When importing or exporting goods, business owners need to be aware of the Uniform Commercial Code (UCC) and Incoterms. These regulations affect how payments are made and which party is responsible for various costs and risks. Understanding the differences between UCC and Incoterms can help business owners make sound decisions when trading goods overseas.
What are the general differences between UCC and Incoterms?
UCC (Uniform Commercial Code)
- is a set of regulations that govern commercial transactions in the United States (US).
- applies only within the US.
- is a set of regulations. This means it is more specific and detailed,
- is mainly concerned with the sale of goods,
- covers issues such as payment, delivery, and title transfer,
Incoterms (International Commercial Terms)
- are a set of global trade terms that define the responsibilities of buyers and sellers when shipping goods across international borders.
- apply globally
- are a set of trade terms and are less specific but provide a more general overview of trade procedures.
- cover the shipment of goods.
- focus on transportation and insurance.
Overall, UCC is more relevant to businesses within the United States, while Incoterms are more relevant to businesses operating in the global marketplace. However, both sets of terms are important for understanding trade finance procedures and ensuring compliance with international trade regulations.
Uniform commercial code
How payments are made?
As a trade finance professional, you need to be aware of the different methods of making payments under the Uniform Commercial Code (UCC). The most common payment method is by way of a negotiable instrument, such as a check or bill of exchange. Other methods include payment by wire transfer, credit card or debit card, and ACH transfer.
In order for a payment to be valid under the UCC, it must comply with the terms of the relevant sales contract or invoice. For example, the payment must be for the correct amount and made in accordance with any applicable deadlines. If a payment is late or does not meet all of the requirements set out in the contract, then it may be considered to be in default.
In the event of a default, the party who is owed money may be able to take legal action to recover the amount that is owed. This could involve filing a lawsuit or taking other legal steps to get the money that is owed. Alternatively, the party may try to negotiate a settlement agreement with the other side.
Payments under the UCC can be complex, so it is important to ensure that you are aware of all of the applicable rules and regulations. By doing so, you can avoid any potential problems and ensure that your payments are processed smoothly and efficiently.
Which parties are responsible for various costs and risks?
The global trade certificate is a valuable document that helps to protect the interests of both buyers and sellers in global trade. It can provide proof of purchase for goods, as well as evidence of payment and shipment.
There are various parties responsible for costs and risks in the process of global trade, including:
- The buyer is responsible for costs such as transportation, insurance, and tariffs.
- The seller is responsible for costs such as shipping, freight, and duties.
- The bank is responsible for costs such as letters of credit and documentary fees.
- The insurer is responsible for costs such as loss or damage during transport.
- The government is responsible for costs such as customs duties and taxes.
In addition to these costs, there are also a number of risks involved in global trade, such as:
- The risk of losing goods during transport.
- The risk of damage to goods during transport.
- The risk of not receiving goods.
- The risk of paying more for goods than was originally agreed upon.
It is important for businesses to be aware of these costs and risks when engaging in global trade. By understanding the responsibilities and risks involved, businesses can take steps to protect themselves and their interests.
How payments are made?
When a company needs to make a payment for goods that they have purchased from a foreign supplier, there are a few different ways that this can be done. One of the most common methods is called “Incoterms.” These terms are published by the International Chamber of Commerce.
They are a set of international rules that dictate how payments are made for goods that are traded between two countries. They are used to minimize the risk of disputes between buyers and sellers, and to ensure that both parties understand the terms of the transaction. It includes many foreign trade regulations
There are several different Incoterms options, each with its own set of rules governing payment. The most common ones are:
– FOB (Free on Board): The buyer pays for the goods when they are loaded onto transport designated by the buyer.
– CFR (Cost and Freight): The buyer pays for the goods and the cost of getting them to the destination port.
– CIF (Cost, Insurance, and Freight): The buyer pays for the goods, the cost of getting them to the destination port, and the cost of insurance.
– DAP (delivered at place): the sellers pay all cost and take reponsibility for the cargo until it is delivered at named place.
– DPU (delivered at place unloaded): The buyer is responsible for import clearance and any applicable local tax or import duties.
– FCA (free carrier): The place of delivery affects who is responsible for loading and unloading. If the named place is under the supplier or seller’s control, the seller is responsible for loading and unloading
– CIP (carriage and insurance paid):CIP is similar to CPT, but the seller or supplier must also insure the goods in the shipment for 110% of the contract value, to a coverage level set by the Institute Cargo Clauses or similar.
– CPT (carriage paid to): the seller or supplier pays for carriage (transport) to a named destination, including haulage and customs export clearance fees.
– FAS (Free Alongside Ship): The FAS rule applies to shipments by vessel only, not by air or land. Under FAS, the seller is considered to have delivered the goods when they are cleared for export and placed alongside the buyer’s ship at a named port
– EXW (ex works): Buyers make all payments such as inland waterway transport, carriage and insurance paid.
In order to make a payment using Incoterms, both parties must agree on which option they are using. The buyer will need to provide proof of payment to the seller, usually in the form of trade finance certificates. These documents show that the money has been transferred and that the buyer is legally obligated to pay for the goods.
The use of certificates of trade finance is becoming increasingly common in international trade. They provide a secure way for buyers and sellers to make payments, and can help to minimize the risk of disputes. By understanding Incoterms and the certificates that go with them, companies can streamline their payment process and ensure that their transactions are smooth and efficient.
Which parties are responsible for various costs and risks?
In today’s business world, it is important to be familiar with the different Incoterms – the terms of sale used in international trade. Each incoterm has its own set of costs and risks which are borne by the different parties involved in the transaction. Let’s take a look at some of the most common Incoterms and who is responsible for what.
The fob origin freight incoterm is one of the most common terms used in international trade. Under this term, the seller is responsible for delivering the goods to the port or other designated location, and the buyer is responsible for paying all transportation costs and risks from that point onward. This includes costs such as freight, insurance, and handling fees.
Another common Incoterm is cif cost, insurance, and freight. Under this term, the seller is responsible for delivering the goods to the port or other designated location, and the buyer is responsible for paying all transportation costs and risks from that point onward. The difference with cif is that the buyer is also responsible for buying insurance coverage for the goods.
The most risky Incoterm is ddp delivered duty paid. Under this term, the seller is responsible for delivering the goods to the buyer’s door, and the buyer is responsible for all costs and risks associated with taking possession of the goods. This includes duties and taxes which may be payable upon importation.
It’s important to be aware of which Incoterms are used in your particular business dealings, and to understand the costs and risks associated with each one. For more information on them and international trade, be sure to check out the resources available at the ICC Academy.
The next time you are shipping goods, be sure to understand the distinguish between UCC and Incoterms so that you can make an informed decision about which set of rules will work best for your business. Keep in mind that payments and who is responsible for various costs and risks may vary depending on which terms you choose. By understanding the basics of each system, you can make an educated decision about how to get your products from point A to point B as efficiently as possible.