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Unit 2: Methods of Payment and Incoterms

goods by any other method of transport, he will have problem producing the bill of Notes
lading, which is possible only in case of ocean transport. The bill of lading carries the title
of goods, which is not possible in any other documents being used in other means of
transport such as Airway Bill; Combined Transport Document; Multimodal Transport
Document and Customs Transit Challan. It is well-known that the document carrying the
title of goods is preferred for documentary collections (D/A and D/P) and payment under
Letter of Credit.
5. A solid base to the contract: As incoterms provide a solid base to contract execution in
international trade transactions, domestic traders, in case of large-scale contract, also use
the same, as incoterms are very clear and specific in differentiating the responsibilities of
seller and buyer. The reasons of increased use of incoterms in purely domestic transactions
are only because of the larger clarity provided by them in exercise of role and
responsibilities of seller and buyer. That is why some people have rightly referred to
incoterms as incoterms.

2.2.2 Need of Revisions of Incoterms

There have been questions why incoterms have been revised so many times. The answer is very
simple because the successive revisions and editions of incoterms have provided an opportunity
to adapt them to the ever changing and emerging business and commercial practices in an era of
liberalisation and globalisation. The revision; which took place in 1980 introduced another
incoterms as Free Carrier (FCA) in order to deal with problems such as receiving goods from
Land Customs Station, Inland Container Depo, and Container Freight Station, which was not
possible under incoterms FOB as being traditionally used. Such new incoterms were the need of
time and were demanded by the trading community, as manufacturing is no more concentrated
around seaports or coastal areas. It may be concentrated deep inside the country requiring the
stowing of cargo into a container and transport of cargo to nearby seaport for subsequent
carriage through rail or road, or a combination of both. It can be said that Incoterm FCA was
introduced to facilitate the transport of goods through combined or multimodal transport of
cargo, as the management of logistics as well manufacturing activities has been very complex in
today’s world.

Beginning in the eighties, paper documenting was replaced by fast, transparent and speedy
electronic trade documentation and accordingly, the 1990 revision of incoterm provided some
clauses dealing with the exporter obligations to provide proof of delivery of cargo. Such clauses
introduced provide the proof of delivery of cargo through electronic mode (EDI) by replacing it
with paper documentation. Hence; the electronic mode of communication in a legally accepted
manner; has not only reduced the transactional cost in international trade but has also improved
the speed of work by reducing the trade cycle. It can be said that the International Chamber of
Commerce, through the 1990 revision of Incoterms, has played its role in trade facilitation in the
best possible way.

2.2.3 INCOTERMS 2000

The dimensions of trade activities worldwide have changed drastically and there has been a
significant expansion of trade and investment under the World Trade Organization. Accordingly,
the revision of incoterms that took place in 2000 attracted a huge response from the trading
community, shipping companies, insurance companies, banks, freight forwarders and respective
government being represented through their customs and excise departments. It was a far more
democratic revision as all concerned parties participated actively in the revision process. Some
trade facilitating institutions particularly the World Customs Union, United Nations Centre for
Electronic Trade Facilitation, United Nations Conference on Trade and Development;

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