Our Trading Assistance Staff continue to see cases where North American buyers who import fresh produce from offshore growers or sellers, struggle understanding their responsibilities under the perceived “agreed” INCOTERMS®.
North American buyers and sellers of fresh fruits and vegetables have adopted two main trade terms for their transactions within North America, FOB and DELIVERED (FOB Destination), which are used mostly for inland transportation. While this has worked fairly well in North America, we have noticed that when buying product from Europe, Asia, South Africa, South America or other parts of the world, important details regarding risk, cost, and clearance are not properly discussed or understood depending on the INCOTERMS® agreed.
We cannot stress enough the importance of having better knowledge of the INCOTERMS® within your company in the buy/sell department or logistic department if exists. One common mistake that continues to cross our desk is when a North American buyer requests the offshore grower/shipper to have the product “delivered” to them at the named port. The North American buyer assumes that the offshore grower/shipper will take care of all the details to deliver the product at the named destination but forgets to discuss the risk and/or customs clearance. Without discussing these elements, the grower/shipper can use the CFR or CIF INCOTERMS® and complied with the buyer’s request. This lack of communication normally creates a dispute when a shipping line needs to be claimed for damages or when is time to absorb customs clearance costs.
In the previous example, the North American company could have used a more appropriate term such as DAP, DPU, or DDP, which automatically would have transferred the risk of transit to the grower/shipper, as well as establish responsibility for customs clearance cost.
We strongly suggest DRC members visit the International Chamber of Commerce website and become familiar with the INCOTERMS®. You will be able to download for free two documents: Free Incoterms 2020 Introduction and a wallchart.