Also see our Incoterms-2010 blog for debates just on Incoterms 2010.
It is interesting to consider the point that the Incoterms ® Rules are not intrinsically perfect despite the many revisions that have taken place since 1936. They are certainly a brave and robust attempt to provide an international trade language to define where delivery takes place legally in supply contracts. That is not to say that in the wide and complicated world of international trade there are not some inconsistencies and disagreements as to the interpretation of some elements of individual terms.
The ICC publication ‘The Incoterms 2000 Forum of Experts’ (Publication No. 617) is a transcript of the international forum held in Paris in September 1999 to launch the latest version. It illuminated some of the difficulties of interpretation but in the overview to the publication it stresses that Rules are the perfect illustration of a global standard, elaborated by business to respond to the need of business to provide flexible rules for governing its activity. We hope to receive a similar overview to the new 2010 set.
Terms that businesses appear to struggle with when trying to put them into practical use are ExWorks, FCA, the 4 remaining sea freight terms (FAS, FOB, CFR, CIF)and Group C in general. Why isn't Exworks suitable for international trade? If it isn't suitable why didn't the ICC take it out of the new Incoterms 2010 set? Why must a seller not only be responsible for export customs clearance but also have to pay for it under FCA Seller's Premises? And, how in practice, does a seller pay for export customs clearance when using air express operators such as UPS, TNT, DHL and Fedex who do not split down the costs? Why can't I have goods moving in a sea freight container delivered on board the ship under FOB - why must it be FCA port of departure? Moving away from FOB increases the costs and risks of the buyer?
We could go on. It appears to some that in the new set of Incoterms the ICC are hoping to shape the way international trade uses delivery terms rather than following what the international trading companies actually do. Incoterms Training is essentials and it must be done for the business as a whole not just a couple of logistics people. Incoterms in sales contracts and the use of Incoterms in purchasing departments should be given a higher profile than it appears to have in the majority of businesses.
Strong & Herd LLP Blog - Import / Export Services
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Though we want to use Incoterms, and the new version in particular, our company is struggling to convince buyers to accept containerised seafreight shipments under FCA terms. Why should they have increased costs and risk, they argue, when we have never had a problem before? Hard to argue during the negotiation purposes that it will help us in a dispute! I deal with sales as well and I'm struggling with my sales manager getting him to move from ExWorks. Why worry! I worry - I have to get the export documents, but I can't justify extra costs. And how does this FCA Seller's premises work with courier companies, eg UPS, DHL, FEDEX - I can't possibly pay for export clearance when the buyer is paying a door-to-door price. Not a new problem though. My old boss used to say, there is the legal definition of Incoterms then there is the practical interpretation.
ReplyDeleteAt a recent ICC Incoterms Masterclass one of the attendees asked a question about FCA Seller's Premises about how could an exporter control the costs related to "clearing the goods for export". It doesn't seem right that you hand over responsibility at your premises to a freight company you may never have used before (may not even know them), give them the export paperwork and then - acting in the exporter's name - they make a presentation to customs and charge you for something you have no formal agreement about. The ICC guys acknowledged the risk of a buyers forwarder back-charging high export handling fees to the seller, but it had not been tackled in the drafting of the new set, and appeared they didn't want to look at it now - there was simply no practical response given. Until I get a forwarder arguing differently I'm saying that the costs under FCA Seller's Premises are the same as under ExWorks .... nothing for me to pay! After all I can only assume they are charging the buyer for this activity in the freight amount anyway. They are not my agent!
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