By Steve Agbota, [email protected]
International Commercial Terms (INCOTERMS) 2020 rules came into force on January 1, 2020 to enable those in the export and import trade make appropriate choices on the rules in their trading transactions.
As leading country in the area of import and export business, experts have said Nigeria needs specialised skills in trade and transport sectors to be conversant with the workings of the INCOTERMS 2020 because of its relevance to trade across the globe.
Unfortunately, due to the lack of understanding of the INCOTERMS, many Nigerian exporters and importers have lost billions of dollars in contractual agreements with their foreign counterparts, leading to litigations.
However, the INCOTERMS rules are series of pre-defined commercial terms published by the International Chamber of Commerce (ICC), the purpose of which is to provide a set of international rules for the interpretation of the most commonly used terms in trade. They are aimed at curtailing to a considerable degree, the disagreement and uncertainties that emanate from the different interpretations of such trade terms in different countries. The first edition of incoterms was published in 1936 and has since then undergone a number of amendments, the most recent which is the ninth version being INCOTERMS 2020. This is in order to bring the rules in line with international trade trends and practices.
Interestingly, the INCOTERMS 2020 clearly spells out the rules viz-a-viz delivery, risk and costs as applicable to the different modes of transport in domestic and international trade from seller to buyer. It is very explicit on obligations and responsibilities of the parties in the contract, taking into account some common complexities that usually arise and has included security-related requirements within carriage obligations and costs. The Verified Gross Mass (VGM), a new development in maritime trade was also addressed and this has been adjudged to be an improvement from the previous version, INCOTERMS 2010.
Speaking at a sensitisation workshop organised by the Council in collaboration with ICC, Nigeria in Lagos, Executive Secretary, (NSC), Hassan Bello, said adequate understanding of the INCOTERMS rules would go a long way in mitigating trade disputes, litigation and its waste of time and resources.
“It is very important to create the required awareness for all our stakeholders in the trade and transport sector to have a full understanding of the workings and application of INCOTERMS 2020 and to be able to make appropriate choices on the rules in their trading transactions.
“It is pertinent for every stakeholder in the trade and transport sector in Nigeria to be conversant with the incoterms, because it does not only apply to international trade, but also very relevant in domestic trade,” he said.
Bello noted that with the commencement of the African Continental Free Trade Area (AfCFTA), which seeks to create a single market and deepen the economic integration of the African continent, Nigeria must put in place all necessary measures to reap the biggest benefits of the AfCFTA as the biggest economy in Africa.
According to him, understanding and right application of INCOTERMS 2020 is very important for stakeholders to play significant roles in the working of the AfCFTA.
“Considering recent developments in the inland transportation of goods through the rehabilitation and expansion of the Nigerian railway network and establishments of Inland Dry Ports in different parts of the country, we need to be adequately prepared for the increase in trading activities that this development will bring to international trade. More goods would be transported from different parts of the country to the dry ports and seaports and into the international markets and vice versa.
“The sellers and the buyers of these goods need to understand their responsibilities in terms of the delivery, costs and risks involved in the transactions required to move the goods from origin to destination. This can only be possible with adequate understanding of the INCOTERMS 2020,” he said.
Also speaking, Secretary General, ICC, Nigeria, Olubunmi Osuntuyi, said a number of traders have lost huge resources to lack of knowledge of International procedures and conventions.
She urged the trading public to be sure of any contractual agreement before they append their signature to avoid putting their resources to risk.
“We cannot afford at this level to be wasting resources. When people enter into contractual agreements with their trading partners whether within or outside the country, they should be sure of the agreement and operate from the point of strength.
“A number of persons have lost a lot of money as a result of lack of knowledge of International procedure and conventions like the incoterms. If they truly understand before appending their signature on such a contract, they will look at it very critically so that they don’t put their resources to risk and they are sure that the essence of entering into that contractual agreement is achieved.” she said.