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Is there a connection between Incoterms® and the shipping line..??
Are Shipping Lines concerned with Incoterms®..??
Do Incoterms® really affect the shipping line..??
These are few of the questions raised on this blog wherein readers (mostly forwarders and importers / exporters) have complained that their booking was on FCA, FOB, CIF etc and that the Carrier refuses to show details relating to commercial and sales information of the cargo on the bill of lading..
So I thought to clarify the connection between the shipping line and Incoterms®..
ICC (International Chamber of Commerce), defines Incoterms® as below :
Incoterms® – International Commercial Terms
The Incoterms® rules are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods. First published in 1936, Incoterms® rules provide internationally accepted definitions and rules of interpretation for most common commercial terms.
The rules have been developed and maintained by experts and practitioners brought together by ICC and have become the standard in international business rules setting. They help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers. Incoterms® rules are recognized by UNCITRAL as the global standard for the interpretation of the most common terms in foreign trade.
As you can see from the explanation above, Incoterms® are primarily an integral part of the sales contract for use between the seller and buyer..
So technically and legally there is no connection between Incoterms and the shipping line as these terms do not form part of any contract between a customer and shipping line..
This is because there is a difference between a sales contract and contract of carriage..
There are cases where clients ask the shipping line to quote (for example) “FOB Durban to CFR Shanghai”.. In such cases, the shipping line just needs to make sure that they understand and follow the requirements of the customer..
In this case, the shipping line’s quote will only include the sea freight from Durban to Shanghai as the other costs are not for account of this particular client..
However, the shipping line needs to get clarity from the client as to who will be paying the local charges (Terminal Handling Charge, Agency charges etc) at both ends as it is not covered in the quote, but is something that the shipping line will incur and will need to recover from someone..
Carriers normally will not show the Incoterms on their bill of lading either in the ports fields or in the body of the bill of lading as it is considered as commercial information not under the control of the carrier..
Therefore, the carrier doesn’t want to undertake the liabilities and risks that comes with the commercial and Incoterms information when it is not a part of their contract..
But ironically, the shipping lines use the terms CIF business or FOB business to classify cargo that is commercially controlled by the shippers at a port (CIF) and cargo that is commercially controlled by the consignees at the same port (FOB)..
Here commercially controlled refers to whoever agrees on the freight rate negotiations/payments with the shipping lines..
Have you come across any instances where the shipping line has been involved with Incoterms..??
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