Today I received a case in which a company’s customs representative asked a legal question about the use of Incoterms®.
Specifically, the company uses the clause “FCA according to Incoterms 2010” in most order export confirmations/invoices.
A lawyer specialized in customs and trade law had then pointed out to him that it would be a good idea to still include the following sentence in the invoice: “Freight charges ordered by buyer including handling”. With this addition, one could add about 10% to the actual service price for export documents or other additional costs such as redelivery.
In my analysis of the case, I first noticed that the company should refer to the current Incoterms® of 2020 in the clause – not to those of 2010, after all, there have been some changes here (Pokrant, RdTW 2020, 201). In addition, the relation place of FCA (Free Carrier) is missing. The FCA clause can only be used correctly if there is also a place of relation to which the delivery has to be made, for example “Shanghai”.
The question then arose as to whether the additional wording of the invoice is coherent with law. Here, first of all, the standard constellation of FCA has to be considered. FCA means according to general understanding:
The seller must bring the goods to the place of delivery specified by the buyer. The seller takes care of packing, goods inspection and clearance of the goods for export at his own expense. Depending on the selected place of delivery, the seller must also take care of loading and stowage. The buyer is responsible for the main transport, transit and import.(Chamber of Commerce and Industry Stuttgart, Incoterms® 2020, Article Nr. 34848, 2021)
If the seller now charges the freight at the expense (invoice) of the buyer, this is correct (“The buyer is responsible for the main transport, transit and import.”).
The statement, however, that costs due to “handling” are the responsibility of the buyer, must be viewed somewhat critically. According to FCA, the seller is responsible for packaging costs, inspection of goods and clearance for export. Now, “handling” could be seen as “packaging costs, inspection of goods and clearance for export” as the latter ist quite a broad term. Thus, the wording could violate the general principles of FCA.
From the legal point of view, such a modification of Incoterms® clauses is possible and permissible (so-called clause mutation), as also confirmed by Prof. Burghard Piltz, member of the Drafting Group for Incoterms® 2020, stating that the parties are free to agree on the clause most suitable for their purposes. According to Piltz, modifications are permissible, but should be formulated clearly and unambiguously and should also respect the structural principles of the respective clause group.(Piltz, IWRZ 2020, 157, 165).
In our case, it is not quite obvious, if the “handling term” was formulated clearly and respects the strctural principles of FCA. Thus, the supplementary agreement regarding “handling costs” could possibly represent a provision that is indeed violating terms for using Incoterms®.
Finally, for reasons of legal certainty, this invoice supplement should therefore probably not be used.