International Business Law Commercial terms INCOTERMS International Transport Contracts Doc. Mgr. Tomáš Gongol, Ph.D. International Business Law PEM/NPPMO INCOTERMS Origin :in practice of the trade (a part of lex mercatoria) Application is possible only by using a reference in the contract! Made by International Chamber of Commerce in Paris (ICC) oFirst version of INCOTERMS was published in 1936 (then in 1953, 1967, 1976, 1980, 1990, 2000, 2010) oThe newest: INCOTERMS 2015 INCOTERMS connects a purchase contract with a transportation contract oit regulates obligations of the parties about transporation of goods or its insurance Content of INCOTERMS Rights and obligations of parties in relation to supply of goods •If it’s used then it replaced Vienna convention (and sometimes even goes beyond it) in the following issues: oPlace of delivery oPackaging oGoods checking oObligations related to import and export oMoment of transition of danger oMoment of transition of costs oInsurance (only CIF and CIP clauses) CIF: Cost, Insurance and Freight; CIP: Carriage and Insurance Paid Tady tim prekladem: okamzit prechodu nakladu si nejsem moc jista Types of clauses INCOTERMS contains 11 clauses (previously 13) which can be further divided into several groups: According to rights and obligations of the parties oMinimum seller’s obligations: E clauses oSplit responsibilities: F and C clauses oMinimum buyer’s obligations: D clauses Tady k tem zkratkam jsem vzdy radeji dopnila I jejich jmena Structure of particular INCOTERMS 2000 clauses The seller’s obligations A1 Provision of goods in conformity with the contract A2 Licences, authorisations and formalities A3 Contracts of a) carriage and b) insurance A4 Delivery A5 Transfer of risks A6 Division of costs A7 Notice to the buyer A8 Proof of delivery, transport document or equivalent electronic message A9 Checking – packaging – marking A10 Other obligations The buyer’s obligations B1 Payment of the price B2 See A2 B3 See A3 B4 Taking delivery B5 See A5 B6 See A6 B7 Notice to the seller (determine the time within an agreed period + place of taking delivery) B8 Proof of delivery, transport document or equivalent electronic message B9 Inspection of goods B10 See A10 Incoterm 2010 Loading at origin Export customs declaration Carriage to port of export Unloading of truck in port of export Loading on vessel/airplane in port of export Carriage (sea/air) to port of import Insurance Unloading in port of import Loading on truck in port of import Carriage to place of destination Import customs clearance Import duties and taxes Unloading at destination EXW Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer FCA Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer FAS Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer FOB Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer CPT Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer CFR Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer CIF Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer CIP Seller Seller Seller Seller Seller Seller Seller Buyer/Seller Buyer/Seller Seller Buyer Buyer Buyer DAT Seller Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer DAP Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer DDP Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Buyer Ex works (EXW) Used for all modes of transportation. Transfer of risks takes place when the seller places the goods at the disposal of the buyer at the named place (e.g. factory, warehouse, etc.) http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/EXW.ashx FREE ON BOARD (FOB) Used ONLY for vessels. Transfer of risks takes place successively once the goods have been placed on board the vessel nominated by the buyer at the named port of shipment. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/FOB.ashx CASE •In the agreement between the Ethiopian company (seller) and czech joint-stock company (buyer) for the supply of flax seed worth 15,500 EURO, Incoterms FOB Assab – Djibouti, had not been agreed the crusual (applicable) law. To solve eventual disputes arising from this agreement the parties have chosen, as arbitration body, Arbitration Court of the Economic Chamber and Agricultural Chamber of the Czech Republic in Prague. • •QUESTIONS: •1. What law will be applicable? •2. Who is responsible for loss or damage of goods during transport across the Germany? •3. What is most comfortable INCOTERMS condition to use for the seller? • FREE ALONGSIDE SHIP (FAS) Used ONLY for vessels. Transfer of risks takes place when the seller places the goods alongside the vessel on the quay nominated by the buyer at the named port of shipment. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/FAS.ashx FREE CARRIER (FCA) Used for all modes of transportation. Transfer of risks takes place when the seller delivers the goods to the carrier nominated by the buyer at the named place. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/FCA.ashx COST AND FREIGHT (CFR) Used ONLY for vessels. Transfer of risks is similar to FOB. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/CFR.ashx COST, INSURANCE AND FREIGHT (CIF) Used ONLY for vessels. Transfer of risks is similar to FOB. Marine and transport insurance shall be taken out by the seller for coverage of the buyer’s risks from the place of transfer of risks to unloading at the port of destination on conditions that minimum match Institute Cargo Clauses C or similar. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/CIF.ashx CARRIAGE PAID TO (CPT) Used for all modes of transportation. Transfer of risks takes place when the seller delivers the goods to the first carrier. