On July 12, Integration Point held a free webcast on “Incoterms: Rules of Engagement.” We discussed the meaning of each term and where responsibility is placed both from a transportation and Customs perspective, as well as best practices to minimize risks and costs.

During the webcast, some questions were unanswered due to time constraints. Our speaker, Jenae Ciecko, President of Copper Hill Inc., will answer them here.

 

For "FCA," could the carrier be in the U.S. even though the seller is in Thailand? Is the seller responsible for everything up to the location of the carrier in the importing country, or is this only for the carrier in the country of export?

FCA named place can name the place anywhere along the supply chain. It is the responsibility of both parties to ensure they can meet their obligation to that specific named place. 

 

For clarity, when EXW are used, is the buyer always the exporter of record, or are they only responsible for the export documentation? Could there be a case where the buyer could input the seller's details within that documentation?

Yes, with EXW, the buyer is responsible for freight and customs both on the export and import side. There are specific rules in the export regulations regarding USPPI.

 

What happens when someone's sending something DDP and the U.S. Customs broker asks the buyer for POA and any other paperwork in order to clear?  Obviously, buyers don't want to give POA for any and all brokers whom a seller decides to use.

This is an example of one of the pitfalls of buying DDP. Sometimes sellers will agree to DDP when they don’t have an established ability to import into the country of destination. Technically they should take care of everything including signing a POA and providing necessary paperwork to clear. Oftentimes in an effort to simply get the goods, buyers will be forced to facilitate the transaction.

 

With the upcoming Incoterms 2020, with the introduction of China and Australia for the first time in the drafting, will there be any terms changing or being eliminated?

Not to our knowledge, but we will only know for sure when they are published.

 

What is PPI?

Principal part of interest. A U.S. Principal Party in Interest (USPPI) is the person or legal entity in the United States that receives the primary benefit, monetary or otherwise, from the export transaction. Generally, that person or entity is the U.S. seller, manufacturer, or order party, or the foreign entity while in the United States when purchasing or obtaining the goods for export.

 

What is the usage of NDS Neutral Delivery Services? Is it an Incoterms supplement?

Some carriers offer Neutral Delivery Service (NDS). With this service, companies can have products sent from their overseas vendor directly to their end customer in the United States. It isn’t an incoterms supplement. A standard incoterm would still need to be negotiated and agreed upon.

 

If EXW is used on a PO, can the seller be named as the Exporter of Record, and if they are, are there any implications?

Technically no. If the term is EXW and you are the buyer, you are responsible for the export.

 

So if FCA is recommended over EXW, if the customer includes EXW on their PO, do we have to use EXW?

If the PO is representative of what was agreed to at the time of negotiation – yes.  If you are still at a point of negotiation, you could push back and request FCA named place.

 

How specific should "named place" be?

As specific as possible to avoid any confusion later. 

 

If we deliver the goods at a U.S. port and the freight charges are brought by the buyer, what is the best incoterm to use? We pay for the drayage to the pier­.

FCA named place should be the point you deliver to. Basically, when you stop paying and they start paying.

 

­I understand that the incoterms transfer "risk," which is one of the elements of revenue recognition. So they may not dictate revenue recognition, but there is an impact or cross-over. Can you comment on that?­

Incoterms don’t account for revenue recognition. They only identify responsibility of transportation and customs. That said, revenue recognition has to be negotiated and documented elsewhere.

 

My company is a manufacturer. If we sell goods FCA-Our Loading Dock, who assumes risk when our goods are in the process of being loaded on the buyer's truck (e.g., while the goods are on a forklift)? ­

With FCA your dock, you are responsible to load the goods on the buyer’s truck. Therefore, if they are damaged in that process, you are responsible.

 

Can you confirm when using FCA that the Seller is the USPPI and responsible for export compliance and AES filing if required? ­

Yes, with FCA named place, the seller would be the USPPI and responsible for the export filing.

 

Can a seller in the U.S. be an Importer of Record in all global locations when using DDP­?

Only if they establish the proper tax presence in the countries in which the goods are destined for. 

 

You have been talking a lot about Buyers/Sellers, but what about when there is no sale but rather companies doing services?­

Incoterms are only used to determine freight and customs responsibility when goods are bought/sold and shipped. This would not apply to a service.

 

­How does a U.S. Entity without a Europe legal entity at all actually pay the value-added tax (VAT)?  ­

I assume this is meant if the U.S. Entity negotiates a DDP term to Europe. If this is the case, then yes, the U.S. Entity would be responsible for the VAT. That entity will have trouble and possibly may not be able to recover the VAT.

 

Do you expect major revisions to Incoterms in 2020? New terms? Exclusion of some?

We are unsure what to expect with all that is going on in the trade compliance area right now. If we look to the past, we would say no, but it really is hard to say.