Understanding contracts for carriage: The new ICC Guide on Transport and the Incoterms® 2010 Rules

Created by a joint drafting group of the ICC Commercial Law and Practice Commission and the ICC Commission on Customs and Trade Facilitation, this new guide aims to take the guess work out of what is involved for an independent carrier to implement a transport contract against the backdrop of a contract for the sale of goods involving an Incoterms® rule. In clarifying some of the main issues that arise when using Incoterms® 2010 rules and contracts of carriage, parties can feel at ease knowing their transactions will run smoothly.

The actual carriage contract may not be obvious, as carrier terms and conditions are typically stated by reference rather than recited in transport documentation.

Often, parties do not account for the differences in regulations and practices governing mode of transport. However, determining how goods are delivered and received from carriers, including the responsibilities and legal liabilities involved is essential. “The actual carriage contract may not be obvious, as carrier terms and conditions are typically stated by reference rather than recited in transport documentation,” said Frank Reynolds, President of International Projects Inc. and the United States delegate of the Incoterms® rules drafting group.

“Bad things happen when contracts do not align, and the parties to one do not necessarily understand the obligations set forth in the other. To prove my point, just ask a forwarder and a sales contract lawyer to define ‘delivery.’ You will be amazed at the difference.”

Bad things happen when contracts do not align, and the parties to one do not necessarily understand the obligations set forth in the other.

In fact, two contracts should be utilized: a sales contract to outline the responsibilities that the seller and buyer have to one another; and a transportation contract that states the commitments between the carrier and the party contracting for carriage. This division must be made as a contract of carriage involves separate parties and has to adhere to an entirely different set of obligations.

“This guide gives parties contracting for carriage and related services and those providing them, a clearer understanding of each other’s intentions and concerns,” said Mr Reynolds. Each of the various buyer-seller Incoterms® rules are explained to help simplify what is required of the shipping providers and relevant shipping practices are outlined where possible.

This long awaited guidebook will aid the transport industry to avoid costly misunderstandings and improve their overall practice.

To learn more about the new ICC Guide on Transport and the Incoterms® 2010 Rules, please visit the ICC Knowledge 2 GO.