Suggestions on Incoterms 2000 Revision

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9 February 2008

To: Emily O'Connor, Senior Policy Manager
and Members of Commercial Law and Practice
International Chamber of Commerce (ICC)

Dear Ms O'Connor and Members of CLP,
I am glad to present my suggestions on Incoterms 2000 revision as follows.

Addition of CIN (Cost and Insurance)
From my consultancy work, a lot of traders find that the existing 13 Incoterms 2000 are not enough to cover their trading needs. Some exporters were worried that if they sold on EXW, FAS, FOB or FCA, an unethical buyer might take a “wait and see” attitude and would not cover insurance. If the goods were cheaper in the commodity market upon arrival, the buyer would buy from a third party on spot price and declined payment based on fabricated discrepancies in a letter of credit transaction. If the goods were lost due to perils at the sea, then the seller might suffer double lost: lost of goods and lost of the opportunity to cover it's lost by claiming on insurance otherwise arranged.
Hence, a new Incoterm CIN (Cost and Insurance) can help in that situation.
Delete FOB, CFR and CIF
During the revision of Incoterms 1990, there were suggestions to abolish FOB, CFR and CIF as they were seriously misinterpreted and misused in the market place, creating confusions and disputes that could have been avoided if Incoterms like FCA, CPT and CIP were used instead.
The task force/drafting group at that time finally decided to extend the use of these terms as they were very popular amongst the traders. They hoped that within the last ten years, traders could improve their understanding of the Incoterms 2000.
We should not hang on forever and now it should be the right time to make a change.
Clarification of EXW
The future guide book on Incoterms should highlight that terms used in the market place like Ex Stock, Ex Warehouse, Ex Godown, Ex Factory, Ex Depot and Ex Plant are not Incoterms to avoid confusions.
Ex Work (missing an S) is also not an Incoterm.
Recognition of some Variants of Incoterms
Many Variants of Incoterms are used in the market place to cover special arrangement between the seller and the buyer, such as EXW loaded, FCA loaded, CIF maximum cover, DDU unpaid and the like.
If FOB, CFR and CIF were to be abolished, it follows that Variants like FOB loaded, CIF undischarged should not be recognised.
Include THC in Incoterms
THC (Terminal Handling Charge) is not expressly covered in the rights and obligations (A1 to A10 and B1 to B10) in each trade term of Incoterms 2000. As a result there are disputes amongst the parties that could have been avoided if Incoterms 2000 had included THC.
Add Tables and Flow Charts on Incoterms
P&O has made a table on Incoterms 2000 separately for marine and multimodal transport, with Incoterms 2000 on the vertical axis against corresponding charges and costs on the horizontal axis. In each Incoterm, at the spot where the two axis cross, it is marked either S (Seller) or B (Buyer) to signify that either the seller or the buyer is responsible for that charge or cost. In this way it is very easy for traders to find out which party should be responsible for that charge or cost in an Incoterm. Pictures speak louder than words. These tables receive overwhelming welcome in my Incoterms 2000 workshops globally. The task force/drafting group in Incoterms 2000 revision should add these tables in the guide books.
P& O also provides a flow chart to help the traders in picking up the suitable Incoterms 2000 for them. This should be included in the guide books as well to help the traders in correct application of the Incoterms.
T. O. Lee
Toronto

(905) 237-6465

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