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/CPT.ashx CARRIAGE AND INSURANCE PAID TO (CIP) Used for all modes of transportation. Transfer of risks is similar to CPT, i.e. when the seller delivers the goods to the first carrier. Marine and transport insurance shall be taken out by the seller for coverage of the buyer’s risks from the place of transfer of risks to the point of destination on conditions that minimum match Institute Cargo Clauses C or similar. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/CIP.ashx DELIVERED AT TERMINAL (DAT) Used for all modes of transportation. Transfer of risks takes place when the goods have been unloaded from the arriving means of transport and placed at the disposal of the buyer at a named terminal at the named port of destination/point of destination, not cleared for import. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/DAT.ashx DELIVERED AT PLACE (DAP) Used for all modes of transportation. Transfer of risks takes place when the goods have been placed at the disposal of the buyer at the named point of destination, cleared for import. http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/DDP.ashx DELIVERED DUTY PAID (DDP) Used for all modes of transportation. Transfer of risks takes place when the goods have been placed at the disposal of the buyer at the named point of destination, cleared for import http://www.primecargo.dk/Information/Shipping%20Tools/~/media/Incoterms/DDP.ashx http://strategy.consiliumglobalbusinessadvisors.com/Portals/165116/images/Incoterms-2010.jpg International Transport Contract •Importance for international business oTransport of goods – seems as complementary service to the purchase contract oCovering the transport by contractual party is not very common •Definition of international transport oTransportation is international when the place of departure (sending) and the destination place are in different countries §Sometimes those places are in the same country but part of the transport is take place someplace else. Legislation Unified oEsp.. Transportation contracts (contained in international contracts) §Key point: shipping document, liability of the carrier, dispute solving Conflict oWhen unified type doesn’t exist oE.g. forward contract oApplicable law: legislation of the place (country) where the carrier or shipper is established in o Form contracts oIn practise: the carrier presents it to customer International contracts in international transportation of goods •CMR: Convention on the Contractor the International Carriage of Goods by Road – Reg. No. 11/1975 Coll. •COTIF: Convention Concerning International Carriage by Rail – Reg. No. 8/1985 Coll. as amended • •United Nations Convention on the Carriage of Goods by Sea (The Hamburg Rules) 1978, Ministry of Foreign Affairs No. 193/1996 Coll. • •Convention for the Unification of Certain Rules for International Carriage by Air (The Montreal Convention) 1999 – Ministry of Foreign Affairs, No. 123/2003 Coll. International sources of technical issues oConvention on International Regime of Maritime Ports – Reg. No. 64/1932 Coll. oConvention on International Civil Aviatory – Reg. No. 147/1947 Coll. as amended of Reg. No. 29/1957 Coll. o oEuropean Convention on Road Signs – Reg. No. 175/1960 Coll. oAgreement on adopting particular homologation conditions (verification of conformity) and mutual recognition of equipment homologation and other parts of motor vehicles – Reg. No. 176/1960 Coll. o oCustom Convention on International Agreement on Safe Containers – Reg. No. 62/1986 Coll. International railway transport 9 May 1980 – Convention concerning International Carriage by Rail (COTIF) 3 parts 1.Text of Convention = statute Intergovernmental Organisation for International Carriage by Rail (OTIF) §Purpose: to create uniform legal order for international carriage of passengers, luggage and goods 1.Appendix A – Uniform rules concerning the Contract for International Carriage of Passengers and Luggage by Rail (CIV) 2. oTransport document = ticket and luggage ticket (must contain the abbr. “CIV“) o oRailroad liability §For death, injury during operation or entering or exiting (statute of limitations: 3 years) §For damages caused by losing or damaging things that passengers having on themselves and for damage of hand luggage (statute of limitations: 1 year) §For damages on luggage which was transported (statute of limitations: 1 year) Nejsem si jista, ale podle zneni COTIF, ktere jsem nasla na strankach jsem Pripojek A I B prelozila jako Appendix 1.Appendix B – Uniform Rules concerning the Contract for International Carriage of Goods by Rail (CIM) 2. oUniform legislation CIM is complemented by 4 Annexes which regulate more specific issues: oInternational Carriage of Dangerous Goods by Rail (RID) oInternational Haulage of Private Owners’ Wagons by Rail (RIP) oInternational Carriage of Containers by Rail (RiCo) oInternational Carriage of Express Parcels by Rail (RIEx) • CIM CIM applies to: all shipments of goods transported with consignment note issued for the route: 1.On territory of at least two countries 2.On railway lines registered in the list administered by Central office for international carriage by rail. 3. •CIM regulations are binding for countries which agreed with COTIF Convention as well as for transportation contract countries oIt is possible to deviate but only if CIM regulations itself allow it! •If CIM regulations or international tariffs don’t regulate some issues then the applicable law shall be the national law of the country in which the party make a claim •Transport document = consignment note Transportation contract shall be enter into consignment note • •Carrier is responsible for: oTotal or partial loss of goods oDamage of goods to the