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Breakbulk Americas 2011

Custom of the Port

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Agenda

•Panelists •What is Custom of the Port? •What does Incoterms say? •Port perspectives •Carrier perspective •Solutions •Questions/Answers

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Custom of the Port

When does FOB not mean FOB?

How does Custom of the Port affect buyer and seller obligations?

Why do Incoterms not solve Custom of

the Port issues?

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So what is Custom of the Port?

FOB sales contract - seller obligation to deliver on board the vessel, buyer contracts for carriage. Local practice (Custom of the Port) - decides how stevedoring and other port costs are distributed to seller or buyer. Practice varies between ports or even within a port. This distribution of costs between seller or buyer may conflict with standard FOB Incoterms seller/buyer allocation of costs. Result – buyer surprise and most likely a dispute!

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What does Incoterms say?

“The custom of the port will decide the extent to which loading costs under FOB should be distributed between seller and buyer. If this is known to both parties, no

difficulties should arise.” But –

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Case : Antwerp FOB-conditions

Legal aspect:

•Before : international sales-contract based on either Incoterms 2000 OR Local Practice

•Now : international sales-contract based on

Incoterms 2010, automatically refers to prevailing Local Practice (CoP)

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Case : Antwerp FOB-conditions

Practical:

•FOB-seller allowed to deliver goods „in the perimeter‟ of the vessel, in good condition •Extended free time for conventional cargo:

up to 42 days free storage •No interference with:

• Transfer-costs from perimeter till vessel • Loading of the vessel

• Lashing/securing of the cargo •Additional advantage „Antwerp conditions 1951‟

for delivery ex barge

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Case : Antwerp FOB-conditions

Practical:

•FOB-buyer negotiates Liner-terms with Shipping Line

•With Liner-terms, costs & risks are clearly defined & included in Sea-Freight:

• Transfer-costs from perimeter till vessel • Loading of the vessel

• Lashing/securing of the cargo

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Case : Antwerp FOB-conditions

Attention:

•Export documentation-cost (incl. customs) for FOB-seller‟s account !

•Transfer of risk from FOB-seller to FOB-buyer as

from establishment FOB-receipt !

•FOB-buyer preferably appoints his own agent (other than Ship‟s Agent or FOB-seller‟s Agent) in the port to supervise and to establish FOB- receipt, in order to avoid possible conflict of

interest !

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Solutions

1-If FOB sales contract, buyer & seller must know the Custom of the Port at the intended loading terminal, prior to issuing the sales contract.

Incoterms: “A buyer who does not know the custom of the port in the seller‟s country should be cautious when using FOB and should require a precise stipulation concerning the loading costs.” Example: FOB Incoterms 2010 Port of New York, Amos Terminals. All landside and vessel loading costs and risk for seller‟s account, notwithstanding custom of the port.

2- Buy/sell FAS

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Custom of the Port

Questions/Answers

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Custom of the Port

When does FOB not mean FOB?

How does Custom of the Port affect buyer and seller obligations?

Why do Incoterms not solve Custom of

the Port issues?