Bite-Sized Entry #4: Incoterms

What are Incoterms? Why are they important?

Maikro~
PERL.eco
2 min readNov 3, 2019

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Let’s say you’re a seller shipping a container of pearls from the US to a buyer in China. Unfortunately, tragedy strikes and the container falls off the ship and the pearls are lost. Who’s liability is it? Is the seller obliged to re-ship the pearls, costing them millions of dollars? Or does the buyer bear the costs?

This is where Incoterms come into play. They define the rules, rights, risks and obligations of the contracting parties, including which party is ultimately responsible for the cargo throughout every stage in its value chain, including liability for port charges and fees. There are 13 rules in the Incoterms, which cover common and specific transactions, with main differences relating to when liability is transferred between sellers and buyer.

WHAT’S THE VALUE PROPOSITION FOR PERLIN?

ALL international trade transactions use the ICC’s Incoterms. Once the smart contract Incoterms Perlin is building for the ICC come into effect in 2020 — ALL digital trades will also use these new Smart Contract Incoterms.

A specific example is the Ex Works rule has the liability shift to the buyer the moment the item leaves the factory. On the other hand, the Delivery Duty Paid rule has the liability shift from seller to buyer only when the item has reached the doorstep of the buyer, and therefore any damage or loss of shipment beforehand has the seller responsible.

You now know how Incoterms work! In the next segment, we’ll show you how Perlin is reshaping the Incoterms into the ICC Incoterms Smart Contract Suite, ready for 2020!

For more resources on Incoterms and their specifics, click here.

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