UNDERSTANDING HOW TO BECOME A SMART EXPLORER

JOHANNA ALEXANDRA BARRERO RESTREPO

CÓDIGO: 1.118.532.756

SERVICIO NACIONAL DE APRENDIZAJE SENA

FASE DE PLANEACIÓN
CIUDAD
2021
 INTRODUCTION

The purpose of this paper is to learn a little more about the international terms used for the purchase
or sale of a product or service, which are called Incoterms. These terms are used in the international
arena for transactions that are made daily in imports or exports of products or services.

To understand a little of the terms Incoterm and with the help of the following video
(https://www.youtube.com/watch?v=5M-FnhpqmqA). In which we will explain a little about what
are the terms, their importance and their proper application in global transactions. For this, a
workshop will be held to answer each of the questions.
 CONTENTS

INTRODUCTION ................................................................................................................................ 2
ACTIVIDAD ......................................................................................................................................... 4
1. Primero observe el video “International Trade Webinar - Incoterms”, el cual se encuentra en los
documentos complementarios pertenecientes a esta actividad de proyecto y seguidamente desarrolle el
taller dando respuesta a cada uno de los siguientes planteamientos, utilizando argumentos claros,
estructuras gramaticales adecuadas y un vocabulario técnico: .............................................................. 4
CONCLUSIONS ................................................................................................................................... 6
 ACTIVIDAD

1. Primero observe el video “International Trade Webinar - Incoterms”, el cual se encuentra en los
documentos complementarios pertenecientes a esta actividad de proyecto y seguidamente
desarrolle el taller dando respuesta a cada uno de los siguientes planteamientos, utilizando
argumentos claros, estructuras gramaticales adecuadas y un vocabulario técnico:

1. Why did some of the lecturers say that understanding the way Incoterms work could be a
quite confusing area?

Because most understand or believe that incoterms are the complete contract or agreement in an
international negotiation. When the reality is that Incoterms define the delivery time, insurance
and documentation attached to this transaction.

2. How are Incoterms useful to avoid misunderstanding when talking bot international
trade?

It is important to be aware of incoterm terms to understand the agreements you would like to make
rather than being forced to accept an agreement that you are not comfortable with or that does not
fit your business. In addition, it is important because:

- Eliminates the risk of loss.

- Limit your liability exposure
- You protect yourself by operating globally

3. Why do many people see the incoterm ex-works (EXW) as the simplest way to understand
how the incoterms work?

This Incoterm has a very simple to manage function in terms of the contract of delivery of the
product with the buyer. In this case the manufacturer only has to deliver the product at the door of
its factory and the buyer is in charge of transporting it to its destination, i.e. the manufacturer has
no further responsibility for the product.

4. Why could you use a wrong incoterm for your business if there is not right or wrong when
using an Incoterm?

Because the important thing about the Incoterm is that it suits you and your customer best, all this
in order to eliminate the risk of losses in the transaction.

5. How many Incoterms should you use to stablish a good contract for your international
trade?

It is not to look at Incoterms in isolation, but to take a quick look at which Incoterm suits you best
at the time of your international transaction. Taking into account the country where you are going
to buy and sell your product or service, helps you to define which Incoterms to use.
6. What are some of the operations that generate costs and must be paid either by the buyer
or the seller?

The operations that generate payment are:

- Transportation
- Tariffs
- Insurance

7. What are the three basic elements that Incoterms cover? Briefly explain how they work
all together in a contract of sale.

The three elements are:

- Place: where the seller delivers the goods to the buyer

- Costs: what the seller pays to that point of delivery, unless otherwise agreed with the buyer.
- Risk: when the seller passes the transit risks to the buyer

These three elements work in a contract when the responsibilities are made clear: if the seller only
takes care of the product at the door of his factory, then the buyer has to bear the transportation
costs to the place of sale, in this transaction there is a risk of transit where the goods may be lost,
stolen or suffer physical damage due to mishandling or improper storage.

8. Why is it important to do a market research before establishing what the best incoterm(s)
should be taken into account for your sales contract or agreement?

To understand your market is to understand all aspects surrounding your sale. These aspects are:
payment terms (currency and timing), tariffs, means of transportation, free trade agreements if
they exist between your country and the country where you are going to export your product or
service, customs, internal politics.

9. What aspects should be taken into account to establish the best incoterm(s) to define the
shipment of services?

The aspects to be taken into account are:

- The market that is identified, its advantages and disadvantages.

disadvantages.
- Whether or not you need Incoterm
- The elimination of risk to the maximum as having clear insurance, freight or losses.

10. Why would it be necessary to add extra words or explanation in your sales contract when
using incoterms?

Because the clauses make clear the responsibilities of both the seller and the buyer in terms of
shipping terms (terminal handling charges), insurance and standard practice transportation to be
used when negotiating internationally.
 CONCLUSIONS

- We must be clear that Incoterms are terms that are used in the different negotiations, not purchase
and sale contracts.
- It is always necessary to make a market study to identify which type of Incoterm to use in the
transaction.
- The responsibilities of both the seller and the buyer must be put in writing in the contract of sale
of the product or service.