Incoterms Explained : simply, we hope
November 19, 2005 by SwizStick
Filed under Incoterms 2000
It always astounds me how little people seem to know about incoterms or understand them. From my experience in the logistics industry, most major trading companies in Asia, and especially Europe, seem to have at worst a basic knowledge of Incoterms with most having a strong understanding of the terms they commonly use.
Unfortunately, I can not say the same of many companies I have come into contact here in my home country of the U.S. While there are exceptions, by and large most of the shipping/logistics managers I have come into contact with have little to no understanding of Incoterms. Some even lack the understanding of the 1-2 Incoterms their company normally uses on a daily basis.
One of our goals here with 3plwire is not just to disseminate news and opinions but also to educate. With that in mind, we will begin posting explanations of the Incoterms that are commonly used in world trade, hopefully making them easier to understand.
My partner Splatty will start with an introduction to Incoterms and their uses. After that, we will take turns explaining the various Incoterms used, taking them on one-by-one.
john on Wed, 20th Oct 2010 8:28 am
For a start I don’t anybody involved in Incoterms really understand what they are talking about and so I suppose that includes you.
Also it doesn’t matter what one person thinks is correct because another will disagree.
What do I bill back to HKG on a DDU shipment? I say Customs Clearance handling and delivery but a lot of people say Customs Clearance is to the consignee with duty and tax. So tell me how you deliver without clearing first and therefore clearance being part of DDU. So which new code explains that?
linda on Mon, 9th Jan 2012 4:03 pm
So would like to know the answer to John’s question myself.
We have a customer whos broker does the clearing but the destination is the customers address. Our carrier indicates customs delay – which indicates they have passed to the broker it can be up to 7 days for them to clear. When is our obligation completed in this case?
3plwire on Fri, 13th Jan 2012 12:45 am
In regards to John’s comment he is basically just confirming what we already stated: that many companies often don’t really understand the incoterms they are using and often they get misinterpreted.
And he is right: it doesn’t matter what ONE person thinks; it matters what TWO people think: both the buyer and the seller. At the end of the day what is most important is what both the buyer and seller understand and agree to. If you are not sure how the other party interprets the selling / incoterm, ask them: make sure you know.
And as we always say, consult an experienced trade attorney with experience settling trade / incoterms disputes. They will be able to advise you on the proper definition of the incoterms you use.
As for Linda’s question, you didn’t indicate what incoterm you had a question on but since you referenced John’s question I assume you are selling on DDU terms. Your obligation under DDU terms ends once the cargo is delivered to the named place of destination mentioned in the terms. No, that does not include Customs Clearance which is the responsibility of the buyer / customer. If it’s taking 7 days to clear through Customs (which I find absolutely ridiculous unless Customs is inspecting each and every shipment) that’s the buyer’s problem, not yours. Your responsibility ends once you have reached the named destination in the DDU terms. Is it your buyer’s address? Then you would be obligated to deliver to their address.
Most importantly, remember that DDU has been removed from Incoterms 2010 and the new incoterm DAP (Delivered At Place) replaces it. So while many companies are still using DDU, the proper new term they should be using is DAP, which is actually far clearer. Note that DAP, like DDU, does not include customs clearance.