S&H has been doing a lot of training on the Incoterms 2010 set since Sept 2010, mainly to UK businesses but also in the EU and couple of USA businesses. There has been a recurring issue with importers (predominantly retail importers) - they don't want to move from FOB to FCA for their containerised shipments coming to the EU/UK. It can be a hard sell to exporters too - think this is mainly down to the centuries FOB has been around (pre-Incoterms) - but eventually they do see the logic in the delivery point and risk passing once the goods are either loaded in the container at their premises or delivered to the buyer's agent at the port for LCL shipments.
Not so buyers ... why should we have extra risk and extra costs? why should we try to control a forwarder in another country? why should we change what is working? why should we renegotiate contracts with freight companies? why should we pay storage if the ship is loaded late? and a new one .... why should we have to get involved in port security issues in another country. They say the benefits as neglible but the aggravation it will cause costly and risky. These arguments are not new .. FOB hasn't been applicable to containerised freight for decades but a new set brings new debates!
The ICC have said that FOB "is not appropriate" for containerised freight - not that it can't be used; but this was just a legal nicety to allow the use in some small ports around the world that don't operate big container bases. Unfortunately if you weren't on the review committees you won't know that as they didn't make the concerns on using FOB for containerised freight clear. Would love comments.
See also topics on our main blog at: Strong & Herd
Comments related to business use for the new Incoterms 2010 set of international delivery terms. Some helpful tips included on the changes made by the ICC - the new Incoterms came into force January 2011. Share your comments with us.
Sunday, 30 January 2011
DDP shipments - product liability issues
It has been reported that during a recent ICC Masterclass on the Incoterms 2010 set the question of using DDP came up in discussion. We have a list of warnings about using DDP for both a seller and a buyer but this was a new one - product liability. To quote: They did mention that seller's should consider under DDP that as "proper importer" you might have product liability insurance issues in other countries that one might otherwise not be aware of.
Not being lawyers or experienced with product liability, we can see that this is something to consider but do wonder how it would be enforced - ie: product liability being placed in a country outside the authorities normal jurisdiction. How would someone in the buyer's country go about enforcing that product liability matter? We suppose this could work because of the need to be registered as an importer (EORI in the EU). Like lots of contractual things product liability is actually outside the scope of Incoterms.
Other concerns relating to DDP are:
1. Can the seller act as importer in an overseas country? Many countries, including the EU, have a registration system for importers (EU one is called EORI) and import entries must have a valid EORI before they can be made.
2. Paying local taxes, eg VAT - if the seller is not registered for the local tax scheme then, at best, it will take a long time for them to recover their money but normally they will never be able to recover it.
3. DDP named place excluding local taxes (eg VAT) - though this is acceptable under Incoterms 2010 in practice it either means the buyer getting involved in customs issues (which they obviously didn't really want to do or they won't buy DDP) or the seller/ freight company "using" the buyer's VAT/tax ID ... I once heard this called "technically illegal" by a customs officer.
4. Customs duties - for sellers: can you be sure you know the correct amount and recover it from the buyer? for buyers: how do you know the seller is paying the right amount and that you couldn't have used a procedure that meant no duty paid?
5. "Legal importer" - if seller's are not set up in the receiving country and use the buyer's details then the buyer becomes the legal importer and is therefore legally responsible for everything, including errors made on import entries by freight companies they have no control over.
I could go on, but I won't.
Not being lawyers or experienced with product liability, we can see that this is something to consider but do wonder how it would be enforced - ie: product liability being placed in a country outside the authorities normal jurisdiction. How would someone in the buyer's country go about enforcing that product liability matter? We suppose this could work because of the need to be registered as an importer (EORI in the EU). Like lots of contractual things product liability is actually outside the scope of Incoterms.
Other concerns relating to DDP are:
1. Can the seller act as importer in an overseas country? Many countries, including the EU, have a registration system for importers (EU one is called EORI) and import entries must have a valid EORI before they can be made.
2. Paying local taxes, eg VAT - if the seller is not registered for the local tax scheme then, at best, it will take a long time for them to recover their money but normally they will never be able to recover it.
3. DDP named place excluding local taxes (eg VAT) - though this is acceptable under Incoterms 2010 in practice it either means the buyer getting involved in customs issues (which they obviously didn't really want to do or they won't buy DDP) or the seller/ freight company "using" the buyer's VAT/tax ID ... I once heard this called "technically illegal" by a customs officer.
4. Customs duties - for sellers: can you be sure you know the correct amount and recover it from the buyer? for buyers: how do you know the seller is paying the right amount and that you couldn't have used a procedure that meant no duty paid?
5. "Legal importer" - if seller's are not set up in the receiving country and use the buyer's details then the buyer becomes the legal importer and is therefore legally responsible for everything, including errors made on import entries by freight companies they have no control over.
I could go on, but I won't.
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