The Incoterms® rules are a globally-recognised set of standards, used worldwide in international and domestic contracts for trade transactions..
Following its introduction in Incoterms® in 1936, these international commercial trade terms were revised in 1957, 1967, 1976, 1980, 1990, 2000, 2010 and most recently in 2019 (Incoterms® 2020) to accommodate changes as global trade developed and evolved..
The rules were developed by ICC in consultation with experts and practitioners brought together by ICC.. These rules have now become the standard in international business rules and recognised by UNCITRAL as the global standard for the interpretation of the most common terms in foreign trade..
The International Chamber of Commerce (ICC) chose its centenary year 2019, to launch the 9th version of the Incoterms®, the Incoterms® 2020..
While Incoterms® 2020 came into effect on 1 January 2020 all contracts negotiated under other previous versions of Incoterms® rules are still valid because parties to a contract for the sale of goods can agree to choose any version of the Incoterms® rules as long as the chosen version is specified explicitly..
As per the International Chamber of Commerce, the recently released Incoterms® 2020 rules seeks to “offer a simpler and clearer presentation of all the rules, featuring revised language, an expanded introduction, explanatory notes, and articles reordered to better reflect the logic of a sale transaction“ and traders are encouraged to use the latest version..
Shipment with multiple Incoterms ®
A question that has come up in terms of Incoterms® is whether “a shipment can have multiple Incoterms rules”..
The simple answer is NO.. A shipment cannot have multiple Incoterms ® rules..
Alexander Robertson of Robertson’s Cargo Consultancy (Pty.) Limited explains why..
A shipment can have various sellers and buyers whilst it is in transit.
We call these numerous sales “string sales”.
This is particularly used with fresh produce but not restricted to that product.
What can happen is that the first seller can sell the goods on an FCA (Free Carrier) rule to the first buyer, who in turn will sell the same cargo which they have procured already on board the vessel. The buyer who now becomes the seller can chose CPT, CIP or DAP.
In the case of CPT or CIP changing to DAP, there can be problems unless the named destination is changed. The second seller continues to take on the risk instead of passing it on to the second buyer.
There is no limit to the number of sellers and buyers who may be involved in the selling and buying of the goods.
It must be remembered that the seller cannot have multiple Incoterms ® rules with the same buyer for the same shipment.
Some countries also dictate under which international purchases may be transacted, thus making quite clear that every care must be taken when agreeing on the choice of any Incoterms® rule.
Invoices also need to reflect the various add-ons such as delivery to port/terminal, freight and insurance as the Customs authorities will base the duty payable on the value declared in the invoice.
Different countries have different values on which they calculate duty and no buyer will want to pay duty on a higher value than necessary. For example, in South Africa duty is calculated on the FOB value and thus Customs need to see on the invoice the FOB value.
Incoterms® rules were designed to help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers..
But it has been seen that as the volume and complexity of global trade increases so does the possibility of incorrect usage of Incoterms® rules..