We shipped a recent export consignment to an Indian customer with the shipping term FCA (Sellers premises) Incoterms 2010. In accordance with the Incoterm the customer instructed their freight forwarder to collect the goods from our site, we handed the goods to the forwarder along with appropriate documentation sufficient to clear the goods through Customs and thought that was the end of the matter, we were surprised one morning to receive an invoice from the forwarder charging us for Customs presentation and export declaration fee, the amount was over £80. Needless to say we took this up with the forwarder on the basis that we expected such charges to be billed forward to our customer. They were adamant that these costs should be to our account. What do you think ?

A look at the ICC publication “A guide to Incoterms 2010” allows one to look at all the 11 Incoterms and the Seller and Buyer obligations that are attached. Under FCA (Free Carrier named place in the country of departure) A6 Division of Costs it clearly states that “The seller must, subject to the provisions of B6, pay -

  • All costs relating to the goods until such time as they have been delivered in accordance with A4 and
  • Where applicable , the costs of customs formalities as well as all duties , taxes and other charges payable upon export

This is somewhat confusing particularly to those who regard FCA (free carrier) as a modernized form of Ex Works, the words used in another part of ICC rules ‘Cleared for export’ have caused uncertainty. The fact is you are responsible for customs formality charges, but where these begin and end is not crystal clear, it should only be charges related to the actual customs formalities rather than collection and transportation that should accrue to the seller. The words “Where applicable” at the beginning of that clause in the rules is there because intra EC movements do not include Customs presentations at export or import hence the customs formalities requirement becomes irrelevant .

The ICC (International Chamber of Commerce) received comments from traders prior to the issue of a new set of the Incoterms ® in September 2010 (came into force on 1st January 2011). Certain ambiguities such as ‘cleared for export’ could be clarified in the new set. A final point is that Incoterms are a useful way of agreeing responsibilities under the contract of supply but there should be harmony between seller and buyer and you can discuss the forwarder’s charges with your customer, you could revert to Ex Works but this seems a retrograde step with the customer responsible for everything in the delivery chain and evidence of export as required by HMRC for VAT zero rating not always easy to obtain from the customers freight forwarder. 

Under the 2010 set the seller is responsible for these costs clearly, however may reject costly bills as there is no contract with the customers freight agent. Bills must therefore be reasonable and normal to be accepted and paid by the seller

 

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