1. A) what do you understand by the term Incoterms?

Incoterm are the set of rules established by international chamber of commerce (ICC),
covering the terms that are commonly used in international trade contract. So as to reduce the
risk and uncertainty of international trade contract such as damage ,lost or even not delivered
a all when goods across international borders . Also this rules are recognized b buyers and
sellers in the whole world as used to define the responsibility and duties of the buyers and
sellers in the contract of carriage of goods from its origin to destination place (Medvedev,
2010).
Example of these Incoterms are; Ex works(EXW), Carriage Insurance paid to (CIP), Cost and
Freight (CFR), Free on Board (FOB), Free Carrier (FCA), Delivered Duty Paid (DDP) and
Cost Insurance and Freight (CIF) .
B) What are the roles of Incoterms in Global sourcing and Procurement at least 5 roles.
Provides the clear sharing of expenses between parties during transportation, the
international rules established by international chamber of commerce enhance the
distribution and sharing of cost such as custom charges, insurance charges, import or export
tax and storage charges between buyer and seller during when goods are being transported
from its origin to the place of destination.
To reduce risk dispute or disagreement, since incoterms define the responsibility and
duties each party that is seller and buyer and everyone knows his duties and go alone to what
she or he is required to fulfil and not otherwise this situation help to prevent confusion that
may arise between buyer and seller during international. For example in the case of not
delivered of goods the incoterm used will state the responsibility of each parties and transfer
the Rick form on part to another.
Determine risk regarding goods delivered from seller to buyer, for example ex work
incoterm and seller's obligation is to provide goods according to the terms of the contract at
his premises ready to be collected by the buyer while other obligations remain to the buyers.
It is used to regular and ensure proper management of international procurement
contacts which involves selling and buying of goods from abroad to the local country by
improving the efficiency and effective transportation processes when goods are moved across
international borders. For example when Tanzanian government tend to purchase goods such
as Furniture from China the incoterm are the rules which used to regulate and manage the
performance of such purchasing contract.

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It determine the mode of transport to be used in transportation of goods across the
borders due to the fact that some incoterm due to its nature are being used in a specified
mode of transportation for example there are incoterm which is specifically used in marine
transportation such as Free on Board and others are suitable in air mode of transportation like
Cost and Freight so that the selection of incoterm to be used it in international trade contract
it identify the mode of transportation for the movement of goods across international borders.
C) Describe five weaknesses of Incoterms in Global sourcing and Procurement (5 points
with real examples)
Buyers and sellers will have different preferences when using them; For example seller's
may choose CIF because they understand their shipments in a better way than buyers. The
buyers in contrast may prefer FOB for the same reason. So this becomes difficulty to
negotiate and agree on the best way of incoterm to be used and that will favor among them in
terms of costs, duties and responsibilities.
Difficulty in Resolving Damage disputes due to rule inapplicability; There are several
circumstances when using an inapplicable rule creates a strange conflicts of trade
assumptions and renders disputes resolution more difficulty. For example, One scenario is the
aforementioned FOB, this time used for any non-water movement. This misuse is very
common due to FOB's superficial similarity to the antiquated UCC rule which is
unfortunately called "FOB". Where by the modern incoterm rule " FOB" is a water only rule
that specifies a transfer of risks once placed on board a water vessel.
Damage by the party not responsible for the goods; This can result from several
misapplication of Incoterms rules. For example, when using EXW for heavy cargo. Since
EXW entails handling the goods on the seller's premises but, risk transfers prior to handling
the goods, either the buyer operates heavy equipment on the seller's premises or the seller
loads goods for which the seller has no risk or responsibility. This means any damages caused
by the seller loading the goods is now a dispute.
Liability from export compliance failure; All Incoterms, requires a seller to supply
documentation for export and thereby set the expectation of goods sold for export. For
example FCA requires that the documentation about the origin of goods and any relevant
documents for export be made available to the buyer. This is not only serves to ease the
transfer of information, but also sets the expectations in the seller that the buyer must be
vetted along with the ultimate destination of the goods against compliance with export law.

