Can a shipment have multiple Incoterms rules..??

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”.. 

multiple incoterms

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..

So be aware of what the Incoterms® rules can and cannot do and know the steps to follow when you are importing or exporting..

*** End of Article ***

8 thoughts on “Can a shipment have multiple Incoterms rules..??”

  1. Country A exports palm oil and palm oil products to country B. Can there be 1 incoterm used for palm oil, and another incoterm used for palm oil products? There will be different shipments too.

    Reply
    • If they are different shipments, ie: separate sets of documents entirely, then potentially yes. However if these two separate shipments are being shipped in different holds of the same bulk vessel it would be difficult to mix say FOB with CFR because in FOB the seller has no involvement in the charter party but in CFR the seller is responsible to contract for carriage via a charter party. A mixture of CFR and CIF is possible, where the only difference is when the seller must insure for the buyer’s risk in CIF.

      If the question instead relates to containers then the comments would be similar for the any mode/s rules FCA, CPT and CIP. I would very strongly recommend against using the D rules in cross-ocean container trade.

  2. Hi Bob, it must be remembered that here in South Africa we do have a very large inland port with the ocean carrier arranging the railage to that port.

    Here the ocean carrier still has control and liability for any losses from the containers.

    In the event of any loss from or to the container shipments, the claimant must claim against the ocean carrier who then claims against the rail carrier (Transnet Freight Rail).

    The cost of this railage is built into the ocean freight and thus the seller will be paying for the railage to the inland port. The risk in the cargo passes from seller to buyer under FCA, CPT and CIP when the container is handed to the carrier prior to shipping at the country of export.

    There are instances when the Customs may stop the container at the port of discharge for an inspection (customs stop) prior to railing to the inland port which will be at the expense of the buyer who will also be liable for the demurrage and costs of the inspection. The delay at the port of discharge will be for the account of the buyer.

    After the inspection the container will in all probability be released by customs and continue on to the named place of destination, the cost of which is for the seller under the ocean freight agreement.

    Here is South Africa we do have some unusual ways of doing things.

    Reply
    • Yes, but all that is irrelevant to the sales contract between seller and buyer which mentions only when risk passes from seller to buyer.

      In FCA, CPT and CIP it is when the seller hands the goods to the carrier at the origin end, in DAP when the seller delivers.

      DAP, I contend, is too often mistakenly assumed to always be to the buyer’s premises but that is fraught with difficulties and potential problems.

      It works fine that way for road transport in Europe say for Toulouse to Tashkent, but it does not work at all fine and dandy that way for cross-ocean container shipments.

      In my opinion anyone using DAP should ensure it is DAP Destination Container terminal and no further. I will explain this further at my workshops in South Africa in a few weeks.

  3. Hi Hariesh, I think the term “shipment” is used in ambiguity in this question.

    The term shipment can refer to a group of items or a consignment of goods ordered from different suppliers so packed in one shipping container and consigned to one person/consignee/buyer.

    In this case, the goods from such various suppliers can have different INCO-terms rules, e.g., the goods ordered from one supplier can be regarded as the main goods to be shipped or the main shipment, where the Incoterms rule can be CIF, while others goods from other suppliers so send to the main shipment can have different Incoterms rules, e.g. FCA or EXW.

    Even if the question referred to this type of shipment, it is still a great article in content, generally.

    Reply
    • Sadly the above comment is misinformed. There is no such thing as “INCO-terms” rules, the registered word is “Incoterms(r)”. The writer confused a container shipment with CIF which is not for containers.

      In the article itself, Alexander is correct in almost everything.

      He said that a CPT/CIP shipment cannot be changed to DAP without changing the destination but this is not correct.

      Many people assume that DAP means delivery to the buyer’s premises but nowhere in the rule does it say that.

      It states delivery at a named place and that could well be the same CY as with CPT/CIP.

      I assert that a DAP transaction beyond the CY in cross-ocean container trade is impractical and likely not transacted correctly as it involves the seller’s carrier taking hold of the goods again after the buyer has import cleared them.

      The rule also is not clear about whose risk covers the goods for what portion of the time those goods sit say in the CY or CFS if the buyer has problems import clearing the goods.

      String sales usually happen with bulk commodities using FOB/CFR/CIF and the concept was extended to the any mode/s rules “just in case” it happened with these.

      Here Alexander is not quite correct either because the goods being on board a vessel has no relevance to FCA/CPT/CIP in which rules there is no mention of a vessel nor any responsibility on the seller to place them on a vessel.

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