Comments on Incoterms 2010 Draft 3

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5 March 2010

To: Canadian Chamber of Commerce

1 Stuffing a container in Introduction (Line 291 - 293)

According to the provisions of Institute Cargo Clauses (A), (B) or (C), Exclusions Clause 4.3, the insurer will not cover stowage by the assured or their servants in a DIY fashion, other than by an independent third party like a freight forwarder who knows how to stuff the container.

Hence Incoterms 2010 should be consistent with the above insurance provisions by stating that “packed” or “stowed” must be performed by a professional body other than the seller or the buyer or their servants.

2 Add CAI (Cost and Insurance) after EXW (Line 386 - 389 & 471 - 472)

In the market place, it is common for a seller to provide cargo insurance to sales under D/A, D/P, open account or on consignment. This is to avoid the unfortunate event that in case the goods were lost due to perils of the sea, the buyer would refuse to take up the goods or the documents and the seller cannot recover the financial loss due to no cargo insurance coverage.

3 Clarify “mandated” pre-shipment inspection in FCA (Line 780 - 783)

It appears that the word “mandated” used in line 781 and 782 would have a different meaning and this would create confusions and disputes. Please clarify “mandated” or use another word in line 781 or re-write line 781 - 783 to avoid confusions.

The Drafting Group should make similar changes in other Incoterms as well.

4 Unloading duty for seller in CPT (Line 824 - 827)

This statement is too legalised and traders may have difficulty to understand what it really means. Suggest it be re-worded as follows for clarity:

“If unloading is included either in the freight and/or in the sales contract, then the seller cannot claim for unloading cost from the buyer.”

Please make similar changes in other Incoterms.

5 Unloading duty of seller in CPT (Line 890 - 893)

This statement is too legalised and traders may have difficulty to understand what it really means. Suggest replacing “that were for the seller's account under the contract of carriage” with “that were not included in the freight” for clarity.

Please make similar changes in other Incoterms.

6 Transit cost in CPT (Line 897 - 898)

This statement is too legalised and traders may have difficulty to understand what it really means. Suggest replacing “that were for the seller's account under the contract of carriage” with “that were not included in the freight” for clarity.

Please make similar changes in other Incoterms.

7 Franchise, excess and exclusions in CIP (Line 1136 - 1137)

In order to end the disputes on franchise, excess and exclusions in cargo insurance and to support UCP 600 provisions, suggest adding “The insurance may include franchise, excess and exclusions.”

8 Include FI or FO in carriage under charter party (Line 1165 - 1168)

In sea carriage under charter party, which is popular in commodity trade, FI (Free In) and FO (Free Out) are often used, in which the shipper must arrange and pay for loading and unloading respectively. Suggest replacing “that were for the seller's account under the contract of carriage” with “that were not included in the freight, such as in FI or FO” for clarity.

9 Taking delivery in CIP (Line 1261 - 1263)

In commodity trade, buyers often refuse to unload and take up the goods that have been contaminated during the sea voyage as evidenced by the arrival inspection. This is in conflict with the Vienna Convention in international sales of goods. Suggest adding at the end “even if the goods are in defective state on arrival, such as due to contamination during the voyage.” The buyer should claim on the seller under the sales contract but cannot refuse to take up the goods loaded in a chartered vessel to avoid the otherwise very heavy demurrage charges that would make the consequence of the breaches much more serious.

10 Include tanker terms in FAS (Line 1804 - 1807)

To end dispute in transport of liquid cargo by tankers, suggest including “Hose to Hose” and “Manifold to Manifold” in FAS. Under such term, the buyer has to pump the liquid cargo from the tanker upon arrival by connecting the pump manifold on shore with a hose to the ship's manifold used for loading and discharge of liquid cargo. In this way disputes arising from “Hose to Hose” or “Manifold to Manifold” can be resolved based on provisions in FAS.

Similar changes should be made in line 2851 - 2854 in DEQ.

11 To cover midstream operation in FAS (Line 1809 - 1812)

In inland waterways transport from Hong Kong to an inland fresh water port in Guangdong Province, China by barges, containers are loaded on a barge or feeder boat, but not in a container terminal as stated in line 1810. Some containers are carried by barges in place of receipt (Tsuen Wan in Kowloon) and re-loaded onto the deck of an ocean vessel anchored at port of loading (Victoria Harbour of Hong Kong). This is known as “midstream operation”. Hence not all containers are loaded in container terminals as stated in line 1809 - 1810. Containers can be loaded midstream by a feeder boat or barge. Suggest adding at the end “if the containers are not pre-carried by a feeder boat or a barge and re-loaded on an ocean vessel in midstream operation”. Otherwise, in midstream operation, parties cannot use FAS.

Similar changes should be made in line 2050 - 2053 in FOB. The statements in these lines appear to ignore the possibility of midstream operation.

Suggest adding that in FOB, unlike FAS, it is international sale.

Similar changes should be made in line 2321 - 2324 in CFR.

12 FAS is a domestic sale (Line 1814 - 1816)

In FAS, unlike FOB, the sale is domestic, not international. Hence the applicable law should be local law. This must be pointed out at the end of the Guidance Note in FAS.

13 Clarify nature of FCR and FCT in FOB (Line 2142 - 2144)

In UCP 600, FCR (Forwarder's Cargo Receipt) and FCT (Forwarder's Certificate of Transport) are not treated as transport documents. But under Incoterms 2010, they should be accepted as proof of transport in A8. Otherwise in transactions involving FCR or FCT, parties cannot use FOB.

14 Clarify basis of 110% price in CIF (Line 2637)

Suggest clarifying that the amount insured should be 110% of CIF price, by adding “CIF price” after “110%”.

15 Include franchise, excess and exclusions in CIF (Line 2632 - 2635)

Suggest adding at the end of line 2635 “Franchise, excess and exclusions are allowed” to match the UCP 600 provisions.

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