differences across the rules in Incoterms 2020?

Some articles are identical across all rules, some are slightly different, and some articles highlight the differences between rules, particularly in areas like delivery (A2 and B2) and insurance (A5 and B5).

How does the risk transfer between the seller and the buyer in Incoterms 2020?

The seller bears the risk of loss or damage to goods until they have been delivered as per the agreement. The buyer assumes the risk from the moment the goods are delivered, although this can change depending on the rule.

What are the key differences between the seller's and buyer's responsibilities for insurance in Incoterms 2020?

In all rules except CIP and CIF, the seller has no obligation to insure the goods. However, in CIP and CIF, the seller must insure the goods for the buyer's risk, with the buyer only responsible for providing information for the insurance if requested.

What are some challenges highlighted in the video when applying certain Incoterms rules, like EXW and DDP?

The video highlights challenges with EXW, where the buyer must handle export formalities, which is often difficult, and DDP, where the seller is required to manage import formalities and pay VAT or GST, which is usually impossible or very challenging due to legal requirements in many countries.