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Nov.24, 2014

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Q&A 44 THE JOURNAL OF COMMERCE NOVEMBER 24.2014 By Colin Barrett INCOTERMS: LOST IN TRANSLATION? Q: IT WAS DISAPPOINTING to read your answer in the Oct. 13 issue to the person who asked about obligations of the seller and buyer under the FCA Incoterm ("Trade Compliance: Assume the Worst"). FCA — or Free Carrier — is a way to ensure the goods are properly "cleared for export" at the named point specified and included in the sales con- tract. Unlike what you wrote, the buyer understands that he or she will arrange carriage, cargo insurance, etc. In partic- ular, FCA requires the seller to finalize all export formalities. Please note that Incoterms aren't terms of sale. They are terms of delivery at the specified FCA point. You sug- gested that title passes at the FCA point. Incoterms have absolutely nothing to do with ownership or title to the goods. The sales contract addresses that issue. In addition, the importer of record is a very important matter. Again unlike what you wrote, U.S. Customs and Border Protection isn't "lax" about importer of record compliance. The IOR is responsible for proper commodity classification, import security filing, and possible anti-dumping and countervail- ing duties, among other things. Frankly, it looks like you were over your head on this issue. A: FROM ONE WHO WASN'T ACTU- ALLY that far "over my head," thanks very much for one correction that needs to be made. I wrote initially that the term "cleared for export" meant only that the seller had gained govern - mental approval for exportation of the goods in the country from which they were being exported but had not necessarily completed all formalities required for the actual export. In that, I was wrong. I relied on several Internet sources for that information, but it appears those sources are incorrect in that regard. One reader was kind enough to send me an excerpt from the official International Chamber of Commerce explanation of the various Incoterms, which clarifies that "the seller must obtain, at its own risk and expense, any export license or other official authorization and carry out all cus - toms formalities necessary for the export of the goods." This applies not only to FCA, but all other Incoterms. Thus, I was incorrect in telling my questioner that the buyer would have to complete some of the formalities of the export process under FCA terms. It does appear that, since I'm not the only one uncertain about this — there were, as I say, conflicting pieces of information on the Internet — this is an area that might be clarified in actual delivery contracts. I'm not certain why it is that, every time I mention transfer of title in any connection with a question about an Incoterm, somebody feels obliged to "correct" me by emphasiz- ing that Incoterms don't control the transfer of title. I know that. But that simple fact has nothing to do with what is, I think, a not-unreasonable inference that title will generally pass at the delivery point identified by the Incoterm, which is all I said in my original response. It is, after all, pretty likely that, once the seller has completed deliv- ery to the buyer, ownership of the goods will change at that point. Yes, there will be exceptions, but not all that often. So please, readers, you don't need to tell me that Incoterms don't define the point at which title passes from seller to buyer. It's merely that they are in real-world fact pretty indica- tive of that point, and I usually take them that way with the caveat that I'm just making an inference. Now, some clarification is needed about that "importer of record" busi- ness. "Importer of record" is a term often used in international trade, but, even though it has a legal definition and meaning, it isn't a formal desig- nation. No matter what agreements the parties may reach, no one can officially dub himself or anyone else as "importer of record." The "record" is that of the CBP, and is maintained by identifying the party that performs the tasks (described by my correspon- dent) required for importation. And, as I said in my original answer, CBP doesn't care much who does these things; that's what I meant when I said it was "lax" in this area. "Importer of record" isn't an assign- ment to be taken lightly; Customs will hold that person legally respon- sible for any defects or failures. But the responsibility can't be passed from one person to another by some private arrangement of the parties. It's who does the job that matters, which was my original point. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. No matter what agreements the parties may reach, no one can officially dub himself or anyone else as 'importer of record.'

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