DRC Trading Standards – Section 20 – Trade Terms

As part of our continuing series to review Trading Standards, Section 20 contains those terms that are commonly used in North America.  A few articles in our Solutions Newsletter and Blog have been written focusing on situations where these trade terms are used. We will address most of these terms, which have to do with sometimes inconsistent INCOTERMS (see article North American Terms vs INCOTERMS).

For example, in North America, the most used terms are FOB and Delivered. However, in DRC’s trade terms which are very similar to PACA’s trade terms, the term FOB includes additional terms such as “FOB Acceptance”, “FOB Acceptance Final”, “FOB Inspection and Acceptance Arrival”, “FOB sale at a delivered price” and “FOB Steamer.” These terms are somewhat unusual and because they severely restrict rights and responsibilities they need to be discussed, understood and agreed upon to apply to a transaction. These terms are fully defined in this section of the Trading Standards and you should become familiar with them.

Another term included in this section is “Price After Sale (P.A.S.)” or “Open Price.” There is still some confusion between buyers and sellers using P.A.S. or Open Price which is not the same as consignment (P.A.S.  & Consignment Article). We have seen cases where these terms are interchanged and results in a different outcome from what was understood or expected.

Finally, “Purchase After Inspection,” “Shipping Point Inspection” and “Shipping Point Inspection Final” are also severely restrictive terms. These terms impact the rights of a buyer and the responsibilities of the seller and are very different from more commonly used terms. These terms require an inspection to be made either at shipping point or another location and limit the right of a buyer/receiver to make a claim after an inspection has been performed. In other words, the risk is passed to the buyer after an inspection is performed and limits the right to reject and or make claims at destination.