CONFIDENTIAL ICC DRAFT DOCUMENT – INTERNAL ICC USE ONLY
DRAFT FOR COMMENT – 31 MARCH 2015
ICC PROJECT ON THE INCOTERMS® 2010 RULES AND TRANSPORT
CONFIDENTIAL DRAFT – FOR INTERNAL ICC USE ONLY
COMMENTS DUE BY 7 MAY 2015
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TABLE OF CONTENTS
RULES FOR ANY MODE OR MODES OF TRANSPORT
EXW……………………………………………………………………….3
FCA………………………………………………………………………..10
CPT………………………………………………………………………..17
CIP…………………………………………………………………………26
DAT………………………………………………………………………..27
DAP………………………………………………………………………..33
DDP………………………………………………………………………..39
RULES FOR SEA AND INLAND WATERWAY TRANSPORT
FAS………………………………………………………………………..45
FOB………………………………………………………………………..52
CFR………………………………………………………………………..61
CIF…………………………………………………………………………69
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INTRODUCTION – TO COME
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RULES FOR ANY MODE OR MODES OF TRANSPORT
EX WORKS
EXW (insert named place of delivery) Incoterms® 2010
Important remark: The graphic presentation of the EXW rule suggests that the seller is to make the goods available at the seller’s premises for transportation to the buyer by the buyer’s carrier. Note however that
1. the Guidance notes to the EXW Incoterms® 2010 rule clearly stipulate that ‘“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place.’ The named place of delivery therefore does not have to be the seller’s address but may be another place.
2. in accordance to Article A3a)/B3a) of the EXW Incoterms® 2010 rule neither the seller nor the buyer has an obligation to make a contract for carriage.
The EXW Incoterms® 2010 rule thus may cater for transactions in which the goods
(1) are already transported to a place of collection prior to the contract of sale (e.g. consignment sales and call-off stocks), representing the ‘mirror image’ of the DAT-rule that applies to goods being transported to that place of collection after conclusion of the contract of sale;
(2) will not be transported under the contract of sale; e.g. chain sales in a (bonded) warehouse with the last customer in the chain collecting the goods at the warehouse and clearing the goods out of the warehouse;
(3) are collected by the buyer with its own means of transportation.
As such, the EXW Incoterms® 2010 rule will often be unsuitable for situations in which a carrier, nominated by the buyer, comes to collect goods at the seller’s premises for international transportation. For such situations FCA is usually more appropriate. The EXW Incoterms® 2010 rule, representing the ‘production cost’ of the goods, is in international trade indeed a reference value for the seller to calculate its sales prices[1] but will often not be appropriate as a contractual delivery term.
Question 1. How are goods handed over to the carrier?
“Ex Works” means that the seller delivers the goods when it places them at the disposal of the buyer at the named place (seller’s premises or another place). The seller does not need to load the goods on any collecting vehicle[2].
The EXW buyer and the carrier should agree on the place of collection of the goods and note that in the transport document. The buyer must notify the seller thereof (name of the carrier, selected time within the period agreed for delivery when the carrier or person nominated will take the goods, mode of transport and point of taking delivery within the named place) within sufficient time as to enable the seller to make the goods available. If no specific point has been notified by the buyer within the named place of delivery, and if there are several points available, the seller may select the point within the named place that best suits its purpose.
The EXW buyer should instruct its carrier to pick up the goods on its behalf and accomplish any action (lifting, placing on board, stowing, trimming, lashing, securing, …) required to load and secure the goods on board the arriving vehicle. The buyer must advise the carrier in advance of any special requirements in respect of equipment needed for the loading, securing the cargo, etc. The seller has the obligation to give the buyer any notice in this respect.
With EXW it is common practice for sellers to load goods as in practice the seller will usually be in a better position to do so. Under the EXW Incoterms rule, if the seller does load the goods, it does so at the buyer’s risk and expense. Sellers should however note that when loading, they may assume a mandatory liability under transport law that cannot be avoided in the contract. Such mandatory law may indeed override any aspect of the sale contract, including the chosen Incoterms rule.
Question 2. When and how are goods delivered to the consignee?
N/A. The Incoterms rules do not deal with the receipt of the goods by the EXW buyer from its own carrier.
Question 3. Who shall pay the price for transport?
N/A. The carrier (if any) acts on the basis of a contract of carriage entered into with the EXW buyer. Therefore, it is for the buyer (usually also the consignee) to pay the price for transport.
Question 4. What additional costs can be added to the price for transport? ([Freight Cost])
N/A as the EXW buyer has to pay all costs from the moment of the placement of the goods at the disposal of the buyer at the agreed place of delivery, not loaded on any collecting vehicle (price for transport + additional costs).
Question 5. Is there a variable part to the [freight cost] (i.e. “adjustment factors”)?
N/A as the EXW buyer has to pay all costs from the moment of the placement of the goods at the disposal of the buyer at the agreed place of delivery, not loaded on any collecting vehicle (price for transport + additional costs).
Question 6. When is [freight cost] payable?
The price of transport is deemed to be earned by the carrier upon delivery of the goods to the consignee, unless the contract of carriage provides that it shall be earned, wholly or partly, at an earlier point in time or at an earlier occasion. In most international transport documents this is agreed upon by way of marking ‘freight prepaid’ or ‘freight collect’. Unless otherwise agreed, no price for transport will become due for any goods which are lost before the price for transport for these goods is earned.
As under EXW, the buyer contracts for carriage and is the consignee, the transport document will normally provide ‘freight collect’ or ‘freight payable at destination’ and the buyer will pay the transport price upon or after arrival of the goods as agreed with the carrier.
Question 7. How are the goods to be packed?
