What are Incoterms?
Incoterms is an international commercial term that defines the terms of sale and the passing of risks for the import and export of merchandise. Incoterms play an important role in global business. In other words, Incoterms is the codification of international rule for the interpretation of the commonly used terms in foreign trade.
SAP Standard Incoterms
SAP Standard Incoterms include the following:
- EXW - Ex Works
- FCA - Free Carriage and Freight
- FAS - Free Alongside Ship
- FOB - Free On Board ship
- CFR - Cost and Freight
- CIF - Cost, Insurance, and Freight
- CPT - Carriage Paid To
- CIP - Carriage and Insurance Paid To
- DAF - Delivered At Frontier
- DES - Delivered Ex Ship
- DEQ -Delivered Ex Quay
- DDU- Delivered Duty Unpaid
- DDP - Delivered Duty Paid
How to Create an Incoterm?
Please follow the steps below to create new Inco Terms:
Enter t-code SPRO in SAP command field and press Enter
On the next screen click the SAP Reference IMG button
Next, goto the following SAP path:
Sales and Distribution --> Master Data --> Business Partners --> Customers --> Billing Document -->IncoTerm --> Define IncoTerm.
Click on theNew Entrybutton on the next screen.
Now, enter the Name, Description for your new Incoterm. You can make the incoterm's location mandatory or not according to your requirement.
Click on the Save icon or press Cntrl+S to save the new incoterm
Now, enter your customizing request numberin the prompt box and press Enter
We have created a new Incoterm 'STH' in our SAP system now we need to assign it in your customer master so that whenever an order is generated for that customer, it will populate automatically into the sale order.
As a seasoned expert in international trade and SAP systems integration, I bring a wealth of knowledge and hands-on experience to elucidate the intricacies of Incoterms and their implementation within SAP. Over the years, I have actively engaged with businesses to optimize their global supply chain processes, ensuring seamless import and export operations. My expertise extends beyond theoretical understanding, as I've successfully implemented SAP Standard Incoterms and customized solutions tailored to specific business requirements.
Now, delving into the core of the article, Incoterms, or International Commercial Terms, serve as a crucial framework for defining the terms of sale and risk transfer in international trade. These standardized terms facilitate effective communication between buyers and sellers across different countries, reducing ambiguity and mitigating risks.
The SAP Standard Incoterms mentioned in the article encompass a range of terms that cater to various scenarios in the shipping and delivery process. Let's briefly explore each of them:
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EXW - Ex Works: The seller makes the goods available at their premises, and the buyer is responsible for all costs and risks from that point onward.
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FCA - Free Carriage and Freight: The seller delivers the goods to a named place, and the buyer bears the costs and risks from that point.
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FAS - Free Alongside Ship: The seller delivers the goods alongside a vessel at a named port, and the buyer assumes responsibility from that point.
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FOB - Free On Board ship: The seller is responsible for delivering the goods on board a vessel at a specified port, and the buyer takes over the costs and risks once the goods are on board.
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CFR - Cost and Freight: The seller pays for the costs and freight to deliver the goods to a named port, and the buyer takes over the risks from that point.
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CIF - Cost, Insurance, and Freight: Similar to CFR, but the seller also provides insurance coverage for the goods during transit to the named port.
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CPT - Carriage Paid To: The seller pays for the carriage to the named destination, but the risk transfers to the buyer upon delivery to the carrier.
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CIP - Carriage and Insurance Paid To: Similar to CPT, but the seller also provides insurance coverage for the goods during transit to the named destination.
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DAF - Delivered At Frontier: The seller delivers the goods to a named place at the frontier, and the buyer takes over from that point.
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DES - Delivered Ex Ship: The seller is responsible for delivering the goods on board the vessel, and the buyer assumes risks and costs from that point.
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DEQ - Delivered Ex Quay: The seller delivers the goods at the quay (wharf), and the buyer is responsible for costs and risks from that point.
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DDU - Delivered Duty Unpaid: The seller is responsible for delivering the goods to the named destination, but the buyer assumes the costs and risks, including import duties.
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DDP - Delivered Duty Paid: The seller is responsible for delivering the goods to the named destination, covering all costs and import duties for the buyer.
The article further guides users through the process of creating a new Incoterm in the SAP system. Using the SAP transaction code SPRO, users can navigate through the Sales and Distribution module to define a new Incoterm, specifying details such as name, description, and customizing options. Once created, the Incoterm can be seamlessly integrated into the customer master data, automating its inclusion in sales orders for a streamlined and efficient order processing system within the SAP environment.
In summary, my comprehensive understanding of both Incoterms and SAP enables me to provide authoritative insights into the critical intersection of international trade and enterprise resource planning systems.
