In 1991, a UK company (Claimant) undertook to supply machines to an Asian State (Respondent) pursuant to a contract governed by the law of that State. The buyer refused to pay the full contract price, alleging that the seller had not fulfilled its delivery obligations. The seller initiated arbitration proceedings to recover full payment for the deliveries made.

'8.2.2. Applicability of INCOTERMS 1990. Both parties expressed an opinion regarding the meaning of the terms "delivered duty paid, but excluding taxes and import duties (CDST)". Neither party provided evidence, however, regarding the meaning of such terms under [the law of the Respondent State].

INCOTERMS 1990 contain a definition, and accompanying explanation, of the term "delivered duty paid". Claimant argues that INCOTERMS 1990 do not apply, because the parties did not expressly refer to INCOTERMS 1990 in the Contracts. Defendant argues that INCOTERMS 1990 apply.

Because INCOTERMS 1990 provide an indication of international trade usage, and because neither party has provided evidence of a different definition of "delivered duty paid" under [the law of Respondent State], the Arbitrator finds that INCOTERMS 1990 should be applied to determine the extent of Claimant's delivery obligations under the Contracts.

8.2.3. INCOTERMS Definition. Incoterms 1990 provide the following definition of "delivered duty paid":

"Delivered duty paid" means that the seller fulfils his obligation to deliver when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation. Whilst the EXW term represents the minimum obligation for the seller, DDP represents the maximum obligation.

This term should not be used if the seller is unable directly or indirectly to obtain the import licence.

If the parties wish the buyer to clear the goods for importation and to pay the duty, the term DDU should be used.

If the parties wish to exclude from the seller's obligations some of the costs payable upon importation of the goods (such as value added tax (VAT)), this should be made clear by adding words to this effect: "Delivered duty paid, VAT unpaid (...named place of destination)".

This term may be used irrespective of the mode of transport.

Incoterms define the seller's and buyer's obligations in connection with licences, authorizations and formalities as follows:

Seller must . . . obtain at his own risk and expense any export and import licence and other official authorization and carry out all customs formalities for the exportation and importation of the goods and, where necessary, for their transit through another country.

Buyer must . . . render the seller at the latter's request, risk and expense every assistance in obtaining any import license and other official authorisation necessary for the importation of the goods.

Professor Ramberg's Guide to Incoterms 1990 explains that the parties may impose on the buyer the obligation to pay for certain import duties and taxes by using a phrase such as: "delivered duty paid, exclusive of duty, VAT and other importation charges". Professor Ramberg explains, however, that:

DDP with such an exclusion is not equivalent to DDU, since the obligation to clear the goods for import still falls upon the DDP seller. If the seller wishes to avoid the latter obligation as well, he would have to use the term DDU.

Professor Ramberg also remarks:

If the seller wishes to avoid the obligation of clearing the goods for import, he should use DDU or add the phrase "not cleared for import" after DDP.

Professor Ramberg notes that although the seller's obligations are extremely broad under a DDP delivery term, the seller can protect himself from unforeseen difficulties through use of a force majeure clause in the sales contract.

8.2.4. Claimant's position. As noted above, Claimant argues that the Incoterms 1990 definition does not apply, because the Contracts do not explicitly refer to the Incoterms. . . . Claimant argues that the words "but excluding taxes and import duties (CDST)" mean that the Defendant (buyer) was responsible for paying customs duties and taxes upon importation, and for procuring import permits and VAT registration certificates. Claimant states that the costs and risks associated with customs formalities are closely linked. Claimant argues therefore that Defendant must have been responsible not only for the costs of customs duties and taxes, but also for the risks associated with customs formalities upon importation. Claimant asserts that any other outcome would be anomalous and inequitable. . . .

8.2.5. Defendant's position. Defendant argues that the Incoterms apply to the Contract because the Contracts contain an arbitration clause referring to ICC arbitration. Defendant asserts that the Claimant's obligations are "strictly in accordance with Incoterms 'Delivered Duty Paid' provisions". . . .

8.2.6. Conclusion. In the Guide to Incoterms, Professor Ramberg points out that: "Incoterms do not enter in the contract of sale automatically in the same way as an applicable national law or international convention, although in some cases they may be incorporated into the contract of sale . . . as an international custom of the trade; or by assuming that the parties have intended to apply them (so-called implication)."

Defendant argues that Incoterms are included in the Contracts by virtue of the reference in Section 20 to ICC arbitration. This argument is not persuasive. The Arbitrator finds that the arbitration clause in the Contracts is irrelevant to the issue of whether Incoterms are included in the Contracts.

Claimant states that the Incoterms definition should not apply. Claimant fails to state, however, what definition should apply in the absence of Incoterms. Claimant offers its own opinion as to the meaning of the term "delivery duty paid", but does not offer any authority under [the law of Respondent State], or under any other law or international usage, to support its interpretation.

Thus in the absence of any proof regarding [the law of Respondent State] on the subject, I will refer to Incoterms 1990 as a usage of international trade to determine the Claimant's delivery obligations under the Contracts.

As noted in paragraph 8.2.3 above, the term "delivered duty paid, but excluding taxes and import duties" places on the buyer the responsibility of paying import duties and taxes, but does not excuse seller from the responsibility of clearing the goods for import. If the parties had intended to place on the buyer the cost and responsibility of completing import formalities, they would have used the term "delivered duty unpaid", or "delivered duty paid, but not cleared for import".

Consequently, Claimant's delivery obligation was to deliver the Contract goods to Defendant's office in [city] by [date], i.e. five months after the "effective date" of the Contract as defined above.

Defendant's obligation was to pay import duties and taxes, and to "render the seller at the latter's request, risk and expense every assistance in obtaining any import licence and other official authorization necessary for the importation of the goods".'