Unless agreed otherwise, the goods must be packaged in a manner ‘appropriate for their transport’. ‘Appropriate for their transport’ is not equal to ‘reasonable’ or ‘usual’ but refers to a fitness for the purpose of transportation. This comprises qualities such as apt, becoming, befitting, belonging, right, suitable and to this purpose, verifiable by the transport operator.
So-called ‘any mode’ Incoterms rules may be used for any type of transportation and in an EXW sale, as the seller is not party to the contract of carriage, it may not know the final destination of the goods or the means of transportation the buyer will use. The EXW buyer should therefore inform its seller in advance of the destination, the transport modes used and the regulatory packaging requirements if any.
In the absence of such instructions or knowledge from previous dealings, the seller is not at liberty to choose ‘any’ type of transport packaging but may choose a packaging ‘appropriate’ for the means of transportation used to collect the goods at its premises (most commonly road transportation).
The party best placed to examine whether a packaging is appropriate for transport of the goods is the carrier. If the packaging is not appropriate for transport the carrier will, at the moment the goods are presented to it make the relevant reservations on the receipt document (or refuse to receive the goods). If the transport operator makes no such reservation, the packaging in which the goods are handed over will allow the transport risk to pass to the transport operator and the packaging should be deemed to be ‘appropriate for transport’ without prejudice to the right of the buyer to challenge the packaging of the goods for purposes other than transportation as part of the obligation of conformity under the contract of sale upon arrival at the place of (final) destination.
The indication on the transport document ‘unpacked’ does not automatically mean that the goods have not been ‘appropriately’ packed for their transport as it may be ‘usual for the particular trade to transport the type of goods sold unpackaged’ (some agricultural goods, mineral products, …).
Question 8. Is the buyer or the seller responsible for customs clearance?
The EXW Incoterms rule provides that when selling goods, leaving for a destination outside of the customs territory, it is up to the buyer to carry out all customs formalities at its own risk and expense, including those necessary for the export of the goods from the named place of delivery (including any export license, security clearance or other official authorization that may be required). A buyer who buys from a seller on an EXW basis for export needs to be aware that the seller has an obligation to provide only such assistance as the buyer may require to effect that export but the seller is not bound to organize the export clearance. Buyers are therefore well advised not to use EXW if they cannot directly or indirectly obtain export clearance.
On the other hand, the buyer has limited obligations to provide to the seller any information or documentation regarding the export of the goods. However, the seller may need this information for, e.g., taxation (VAT exemption) or reporting purposes.
In most countries only companies and persons that are registered for tax purposes within the territory are allowed to have customs formalities accomplished in their name. After collection of the goods at the seller’s premises, the buyer’s carrier (forwarder) therefore often, while acting under the instructions and at the expense of the EXW buyer, fulfills the export formalities in the name of the EXW seller. Sellers should however note that when export formalities are fulfilled in their name, they may assume a mandatory liability under customs law that cannot be avoided in the contract. Such mandatory law may override any aspect of the sale contract, including the chosen Incoterms rule.
To avoid inconsistency, the instructions to the carrier, customs broker or freight forwarder and their actions should be in line with the assignment of obligations of seller/buyer regarding customs clearance.
Question 9. Who has the responsibility to identify and declare dangerous goods?
The international carriage of dangerous goods by road, rail, inland waterway, sea and air is regulated by international conventions, regional directives and regulations and national law. Each transport mode has its own set of rules and anyone involved, not only in transport and storing but also in the processing, selling, packing and buying of dangerous goods, will need to classify them correctly and inform the next link of the logistics chain so that all participants in the supply chain, including the emergency authorities, know and understand exactly what the hazard is.
Relevant obligations include:
A. Marking and labeling for the transport of the dangerous goods: responsibility of the EXW seller.
Safety labeling requirements may vary between countries. Although dangerous goods may be moved from their provenance with their original labeling (upon arrival they will often be relabeled), the EXW seller should inquire with its buyer to check requirements in destination countries.
B. Packaging of dangerous goods for their transport: responsibility of the EXW seller.
C. Documentation when transporting dangerous goods: responsibility of the EXW seller.
When dangerous goods are transported, the consignment must be accompanied by a document, declaring the description and nature of the goods and other accompanying documents (authorizations, approvals, notifications, certificates, etc.). Documentation must be in accordance with the specifications set by the dangerous goods regulations applicable to the chosen mode of transport. This document must be completed by the person handing over the goods to the carrier, even if such person is not the contracting party to the contract of carriage.
Question 10. Who is responsible for stowage and cargo securing?
There is nothing as common in modern transportation as a container but the legal qualification of this metal transport box (packaging or means of transportation?) is far from common[3]. This qualification is however important:
- if a container is qualified as ‘packaging’, the EXW seller must stow the goods in the container in accordance with Article A9; but
- if the container is a ‘means of transport’ the EXW buyer has the obligation to ‘load’ the container and the costs and risks of stowage therein.
Moreover, a container, when qualified as packaging, will enjoy transport insurance together with the goods. When qualified as a means of transportation, the cargo insurance will not cover any damage to or loss of the container. On the other hand, if a container is ‘packaging’, any defect of the container (rust, …) causing damage to the goods in the container will be considered to be a defect to the goods themselves, excluding the transport operator’s liability and not covered by the transport insurance. Only if the container is a means of transportation, damage to the goods as a result of the state of the container will make the transport operator liable and oblige the transport insurance to indemnify.
The following rules of thumb commonly apply:
1. when a container is provided by one of the parties to the contract of sale (‘shipper’s provided container’) or is leased from a party other than the carrier, the use of the container will not be part of the contract of carriage and the container will be ‘packaging’, requiring the EXW seller to stuff the container at its own risk and expense. Any defect to the container is a breach of ‘appropriate’ packaging under Article A9 as well as conformity under Article A1.