Incoterms in SAP SD

Incoterms is as a commercial term which is used in an international level which defines the terms of passing risks to exports and imports of merchandise and also the terms of sales. First of all, before discussing on incoterms, let’s see an overview of the module SAP SD. The SAP SD module belongs to the logistics area. It is included with the processes which are supporting businesses or companies to deal with their customers. Some of the processes include receive orders through the telephone, internet or EDI, giving quotations to the users, shipping and also billing goods to the consumers when they receive products. This particular module covers path of a business starting from the initialization and up to the fulfillment of orders.

Incoterms is playing a major role in the global business world. So in other words we can say that it can be also defined as a codification of the international rule that is used to interpret the terms which are using most commonly in the foreign trade. There are many incoterms defined. Some of them are EXW, FAS, CPT, DDU and many more.

The term EXW falls into E –terms. These are mainly the departure terms which will fulfill the responsibilities of the sellers when it is ready to depart the goods from facilities. This has minimum seller obligation. This contains only one category, EXW.

Terms starting from word F, describes the shipments where the major or primary costs of the shipping will not be paid to the seller. The seller will get the responsibility of delivering the goods for a carrier which is appointed by the buyer. One main feature this has is the main carriage will have to be paid by seller.

C terms are dealing with shipments where the seller will pay for shipping without making assumptions on risks of the losses or the damages to goods or else about extra costs because of events which are occurring after the dispatch and shipments. The seller should be responsible in exporting customer clearance and also he is not holding liability for the damages, risks or losses happening during the process of shipping. Here the main carriage will be paid by the seller.

D terms are associated with the sellers and shippers. And the responsibility of them extends to the point till the arrival of goods at some specific point. Here, the seller will have to bear the whole cost and also risks which are required to get the goods to the destination country. These can be known as important and essential arrival terms.

Now let’s focus on how to create these Inco terms. Firstly you should go to the sales and distribution; there go to master data, then business partners; next go to customers. After that go to billing document and finally you can define the Inco Term. You can define and create this Inco term in the customer master. The advantage of it is, anytime an order is generated to a customer, this will get populated automatically in the sales order.