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They only cover the obligations in terms of delivery of the goods; They therefore give no
clear indication of payment terms, guarantees and liability of the seller or buyer in the event
of damage to or loss of the goods. Therefore, these aspects must be included elsewhere in the
sales contract.
Generally; Though there are a lot of weaknesses of Incoterms but still Incoterms is very
important in Global sourcing and procurement during international trade. Therefore, in order
to overcome this dilemmas a Global Trade Management (GTM) helps you by telling the right
incoterms according to the products transported and the country of destination. In this way
you effectively control the risks of your operation and your exchange with your partners.
D) Discuss four groups of Incoterms (2020) in Global sourcing and Procurement
Incoterms were developed and published by the International Chambers of Commerce (ICC)
in 2009. Incoterms are the internationally identifiable acronyms used to establish the precise
nature of the relationship between seller and buyer in any commercial transaction. These
phrases are an efficient way of communicating the specific responsibilities assigned to each
party wherever a transaction involves the transportation of goods. For example, incoterms
outline who is obliged to cover the cost of each part of the international journey, who is
responsible for the shipment at each part of the international journey, and who must ensure
the goods are insured. Incoterms also determine what documentation is required for the
transaction.
What are the types of incoterms?
Currently, there are 11 different incoterms. Each type is divided into four groups: E, F, C and
D. These categories are determined by the delivery location and who is responsible for
covering the cost of each part of the journey. The groups are then split into sub-categories
which refer to various scenarios. When choosing an incoterm, buyers and sellers should
thoroughly review each incoterm and decide which set of terms best suit them and their
shipment.
Incoterms Group E – EXW (Ex Works)
Ex Works places most of the responsibility onto the buyer. The seller ensures the goods are at
the seller’s premises or another named location where the buyer loads and clears the goods
for export.

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Incoterms Group F
In this group, the seller is responsible for delivering the goods to the buyer’s pre-agreed
method of transportation. After this, the buyer takes responsibility for all the costs and risks.
There are a couple of sub-groups in the F category of incoterms, including:
i. Free Carrier (FCA): This is similar to Ex Works. The seller delivers goods either to
the carrier, a nominated person at the seller’s premises, or another named location.
The point at which any risks are passed onto the buyer must be clearly stated.
ii. Free Alongside Ship (FAS): FAS is when the seller delivers goods alongside a vessel
nominated by the buyer. The responsibility lies with the buyer once the goods are
alongside the vessel.
iii. Free on Board (FOB): FOB is when the seller delivers goods on-board a vessel
nominated by the buyer. The responsibility lies with the buyer once the goods are on-
board the vessel. Both FAS and FOB are incoterms used for waterway shipments.
Incoterms Group C
In this group, the seller bears responsibility for all costs to the destination port. Once the
goods are loaded onto the transport, the risks are transferred to the buyer. Group C incoterms
include:
i. Cost and Freight (CFR): CFR is similar to FOB. The difference is that the seller must
pay for the costs and freight to deliver goods to their destination.
ii. Cost, Insurance and Freight (CIF): CIF is similar to CFR. The difference is that the
seller arranges insurance cover against the buyer’s risk of loss or damage. Both of
these terms relate to waterway shipments.
iii. Cost Paid To (CPT): In this case, the seller is responsible for arranging the
transportation of the goods to a named destination, but not for insuring them.
iv. Cost and Insurance Paid To (CIP): This is similar to CPT, except the seller is also
responsible for insuring the goods.
Incoterms Group D
These terms relate to the destination of goods:
i. Delivered at Terminal (DAT): DAT is when the seller delivers the goods to a named
place of destination, once the goods have been unloaded. The seller has full
responsibility for the goods up until the named place of destination.

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 ii. Delivered at Place (DAP): DAP is when the seller delivers the goods ready for
unloading at the named place of destination. The seller has full responsibility for the
goods up to the named place of destination.
iii. Delivered Duty Paid (DDP): This is for when the seller is responsible for all costs and
risks relating to the delivery of goods to the buyer’s named place of destination. This
includes clearing goods for export and import, paying any duty and carrying out
customs formalities.