THE NEW EDITION OF INCOTERMS® AND ITS APPLICATION BY THE BRAZILIAN COURTS

August 16, 2019

 

In September 2019, the new INCOTERMS® 2020 will be launched by the International Chamber of Commerce, coming into effect on 1st January 2020. It is a new edition of these rules universally known by its safety and acceptance by all international trade of goods’ agents.

 

For now, it is not the purpose of the present article analyse the characteristics of each current rule, i.e. INCOTERMS® 2010, or even idealise and reflect upon which would be the new changes proposed by ICC’s new edition.

 

The main focus of this article is just to reinforce the characteristics of each current INCOTERMS® rule by the Brazilian courts, with decisions which duly identify these characteristics and consider their dispositions on the solution of a wide range of conflicts.

 

When faced with the international rules of buying and selling, it is practically impossible to disassociate them from performed goods’ shipping services, whether by sea or by air. Moreover, carriers have become insurance companies’ favourite targets – which daily files numerous regressive reimbursement actions –, since they are strictly liable (Brazilian Supreme Court, Precedent nº 188).

 

Nonetheless, the insurance company will not always compensate its insureds, not even when losses or damages are due to intrinsic defect, poor quality or poor conditioning of the insured object.

In this scenario, the first question the judge should ask himself is: which of the INCOTERMS® rules were contracted by the insured? The answer will establish when the insured's liability begins and ends, the coverage of the insurance contract, as well as any liability exclusion from the carrier.

 

In 2017, the Court of Appeal of São Paulo considered the “DAP” rule to dismiss a regressive claim filed by an insurer which had already provided the compensation resulting from damages occurred on the air shipment of goods to Brazil. In its reasoning, the Court found the seller, and not the buyer (insured), was liable for the main shipment. Thus, the damages occurred during the main shipment was not covered by the Brazilian buyer’s insurance policy, having the insurer paid compensation by mere liberality (Itaú v. MSC - Appeal nº 1029574-92.2015.8.26.0562).

 

On the same basis, the “FOB” rule was upheld by the same Court of Appeal to rule out the insurer’s regressive right, since the damage was noticed when the goods were still on board, exempting the carrier of a double penalty in an eventual compensation of the same fact to the buyer (Bradesco v. MSC - Appeal nº 0042027-44.2012.8.26.0562).

 

Notwithstanding, the eleven INCOTERMS® rules are unanimous in make the buyer liable for providing proper packet for the shipment, unless there are explicitly instructions of the buyer telling otherwise. Even though it is given the right to the carrier to refuse good with improper packaging (article 746 of Brazilian Civil Code), it is not always up to him to interfere in the packet process as well in how the goods are shipped. São Paulo Court of Appeal exempted the maritime carrier of its liability of damages resulted of poor placement of goods in the container. Recognising “EXW” rule was decisive for the judge to understand the buyer’s liability for how the cargo was storage in the container delivered to the maritime carrier and, consequently, the inexistence of a causal link between the damages and the shipment service (Aliança v. Tokio Marine - Appeal nº 1006240-37.2018.8.26.0008).

 

Therefore, these decisions only illustrate the well acceptance of INCOTERMS® rules by Brazilian Courts, which are making thorough reasonings on international trade subjects as well their impact on shipment and insurance contracts, offering more safety and predictability to whoever intends to carry out business with Brazilian enterprises.

 

As we believe, the scenario portrayed above may not change with the oncoming rules.

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© 2018 por Advocacia Ruy de Mello Miller.