moment of delivery oDamage caused by delay o •Carrier is relieved of this liability: oIf the loss, damage or delay was authorised person’s fault or an order by authorised person which was not caused by the carrier, specific defects (such as inherent one, draining away, etc) or oCircumstances which the carrier couldn’t stop and its consequences couldn't avoid. International Road Freight Transport •19 May 1956 – Convention on the Contract for the International Carriage of Goods by Road (CMR) •Conditions of application 1.Applies to every contract for the carriage of goods by road in vehicles (motor vehicles, trailers, semi-trailers) 2.When the place of taking over of the goods and the place designated for delivery, as specified in the contract, are situated in two different countries, of which at least one is a contracting country 3.It is done for reward Mandatory nature of the Convention oVariance can be done but only if the contract allows it. Other (consignment note, liability, atd.) see COTIF International Air Transport •28th May 1999 – Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention) §Replaces so-called Vienna Convention (1929) •Application oApplies to international carriage of passengers, baggage and cargo performed by aircraft for reward oThe place of departure and the place of destination are situated within the territories of two State Parties It has a mandatory nature. •Transport of goods– air waybill •Liability of Carrier oExceptions: inherent defect, quality or vice of that cargo; defective packing; an act of war; an act of public authority In practice: Airlines provide higher compensations than is required by the Convention Complaints: §Damaged cargo: within 14 days, baggage: 7 days from the date of receipt §Delay: within 21 days from the date on which the baggage or cargo have been placed at disposal §If no complaint is made within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on its part. Tady jsem pouzila americky vyraz waybill protoze si nejsem jista, jestli consignment note je take pouzivane u letecke dopravy. Maritime transport 30th March 1978 United Nations Conventio on the Carriage of Goods by Sea (The Hamburg Rules) • •Convention is applicable to all contracts of carriage by sea between two different Countries if: •The port of loading as provided for in the contract of carriage by sea is located in a Contracting Country or •The bill of lading or other document evidencing the contract of carriage by sea is issued in a Contracting Country • •It has a mandatory nature. Joint contractual type : Carriage of goods contract •Despite minor differences in the contracts of good carriage there are common rules in contracts. •International nature of transport oIs not given by the place of business or seat of contractual parties but by the fact that the transport path goes across a border as least one country. oDue to that the carriage of goods agreed between two domestic entrepreneurs shall follow the international convention if the goods is transported to another country or from abroad. Transport document •Transportation contract is created by an agreement between the consignor and the carrier. •Along with handing over the goods there have to be also transport documents - bill of lading, consignment note, air waybill oIt’s a proof of existence of contract and oSecurity that gives the right to dispose with the consignment o Requirements are specified in certain conventions The essential elements of a transportation contract The essential elements: •Contractual parties (carrier, consignor) •Recipient •Type of goods (items), including data on weight, number of pieces, etc. •Destination of goods • Other: •Reward (e.g. setting fares) •Value of the goods •List of documents necessary for performing the tranport •e.g. required by customs or other public authorities and danded to the carrier Rights and Responsibilities Consignor’s responsibilities oHand over the shipment oInform about its character oHand over all documents oPay a fee (freight) Consignor’s R&R •Consignor’s rights oTo get the goods for submitted transport documents •Consignor’s responsibilities oCover those costs which weren’t pay by the carrier Carrier’s Responsibilities oTransport the goods on time and properly Carrier’s responsibilities •Responsibility for delay and damages •It’s limited kind of responsibility • oLiberisation reasons (e.g. defective goods, defected packing, etc.) oLimits the compensation for actual damages (e.g. price of the package) and don’t acknowledge the right for compensation for loss profit U tech liberizacnich duvodu byl jeste jeden priklad a to: zavinění škody oprávněným Coz jsem uplne presne nepochopila a tak jsem to tam nezahrnula Freight Forwarding contract in international business Definition: •The seller (=forwarder) agrees to arrange storage and shipping from one place to another of merchandise on behalf of its shippers. It usually provides a full range of services including: tracking inland transportation, preparation of documents, warehousing, booking cargo spaces, negotiation, etc. The buyer agrees to pay a reward to a seller. •Specialised type brokerage contract oThe seller covers also so-called forwarding activities •Forwarder is liable for damages caused during transport unless he couldn’t avoid damaging it by performing professional care. oIf the contracts says so, the forwarder is obliged to insure the goods. •Forwarder can perform the transport unless it contradicts the contract •Forwarder has a lien on the consignment to ensure claims •Legal regime: oIf there’s no choice of law then the applicable one is the law of the country where the forwarder has a seat or domicile oInfluence has been made by NGO FIATA