Applying the appropriate Incoterm, and the applicable transport and insurance document requirements Figures 5.4–5.14 indicate some of the main aspects of each Incoterm listed in section 5.3.2. The Incoterms are set out in a logical order under each grouping, starting with the term that imposes the least obligation on a seller and ending with that which imposes the most. Sellers and buyers are advised to review the full content of ICC Publication No. 715 once an Incoterm has been identified, so that they understand its full implication and the obligations that it imposes. Irrespective of the chosen Incoterm, the buyer pays for the goods according to the terms of settlement agreed in the sales contract, proforma invoice or purchase order. 184.108.40.206 Group 1: Incoterms for use with any mode or modes of transport These Incoterms may be used irrespective of the mode of transport selected and may be used where more than one mode of transport is used. Understanding rights and responsibilities when using Incoterms Figures 5.4–5.14 illustrate how the rights and responsibilities of the seller and buyer vary depending on the Incoterm used. Understanding the limits of each party’s responsibilities is crucial when negotiating the precise terms of a sales contract, especially when payment is due under a documentary credit. Sellers agree to payment under a documentary credit because a bank gives an undertaking that payment will be made, as long as the documents presented conform to its requirements. This undertaking is independent of the buyer’s ability to pay. Following contract negotiations, the seller should scrutinise the terms of a documentary credit to make sure, among other aspects, that it conforms to the Incoterm quoted in the sales contract. For example, a documentary credit should not indicate the need for presentation of an air waybill if the Incoterm is designed for sea shipment. Similarly, if the seller is not responsible for insuring the goods, the documentary credit should not indicate a requirement for the seller to procure an insurance document. Any conflict between the Incoterm, the documentary credit and the sales contract can result in delays in the issuance of, advising of, or payment under a documentary credit. Any delays will have a financial cost – including, as a minimum, the impact of the delay on cash flow. In extreme cases, if the terms of the documentary credit cannot be complied with because of such conflict, a bank will not be in a position to honour or negotiate.