Understanding Incoterms in Public Procurement: Rules and Regulations for International Commercial Transactions

2023-07-23 18:21:34

Incoterms (International Commercial Terms) are not specifically related to public procurement in France, but they play an essential role in international commercial transactions, including those involving public procurement. Incoterms are standardized rules established by the International Chamber of Commerce (ICC) to define the responsibilities and obligations of sellers and buyers during the transport and delivery of goods.

Rules relating to the sale and purchase in public markets

For their execution, public works or service contracts require the use of substantial material resources. In addition to the handover procedures, the delivery of these materials is also governed by strict regulations. For a sale and a purchase, it is therefore imperative to comply with the characteristics and obligations set for the given public market. Transport services and insurance do not escape compliance with these provisions.

Furthermore, in order to guarantee the smooth running of public procurement, the public entity may even request that international sales regulations take effect for the supply of materials. These regulatory provisions are known in international trade jargon as ” Incoterms “. This is a standard coding system comprising three letters specific to the methods of transactions carried out.

Defined by the International Chamber of Commerce (ICC), these rules aim to simplify international or local exchanges. They make it possible to regulate the supply of goods in public markets. Thus, the incoterms, through their rules, specify the conditions relating to the costs and risks of transport as well as the costs of the administrative procedures relating thereto.

Les codes incoterms

Incoterms refer to the regulations applicable to the means of transport used for the delivery of equipment. They allow in public procurement framework determine the responsibilities of the buyer and the seller. Also, they fix beforehand the various modalities to be implemented in terms of import/export customs clearance.

There are 2 categories of incoterms.

On the one hand, the so-called multimodal regulations which apply to all modes of transport: air, river or sea. These are the codes EXW (EX WORKS), FCA (FREE CARRIER), CPT (CARRIAGE PAID TO), CIP (CARRIAGE AND INSURANCE PAID TO), DAT (DELIVERED AT TERMINAL), DAP (DELIVERED AT PLACE) and DDP (DELIVERED DUTY PAID). For these, the buyer will be responsible for the transport of the goods and will bear the risks for the sales upon arrival.

On the other hand, the regulations dedicated to transport by sea and river are transcribed by the codes FAS (FREE ALONGSIDE SHIP), FOB (FREE ON BOARD), CFR (COST AND FREIGHT) and CIF (COST, INSURANCE AND FREIGHT).

To cover sales on departure and engage the seller’s liability for the risks associated with the transport of goods and equipment and customs clearance, it will be necessary to rely, for public contracts, on the multimodal incoterms DAT, DAP, DDP.

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