Problems and Solutions of Using Incoterms® Rules

Abstract

International Commercial Terms (Incoterms^® Rules) is a set of standard terms utilized globally as a part of the contracts for sales of goods since 1936. However, most of users still have intepreted the criteria of Incoterms^® Rules differently. The users still have arguments because of lack of understanding of the detailed nuances in each term. The choice of the correct Incoterm® rules can improve the efficiency and effectiveness of the delivery to the end customer, reduce the risks and limit the costs. Therefore, the purposes of this research were to study significant problems and solutions of using the updated Incoterms^® 2020 rules by focus group interviews with twelve users of the Incoterms^® rules from the leaders in automotive and parts industry.

The study revealed that the users of the Incoterms^® 2020 rules still have lack of knowledge in essential criteria. The different agreements against standard were not mentioned in the sales contracts. The terms for maritime transport only were applied to air and road shipments. Moreover, the users had no guidelines to choose the appropriate term for the specific transaction they wished to engage in. To solve the problems, the companies arranged Incoterms^® rules training for the users continuously. The sellers and buyers confirmed their agreements by email for unclear obligations. However, the users should have a reliable manual of the Incoterms^® 2020 rules for references. They should choose the term based on their capabilities without operational or legal limitations. If necessary, the different agreements from the standard should be clearly specified in the sale contracts.