Meet our writer. Written by our resident freight forwarding and shipping expert. Bob Ronai→

The usual answer is because delivery occurs, and risk transfers, when the goods leave the seller’s direct control, such as when the goods are loaded into the container at the seller’s premises or at the CFS or CY, long before the goods go on board. This would be the case with Free Carrier (FCA), Carriage Paid To (CPT) and Carriage Insurance Paid To (CIP).

But what about in the D rules? Here the goods in containers leave the seller’s direct control, head off overseas entirely outside of the seller’s direct control yet delivery occurs, and risk transfers, later on in the destination country.

Given that these days carriers will not allow visibly damaged or leaking containers to be loaded on board, I contend that the on board action should be accepted as being the delivery and risk transfer point if the seller and buyer agree. Ah yes say some, but what if the goods outturn from the container at the other end damaged? My answer, that is the same as delivery/risk transfer in DAP CY where the buyer takes delivery of the container for trucking and unloading later at their premises.

Where did the damage occur? We can assume then it occurred after loading on board. If it is water damage due to a leak in the container, was it freshwater or saltwater? Were the goods adequately packed? What percentage of container shipments arrive damaged? Should we write rules to take into account the small minority or the great majority?

The majority of container shipments are FOB, CFR or CIF. Why don’t the rules reflect common usage?

When does the typical seller think they have exported? When they or the forwarder have completed export formalities with customs or when the container is put on the ship? Surely the answer is the latter, when it is on the ship at the port of loading, having passed that perception of the export border, of physically leaving the country.

When does the typical buyer think the seller has exported? Exactly the same answer. The buyer certainly does not want to have to deal with anything in the exporting country before the container has crossed the perceived export border.

This whole concept for containers is ignored in the current and previous versions of the Incoterms rules.

The Incoterms rules are unknown to the majority of sellers, buyers and forwarders because the ICC not only has ignored their needs, but because the book is over-priced and under promoted.

Right now the ICC is busy telling other organisations and governments how to behave and perform, instead of focussing on the relevance, or lack thereof, of its own key publication which should be helping the world of trade if only it would reflect the traders’ real every-day procedures.

Reader’s comment:

“Why don’t the rules reflect common usage?” Well, why don’t they?

Bob’s response:

Because the majority of the Drafting Group, being European lawyers, didn’t understand what the majority of traders actually do when shipping containers from or to outside of Europe, or just anywhere else, despite my attempts to inform them.

They took the high-handed attitude that the majority of traders have to follow the lawyer-written rules. Realities of trade did not come into it. Realities, that if you write rules that don’t work then they will be ignored, also didn’t come into it.

Want to find out more about Incoterms® Rules 2020?

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