John Felix Bacalso

BSA-II
ASSESSMENT 6

1. The Incoterms clarify all matters affecting international commercial transactions,

especially pertaining to whose financial obligations a certain item falls under.
I believe that Incoterms serve as essential guidelines in global trade. They offer clarity to both
buyers and sellers regarding their respective responsibilities, particularly concerning the costs
and risks associated with delivering goods. By establishing these clear rules, Incoterms help
minimize confusion and potential disputes, thereby facilitating smoother and more efficient
international trade interactions.

2. What are the possible shortcomings of Incoterms as far as adherence is

concerned—that all parties involved follow its principles strictly? Explain
Despite their advantages, Incoterms can sometimes be problematic, especially when it comes to
following them correctly. The rules can be difficult to understand, leading to misunderstandings,
especially if parties aren't familiar with them or don't follow them closely. Also, differences in
laws and business practices between countries can make it hard for everyone involved to stick to
the Incoterms rules. This can cause arguments or delays in delivering goods, which can affect the
success of international deals.

3. What makes the term CIF (cost, insurance, and freight) less attractive to sellers?
The CIF (Cost, Insurance, and Freight) term is less appealing to sellers because it puts a greater
financial strain on them. Under CIF agreements, sellers are not only accountable for
transportation expenses to the destination port but also for insuring the goods against loss or
damage during transit. This could raise the total expenses for sellers and potentially subject them
to risks related to insurance coverage and claims, rendering CIF less advantageous when
compared to other Incoterms.
4. The Ex-Works term, although it burdens the buyer with everything in relation to
the shipping of his merchandise, in what instance could this term be a blessing
in disguise to him? Discuss.
The Ex-Works (EXW) term, while placing all shipping responsibilities on the buyer, can actually
be advantageous in situations where the buyer has access to cheaper shipping and logistics
options or has greater control over the shipping process. This arrangement grants the buyer more
authority over shipping decisions, enabling them to select the most economical shipping
methods, thereby benefiting in terms of cost savings and flexibility.

5. Although the majority of the costs associated with transportation and insurance
are the seller's responsibility, FOB-Free on Board provides a guarantee on the
seller's assumption of risks. Discuss.
While most transportation and insurance costs are typically borne by the seller, FOB-Free on
Board offers assurance regarding the seller's risk assumption. Once the goods are loaded onto the
ship at the port of shipment, the seller's responsibility ends. This term offers sellers clearer
delineation of their responsibilities and liabilities in the shipping process, minimizing the
likelihood of disagreements or confusion between parties.

6. What makes this term Delivered Ex-Quay (DEQ) highly preferable to buyers,
especially in terms of cost and protection against loss?
Buyers greatly favor the term Delivered Ex-Quay (DEQ), primarily due to its cost-effectiveness
and protection against loss. With DEQ, the seller bears the responsibility for unloading goods
from the quay and any related costs or risks, offering buyers greater control over the shipment
process and minimizing the risk of extra expenses or delays linked to unloading at the destination
port. Furthermore, DEQ ensures that buyers are not liable for any unloading-related costs or
risks, providing them with enhanced peace of mind and financial stability.
7. What makes this term Delivered Duty Unpaid (DDU) preferable in as far as loss
guarantee is concerned? Explain.
The term Delivered Duty Unpaid (DDU) is favored for its assurance against loss because it
assigns the responsibility for customs duties and taxes to the buyer. Consequently, the seller is
relieved of any extra expenses or risks linked to customs clearance and import duties, lessening
the seller's financial obligations in the deal. DDU grants buyers greater authority over the import
process and enables them to handle costs more efficiently, resulting in mutual benefits for both
parties involved in the transaction.