Roadmap to Incoterms (2000)

EDITOR: Albert H. Kritzer. Revised by Allison E. Butler.

The provisions of the CISG on delivery obligations "only appl[y] in the absence of contrary agreement between the parties. In practice, the agreement will spell out the seller's delivery obligations quite precisely by adopting an established shipment term (e.g., FOB, CIF). . . ." Jacob Ziegel, "Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods" (July 1981) 81.

The Convention does not purport to define such terms. Honnold explains: "One difficulty is the need to modernize and revise detailed trade terms more frequently than the life-span one may expect from a basic international convention." John O. Honnold, "Uniform Law and Uniform Trade Terms -- Two Approaches to a Common Goal", in: Horn & Schmitthoff eds, Transnational Law of International Commercial Transactions (Kluwer 1982) 170-171.

• He also identifies a more fundamental problem: the need to tailor contracts to individual needs in the face of an array of alternative approaches each of which requires detailed attention to technical issues presented and a logical solution: reliance upon the Convention along with trade terms such as Incoterms. He states:

• "The plans and understandings that underlie a contract need to be gathered from the language and setting of that very contract. . . . In routine transactions, drafting specific contract terms on [delivery and risk of loss] would delay the making and consummation of the contract. Detailed terms may be included in the parties' sale and purchase forms, but the terms in the two forms often fail to coincide and generate the intractable problems of the 'battle of the forms'. The use of Incoterms can speed agreement and avoid the hazard of divergent contract provisions. . . . Incoterms and the Convention play very different roles -- roles that support each other. Incoterms, properly invoked, can be very useful to define precisely some of the central steps that the parties should take. The Convention . . . gives general but useful answers to questions that the parties have not answered by contract provisions or by incorporating Incoterms. [Answers to still other questions are to be found in the gap-filling law.] In addition, the Convention provides a way to avoid or resolve disputes in a wide range of situations, not mentioned in Incoterms, when a party fails to perform his duties under the contract." Id.

A Roadmap is presented to help parties who wish to apply the Convention in tandem with Incoterms. The Roadmap should be used in conjunction with the complete text of Incoterms. Whether or not you refer to Incoterms in your international contract, it is good to have a set of these terms at hand for use as a checklist of items that should not be overlooked. The Roadmap identifies the delivery points, elements of export transportation and other costs and responsibilities associated with Incoterms.

Practical Application: Use of Incoterms should include direct reference to "(INCOTERMS 2000)." A Roadmap to Incoterms (1990) can be found at <http://cisgw3.law.pace.edu/cisg/incoterms.html>.

Typical Elements of Export Transportation and Responsibilities Under Incoterms (2000)

FOOTNOTES

1. Ship loading and unloading costs are normally part of the ocean freight for material carried on regular scheduled vessels. Additionally, there is a heavy lift tariff schedule for individual pieces in excess of three to four tons which is expressed as a single combined rate for the loading and unloading, and normally can not be separated. Ship loading and unloading costs may also be subject to "customs of the port" which can represent an exception to normal responsibilities.

2. Id.

3. If the named place is anywhere other than the seller's premises, or FCA Named Place (International Carrier) than the seller is responsible for inland freight and loading of goods.

4. Under Incoterms 2000, it is the seller's responsibility to clear the goods for export as per FAS term. This is a reversal from previous Incoterms versions that required the buyer to arrange for export clearance.

5. 10(a) = ship's unloading costs (including lighterage and wharfage charges) to the extent included in freight; 10(b) = ship's unloading costs (including lighterage and wharfage charges) that are not included in freight.

6. Id.

7. For DDU and DDP, the precise demarcation of responsibility is dependent upon location of named placed in country of importation.

8. Id.

9. Under DEQ term of Incoterms 2000, it is buyer's responsibility to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. This is reversal from previous Incoterms versions that required the seller to arrange for import clearance.

10. For DDU and DDP, the precise demarcation of responsibility is dependent upon location of named placed in country of importation.