Sur-charge

Sur-charge Asian shippers pleased with revisions.

   A June American Shipper feature ( 'Sur-charge,' at www.AmericanShipper.com/links) highlighted an Asian Shippers' Council request to get the International Chamber of Commerce to clarify the Incoterm FOB (free on board) to prevent its misuse adversely affecting export shippers in Asia.
   The ICC, which develops and publishes Incoterms, released its latest revisions in September, and the ASC told American Shipper its 'objectives have been achieved to a considerable degree.'
   'The term FOB had a large loophole which was exploited by service providers by charging suppliers (sellers) various surcharges when goods were shipped under containerized cargo out of Asian ports,' said ASC Secretary General Rohan Masakorala. 'We requested the ICC drafting committee to consider giving better clarity to the delivery points and to advise where FOB should not be used and the term FCA (free carrier) should be used.
   'One of the major issues was that THCs (terminal handling charges) and other anticompetitive pricing were freely adopted by carriers and other service providers. When buyers who are sourcing on FOB terms used this Incoterm, they were knowingly or not knowingly giving space to carriers to charge costs that were not relevant to exporters from Asia.'
   Specifically, Masakorala pointed to the ICC's elimination of the phrase 'ship's rail' to determine when responsibility changes hands from seller to buyer.
   'In containerized cargo the supplier in no way can hand over goods over the ship's rail in modern developed terminals, but certain buyers kept using the term FOB instead of FCA,' he said. 'And the carriers or service providers, knowing this condition, negotiated the transport contract on FOB terms, giving them room to impose charges on the seller for services they actually provided for the buyer who pays the freight.'
   Incoterms 2010 advises buyers and sellers to specify in contracts which party pays surcharges assessed by carriers.
   'Also, for the first time, we see that the ICC has given the explanation that most 'C' terms users, like CFR (cost and freight) exporters, are having the ability to include all these charges as part of freight, which has been the point of the Asian shippers for the last decade and a half,' Masakorala said. 'Therefore, if the THC could be part of freight when negotiated under CFR terms, where market forces determine the best rate for the seller, the opposite is also true for the users of 'F' terms (such as FOB), where buyers sourcing are also negotiating the rates as per market forces from cargo originating at a point of collection nominated by them.'
   Masakorala said the ASC was appreciative of the ICC and that the burden now shifts to governments in Asia to better protect its shippers.
   'We see the drafting committee of ICC has given due consideration and given lengthy explanations which should give the seller and the buyer a better understanding when negotiating sales contracts,' he said.