Customs evaluation of goods cannot be done without taking into account the provisions of the sales contract, hence the importance for customs and the declarant to master the Incoterms (International Commercial Terms).

SECTION 1: GENERALITIES

Incoterms come in various types. Only a good understanding of the rules will optimize the customs value.

Paragraph 1: Definition

Incoterms are commercial terms, published by the International Chamber of Commerce in Paris since 1936 to govern the sharing of costs and risks between a seller and a buyer.

These terms define the responsibilities and obligations of a seller and a buyer in international commercial contracts, particularly regarding the delivery of the goods (loading, type of transport, insurance…) and the seller’s documentary obligations.

Since their creation in 1936, Incoterms have had several versions. The most recent version, effective from January 1, 2011, is the 2010 version, called “ICC 2010” or “Incoterms 2010”. The previous version was called “Incoterms 2000”.

The “Incoterms 2010” version includes 11 international trade terms, of which 4 are solely for maritime transport:

• each term is coded by three letters, for example EXW for ExWorks;
• in common usage, the three-letter terms must be supplemented with the exact location where the Incoterm applies (agreed destination). For example: FCA Cotonou: address of the forwarding agent.

Paragraph 2: Utility of Incoterms

Incoterms have simplified and clarified relationships among different operators, especially from a commercial perspective. They are of crucial importance as they enable all actors in international trade to have regulations that, beyond conventions, appear as the universal language of international trade.

Incoterms serve three functions:

• they allocate transportation costs between the buyer and the seller;
• they define the transfer of risk location, i.e., who between the seller or the buyer will bear the loss in case of improper execution of the transport;
• they determine the delivery obligations, in terms of timing, on the seller (example: CIP Cotonou, with shipment from France no later than…).

Ultimately, Incoterms allow parties to quickly and unambiguously agree on transaction terms. Therefore, Incoterms are contractual in nature. Important note: Incoterms concern the transfer of risks, not the transfer of ownership.

SECTION 2: CLASSIFICATION OF INCOTERMS BY MODE OF TRANSPORT.

Several types of Incoterms are distinguished according to the mode of transport.

Paragraph 1: Incoterms applicable only for maritime transport

There are four (04) Incoterms that are valid only if the departure and arrival points are maritime ports. These are:

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This text is an extract from the book “BETTER KNOWING CUSTOMS” written by Idrissou IMOROU.

We invite you to read the following article “TYPOLOGY OF CUSTOMS EXEMPTIONS“.