A whopping 75% of all global supply chain disputes are the result of a misunderstanding of international commercial terms (Incoterms), says trade training specialist Mark Goodger. The CEO of Global Maritime Legal Solutions was speaking at the first training session covering the new Incoterms 2020 at the Johannesburg Chamber of Commerce and Industry following the release of the latest edition of Incoterms. Goodger explained that Incoterms are a series of international sales terms which are widely used in global commercial transactions. “They are accepted by governments, legal authorities and supply chain practitioners worldwide and are intended to reduce – or remove altogether – the uncertainties arising from different interpretations of the terms in countries worldwide.” While South Africa is the 12th biggest sea-trading nation by volumes of cargo moved over a distance, the country controls less than 20% of Incoterm rules. Whereas Incoterms 2020 – which is closely aligned with the United Nations Convention on Contracts for the International Sale of Goods – should be incorporated into contracts of sale between buyers and sellers, this is not the case. “Unfortunately, the majority of South African shippers and traders are not compliant with this, which greatly increases their risks should a dispute arise,” said Goodger. He added that one of the most frequent problems was choosing the wrong Incoterm rule for the particular type of contract. According to him, many South African shippers still lack a comprehensive understanding of the Incoterms published 10 years ago in 2010. “Yet the terms were created to simplify issues and serve as protection for the trade.” This is a concern shared by Pat Corbin, chairman and non-executive director of the International Chamber of Commerce South Africa (ICCSA). He said that shippers and related industry members, such as maritime insurers and legal teams, needed to properly educate themselves. Corbin pointed out that while the ICC did not prevent any person or organisation receiving training on ICC matters, such training – particularly on the new Incoterms 2020 – should be delivered by trainers accredited by the ICC academy. “ICCSA supports only training on Incoterms 2020 which is delivered by trainers who have attained the required accreditation of the global organisation and who are listed on the database of trainers of the global organisation,” he said, noting that the process for qualification was extremely stringent and required a minimum 85% pass mark. ICC secretary-general John Denton agreed, saying that as global trade became increasingly complex, so did the risks relating to misunderstandings and disputes when sales contracts containing Incoterm rules were not properly drafted. “Reference to an Incoterms 2020 rule in a contract for the sale of goods clearly defines the parties’ respective obligations regarding topics such as risk, cost and arrangement of transport and customs clearance, thereby reducing the potential for legal complications,” he said.
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Incoterms 2020 should be delivered by trainers accredited by the ICC. – Pat Corbin