10 COMMONMISTAKESwhen using theIncoterms® 2010 rules

The mode oftransport

Title to the goods

Named place

The formalities

Export procedures

Use of a traditional “sea and inlandwaterway only” rule such as FOB orCIF for containerised goods, instead

of the “all transport modes” rule e.g.FCA or CIP. This exposes the

exporter to unnecessary risks. Adramatic recent example was theJapanese tsunami in March 2011,

which wrecked the Sendai containerterminal. Many hundreds of

consignments awaiting despatchwere damaged. Exporters who were

using the wrong rule foundthemselves responsible for losses

that could have been avoided!

Making assumptions about passingof title to the goods, based on theIncoterms rule in use. The Incotermsrules are silent on when title passesfrom seller to buyer; this needs tobe defined separately in the salescontract.

Failure to specify the port/placewith sufficient precision, e.g. “FCA

Chicago”, which could refer to manyplaces within a wide area.

Attempting to use DDP withoutthinking through whether the sellercan undertake all the necessaryformalities in the buyer’s country, e.g.paying GST or VAT.

Attempting to use EXW without thinkingthrough the implications of the buyer being

required to complete export procedures –in many countries it will be necessary for

the exporter to communicate with theauthorities in a number of different ways

Insurance

Carriage and risk

THCs

Use of CIP or CIF without checkingwhether the level of insurance inforce matches the requirements ofthe commercial contract – theseIncoterms rules only require aminimal level of cover, which may beinadequate.

Making assumptions about passingof title to the goods, based on the

Incoterms rule in use. The Incotermsrules are silent on when title passes

from seller to buyer; this needs tobe defined separately in the sales

contract.

Failure to establish how terminalhandling charges (THC) are going tobe treated at the point of arrival.Carriers’ practices vary a good dealhere. Some carriers absorb THC’sand include them in their freightcharges; however others do not.

DelaysWhen DAT or DAP is used with a“post-clearance” delivery point,failure to think through the liaisonrequired between the carrier andthe customs authorities. This canlead to delays and extra costs.

Securityrequirements

Where payment is with a letter ofcredit or a documentary collection,failure to align the Incoterms rulewith the security requirements or

the requirements of the banks.

Data source: www.incotermsexplained.com

when using theIncoterms® 2010 rules

10 COMMONMISTAKES