Incoterms 2010‐why and how Jan Ramberg Presentation in Toronto 2010‐07‐22 The ICC revision methodology •
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Working groups in consultation with national committees incoherent input selected output secrecy until official launch 27 September 2010 in Paris The 2010 trigger • The American FOB and Delivered at Place Guidelines for the revision work •
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Consistent terminology facilitating choice terms for any mode or modes of transport (group 1) terms for transport by sea and inland waterways (group 2) sale in transit adaptations ( “ procured delivered “) security‐related clearance clarifications Status of Incoterms • mixture between standard terms an international usage Incoterms and CISG • EXW difference‐at buyer's disposal compared with buyer's breach • sale in transit‐delivery to the ship compared with time of conclusion of the contract The interrelation between Incoterms and other contracts An international trade transaction requires not only the contract of sale but also additional contracts.
In the first place, the goods would have to be moved from the seller's place to the place selected by
the buyer. Therefore, it is necessary to arrange and pay for the transport. Complications arise as three
parties are now involved, the seller, the buyer and the carrier. One of the main purposes of Incoterms
is to provide for the different roles of the parties in relation to the contract of carriage.
While under the terms starting with the letter C or D it is for the seller to make the contract with the
carrier, under the trade terms starting with the letter E or F it is for the buyer to do so. When the seller
contracts for carriage it becomes important to ensure that the buyer may receive the goods from the
carrier at destination. This is particularly important with respect to shipment contracts. The buyer must
then either receive a document from the seller-such as the bill of lading-which would enable him to
get the goods from the carrier by tendering an original of the document to him in return for the goods.
If the seller has concluded a contract of carriage under the D-terms he must be in control during the
entire transit to the place where the goods are to be delivered to the buyer. It is the seller’s obligation
to ensure that the goods can be delivered to the buyer at the indicated place of destination. If
something goes wrong during the carriage it is the seller's risk as distinguished from the situation
where he merely has to arrange and pay for the carriage under the shipment terms starting with the
letter C. Then, if something goes wrong during the transport, the risk is on the buyer.
It is common that the seller wants to escape the risk of loss of or damage to the goods while in transit
also in cases when the seller undertakes to deliver the goods at destination. This is not only a matter
of insurance. The fact that the seller may be protected by an insurance in case of loss of or damage to
the goods in transit would not relieve him from his obligation under the contract of sale to deliver the
goods to the buyer. In case the goods have been lost, it is for the seller to provide substitute goods
whenever possible. If this is impossible he may escape liability under the applicable law or according
to the individual contract terms. The standard expression "no arrival, no sale" signifies that the contract
of sale is off in case the goods fail to arrive at destination. Nevertheless, it is not advisable to use such
expressions but rather specify the consequences clearly in the individual contract of sale or by using
standard form contracts with elaborate relief clauses which may relieve the seller in specified
circumstances. The ICC has provided solutions in its 2003 Force majeure and Hardship clause (
ICC publ. 650 ).
With respect to the buyer's obligations it is important to use appropriate services by commercial banks
for payment. When the parties have established a continuing relationship the seller would normally
trust the buyer and sell the goods on open credit. In other cases, it is important for sellers to protect
themselves. They may do so by various means. Either party may of course arrange for bank
guarantees to be opened in its favour so that, in case of non-performance, money could be collected
from the guarantee. The most important type of guarantee provided in a standard form is the ICC rules
for demand guarantees (URDG 758),where it is possible to call upon the guarantee by a so-called
simple demand. There are variants to reduce the danger of an abuse of the guarantee ("unfair
calling").
It is quite common where parties do not know each other well from previous dealings that the buyer is
required to open a documentary credit with the seller as beneficiary. The ICC has since long
provided rules for such documentary credits, now in the version of UCP 600. It is particularly important
for the seller to present the correct documents in order to get paid. These documents are specified by
the buyer in the instructions to the bank opening the credit. Therefore, it is essential that the seller is
given sufficient time to check whether these instructions conform with the terms of the contract of sale.
If they do not, the buyer would have committed a breach of contract which at worst would entitle the
seller to cancel the contract. The seller must take care to ensure that the documents presented to the
bank comply with the buyer's instructions.
With respect to the terms of the contract of carriage Incoterms say no more than that the seller
should provide "the usual transport document". Carriers have a rather limited liability for loss or
damage to the goods in transit. They avoid liability for so-called "nautical fault” ("errors in the
navigation or management of the ship"). This defence has been removed in the convention of 1978,
the so-called Hamburg Rules, but these rules have only entered into force on a limited scale. A new
convention was signed in September 2009, the so-called Rotterdam Rules, but it remains to be seen if
the convention will come into force. In addition to a rather lenient liability ,maritime carriers are entitled
to limit their liability to specific amounts which sometimes may prove insufficient to compensate
shippers and consignee for their losses. The seller or the buyer as the case may be are usually be
protected by cargo insurance which under Incoterms CIF or CIP will be arranged and paid for by the
seller with the buyer as beneficiary.CIF and CIP require the seller only to provide insurance with
minimum cover, the reason being that in so-called string sales with commodities the insurance terms
must be standardized taking into account that insurance requirements of prospective buyers down the
string are not known. However, the buyer may ask for additional cover which would be provided by the
seller if procurable. When paying the insured, the cargo insurer would obtain the right to hold the
carrier liable under a so-called letter of subrogation whereby the insured assigns his right to the
insurer to claim damages from the carrier. The carrier’s liability is covered by a liability insurance and
therefore, in practice, loss of or damage to goods in transit becomes a battle between these various
insurers.