‘Be sure that you’re Incoterm-savvy’

South Africa records an annual total of 1.5-billion tonnes of trade goods – and all this needs to be moved at some stage in its life. Says Andrew Robinson, maritime legal specialist at attorneys Deneys Reitz and chairman of SA’s Maritime Law Association (MLA): “There is a longstanding, although ill-advised tradition amongst exporters to negotiate sales on completely inappropriate Incoterms. “The current set of terms was last amended and revised in 2000, and there is some talk of a new set appearing in 2010,” he said. Robinson suggests that it is useful to remember that, whichever Incoterm is used, it must be clearly stated that it is an Incoterm 2000 – failing which, in the event of any dispute, it will be necessary to try to establish what the particular term employed means, according to the law applicable to the contract. “In addition,” he said, “it is important to remember that the Incoterms do not deal with questions of passing of ownership of goods. At best, the Incoterms deal with the place where risk of loss or damage to the goods will pass from the seller to the buyer. “In the absence of any contractual arrangements to the contrary the position in SA law is that ownership will only pass once the goods have been delivered by the seller to the buyer and the buyer has actually paid for those goods. “If that common law arrangement does not suit you, then you need to make it very clear when it is that the parties intend ownership to pass.” Movement-in-bond is another area of special note for shippers. “It is necessary to ensure that, as seller or buyer, you have adequate insurance not only for the value of the goods but also for any customs duties and VAT that you may be obliged to pay in the event that the cargo is stolen, hijacked or otherwise lost whilst moving in-bond,” said Robinson. “Unless the goods have been destroyed, and this can be adequately substantiated, then the buyer or seller will be liable to pay duties and VAT unless the in-bond movement can be acquitted in accordance with the Customs & Excise Act.” Also, in order to move the goods in-bond, carriers are obliged to obtain suitable security in order to cover any exposure that they may have for the nonacquittal of the goods. This leads to the subject of in-transit insurance. According to Robinson, the standard Institute Cargo Clauses “A” – the so called “all risks” clauses – contain terms that will provide cover for cargo whilst it is in the ordinary course of transit. “However,” he added, “it is not uncommon for cargo to be detained in the port pending its movement to final destination. “The obligation, however, is on the party with an interest in the goods to prevent any unnecessary delays in getting the goods out of storage and on to the ultimate destination.” This also means that the insured cannot, for example, keep the cargo in storage in Durban simply because it is cheaper to keep the goods stored there than have them cleared and released, unpacked and stored as breakbulk rather than containerised cargo. “If the goods were to be lost or damaged in circumstances where the goods were being stored other than in the ordinary course of transit,” said Robinson, “the underwriters may well be able to argue that no cover attached at the time because the goods were being kept in storage – NOT in the ordinary course of transit.”