Incoterm 2010 - Case Studies & Solution PDF

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Case study 1 • A company manufactures large tanks at its production site in Germany and sells them to a customer in Switzerland. The buyer and seller have agreed "CPT Zürich Incoterms® 2010" as delivery conditions. The company employs a service provider to transport the tanks to Switzerland. During transportation the tanks are damaged and the customer refuses to accept them. He demands the delivery of new tanks. • Is responsibility for the damage to the tanks to be borne by the buyer or seller? Can the buyer refuse to pay for the goods despite the damage?

In this case, the sales contract is made with the use of CPT Zürich Incoterms 2010 (carriage paid to) which means the seller has to be responsible for the arrangement of carriage and costs for delivery. The seller will complete his obligation when the goods are handed over to the carrier at the agreed destination and risks will transfer to the buyer at the point where the carrier takes charge of the goods. Therefore, the buyer is liable for the damage due to the early transfer of risk and cannot demand the supply of new tanks from ABC company. Case study 2 • The company imports precious stones and metals to the United States from different countries. The company is currently using CIF (Cost, Insurance and Freight) Air Freight, Company Facility, as a term of the international sale. The buyer also requests the Seller to arrange both transport and insurance from the point of shipment to the buyer’s facility and pay customs duties in the United States. • Analyzing the buyer’s choice of Incoterms rule. Giving advice for the client.

First, customers should not choose CIF for the following reasons: CIF term is not applicable to air transport. The buyer also requests the Seller to arrange both transport and insurance from the point of shipment to the buyer’s facility and pay customs duties in the United States. So the best choice would be the DDP term.

According to the DDP term, the Seller must arrange the shipment and pay all costs including import and export duties up to the point when the goods are transferred to the Buyer at the final point of destination. DDP allows the Buyer to request the Seller to arrange the insurance, if the Buyer wants it. However, the Buyer will indirectly pay for the insurance, because it will be included in the price of the goods. At the same time under DDP the Seller has responsibility for the loss or the damage of goods up to the point when the goods are transferred to the Buyer at the final point of destination. Case study 3

• The exporter sent cargo (steel) to the buyer in CIF condition, Incoterms 2010. Before the shipment, he did an inspection and everything was ok. The captain signed a clean Bill of Lading. The problem was that, when the cargo arrived at port of destination, the buyer concluded that the cargo were wet. The buyer is trying not to pay the cargo because of damages. • Analyzing this case?

The risk of loss of or damage to the goods passes when the goods are on board the vessel nominated by the port of loading. According to the CIF, Sellers have to pay transportation fees, insurance fees, and other costs. Moreover, the cargo was checked and signed by the captain. Because of the two things above, the buyer can not refuse to pay the fee of the merchandise. Case study 4 The seller and the buyer made a contract on CIF term Incoterms 2010. Port of loading is Amsterdam Port. Port of discharge is Haiphong Port. On the way, the vessel met a rough sea so part of the goods got lost. When the vessel came to Haiphong port, the buyer refused to receive the goods. Was the buyer right or not right? • Analyzing this case? In case 4, the buyer was wrong Because the buyer bears all risks, losses, and costs of the goods (except for amounts included in the freight) from the time the goods are delivered on board the vessel at the port of loading. When using the CIF term Incoterms 2010, the seller fulfills his obligation to deliver when the seller delivers the goods to the carrier in the manner specified in each condition. Therefore, the buyer still has to receive the goods from the seller, and for damage, based on the insurance policy provided by the seller, the buyer will contact the insurance company to compensate.

Case study 5 • The contract was signed between Company A (the seller) and Company B (the buyer) on FOB terms. After that, the issuing bank issued a letter of credit in which one of the required documents was the Bill of Lading with “Freight Prepaid”. But, the seller did not check L/C carefully and delivered the goods with marking “Collect freight charges” in the Bill of Lading. The issuing bank refused to pay Company A. • Analyzing this case?

According to Incoterms 2010, the seller has no obligation to the buyer to make a contract of carriage. The buyer must contract at its own expense for the carriage of the goods from the named place of delivery. However, the buyer must reimburse the seller for all costs and charges incurred by the seller in providing or rendering assistance in obtaining documents and information as envisaged in A10. The buyer must, where applicable, in a timely manner, provide to or render assistance in obtaining for the seller needs for the transport and export of the goods and for their transport through any country.

In this case, both parties have agreed on FOB terms and the buyer must pay the freight in advance. However, the seller delivers the goods with marking “Collect freight charges” in the Bill of Lading or it means freight charges will be collected when the goods are delivered. Therefore, the bank does not pay company A.

Case study 6 • Hoang Long company imports computer products from the Eurozone. Hoang Long company suggests DDP rule in Incoterms 2010. Exporter does not agree because he does not have experience in carrying out custom formalities for importing goods to Vietnam. Exporters suggest CIP rule in Incoterms 2010. • Analyzing this case? Which rule should two parties choose?

According to Incoterms 2010, “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities. DDP represents the maximum obligation for the seller. In this case, DDP can be considered as a condition that the seller will perform "from A - Z" until it reaches the buyer, except for the loading and unloading of goods from the means of transport. So the buyer – Hoang Long company will prefer DDP rule. If the seller accepts DDP rules, they may face difficulties and risks when carrying out procedures to import goods into Vietnam because they have no experience in doing this. That's why they rejected the DDP rule.

Instead, they recommend another more suitable rule, CIP, under this rule, the person carrying out the procedures for importing goods will be Hoang Long company. CIP requires the seller to clear the goods for export, where applicable. However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities. Since it is a local company, this will be easier for Hoang Long and they are more experienced.

In addition, the two parties can also choose the DAP rule. According to Incoterms 2010, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities. The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place. For items of high value and prone to risks during transportation such as computers, Hoang Long may need the seller to bear the risk. to the named place. Then the DAP rule will become more relevant....