Abstract
Abstract The choice of delivery terms in international contracts has significant impact on both physical and financial risks for importers and exporters. This paper considers implications resulting from a recent Australian tribunal case involving transactions based on Delivered Duty Paid (DDP) terms (Incoterms). This case highlights how importers may become exposed to unexpected financial penalties caused by incorrect processes from foreign suppliers that result in duty and taxation payment shortfalls. The discussion focuses on the risk elements related to DDP for importers and the interpretation of legislation and policy documents. A chronological timeline of events is provided to explain the changes in policies and interpretation related to ownership as defined by Australian customs legislation. The conclusion is that, due to customs considerations and the decision of the tribunal in this case, DDP may no longer be a viable option for international trade transactions, not only in Australia, but also in other nations.
Highlights
International trade in physical goods requires movement of cargo across borders
The ICC is a private body, it cannot issue laws, rather it issues rules that contracting parties voluntarily incorporate in their contracts, thereby making these binding, “parties should be aware that mandatory local law may override any aspect of the sale contract, including the chosen Incoterm rule” (International Chamber of Commerce, 2010, p. 6)
Incoterms provide a common approach to one of the fundamental elements of an international commercial contract dealing with the sale of physical goods, that is, delivery
Summary
In order to execute a sale or purchase contract, a number of activities need to occur that are related to the movement of cargo across borders These include arranging for transport and insurance as well as transacting with, and obtaining approval from, relevant national customs authorities to allow cargo movement from origin to destination, as in all nations, export and import cargo is subject to customs control. The UNICTRAL General Assembly endorsed Incoterms 1990 at its twenty-fifth session, in 1992; Incoterms 2000 (effective 1 January 2000) at its thirty-third session, in 2000; and Incoterms 2010 (effective 1 January 2011) at its forty-fifth session in 2012 These endorsements have led Incoterms to become the rules of universal choice in international. It should be noted that discussion of rules other than Incoterms is beyond the scope of this paper
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