Shipping and delivery terms allocate between the supplier and the purchaser the responsibilities, costs, and risks arising in the transport of goods from the supplier to the purchaser. In Iraqi supply chain practice, the allocation is conventionally effected through the adoption of one of the standard terms of the International Commercial Terms (INCOTERMS) published by the International Chamber of Commerce. The framework operates against the background of the Iraqi Civil Code No. 40 of 1951, which addresses the contract of sale and the contract of carriage, and the Commercial Code No. 30 of 1984, which addresses commercial sales between merchants.
INCOTERMS as Contractual Framework
INCOTERMS are a set of standardised three-letter abbreviations representing pre-defined allocations of responsibility between buyer and seller in the international sale of goods. The current edition is INCOTERMS 2020, published by the International Chamber of Commerce and applicable from 1 January 2020. INCOTERMS do not have the force of law and are not incorporated into Iraqi law by reference; they take effect through incorporation into the parties’ contract by express reference. The standard formulation is to specify the chosen term, the named place or port to which the term applies, and the edition of INCOTERMS to which reference is made (for example, FOB Umm Qasr, INCOTERMS 2020).
Principal INCOTERMS
The principal INCOTERMS relevant to supply chain operations in Iraq are:
- EXW (Ex Works), under which the seller’s obligation is discharged on making the goods available at the named place, with the buyer responsible for all transport, export clearance, and import clearance
- FCA (Free Carrier), under which the seller delivers the goods to the carrier nominated by the buyer at the named place
- CPT (Carriage Paid To) and CIP (Carriage and Insurance Paid To), under which the seller arranges and pays for transport to the named destination, with risk passing at the point of handover to the first carrier
- DAP (Delivered at Place), under which the seller delivers the goods at the named place ready for unloading
- DPU (Delivered at Place Unloaded), under which the seller delivers the goods unloaded at the named place
- DDP (Delivered Duty Paid), under which the seller delivers the goods to the named place with all duties and taxes paid
- FAS (Free Alongside Ship), FOB (Free On Board), CFR (Cost and Freight), and CIF (Cost, Insurance and Freight), applicable to sea and inland waterway transport
The choice among these terms has material implications for the allocation of cost, risk, and responsibility, and should be made with attention to the commercial context.
Transfer of Risk and Title under Iraqi Law
Under the Iraqi Civil Code, in the contract of sale, risk passes to the buyer with the transfer of title, save where the parties have otherwise agreed. The transfer of title to specific goods occurs, in principle, on the conclusion of the contract, while the transfer of title to unascertained goods occurs on their identification to the contract. The parties may modify the statutory position by express provision, including through the adoption of INCOTERMS. Where the contract adopts an INCOTERM, the risk transfer arising under the INCOTERM operates as the contractual modification of the statutory default. The drafting should ensure consistency between the title and risk provisions and the chosen INCOTERM.
Maritime Transport into Iraq
Maritime transport into Iraq engages the ports of Umm Qasr (the principal Iraqi commercial port), Khor al-Zubair, and Al-Faw (under development). The transport is governed by the contract of carriage between the cargo interest and the carrier, conventionally evidenced by a bill of lading. The legal framework for the bill of lading engages the Iraqi Maritime Trade Law No. 84 of 1981 and the international conventions to which Iraq is a party. The bill of lading functions both as a contract of carriage, as a receipt for the goods, and as a document of title to the goods, with corresponding legal effects.
Land Transport
Land transport of goods into and within Iraq engages road and rail networks, with road transport predominant. International road transport is governed by the contract of carriage between the cargo interest and the road carrier. The legal framework engages the Iraqi Civil Code provisions on carriage at Articles 935 et seq., the Iraqi Land Transport Law and its implementing instruments, and, where applicable to the journey, the international conventions on the contract for the international carriage of goods by road. The carrier’s obligations include the receipt of the goods in conformity with the contract, the conveyance to the destination, the protection of the goods during transit, and the delivery to the consignee in conformity with the contract.
Air Transport
Air transport of goods to and from Iraq engages the international airports of Baghdad, Basra, Erbil, Najaf, Sulaymaniyah, and Mosul. The transport is governed by the contract of carriage between the cargo interest and the air carrier, conventionally evidenced by an air waybill. The legal framework engages the Iraqi Civil Aviation Law and the international conventions on the carriage of goods by air, the application of which to particular consignments depends on Iraq’s accession to the relevant convention and the routing of the consignment.
Documentary Requirements
The documentary requirements for shipping and delivery into Iraq include the commercial invoice; the packing list; the bill of lading, sea waybill, road consignment note, rail consignment note, or air waybill as applicable to the mode of transport; the certificate of origin; the insurance certificate or policy where insurance is for the buyer’s account; the COSQC conformity certificate where applicable; the sectoral certifications applicable to the goods; and the contract documentation. The documents should be prepared with attention to consistency, both across the documentation and with the actual goods, as discrepancies are the principal source of disputes in the documentary supply chain.
Letters of Credit and Documentary Collection
Payment in international supply transactions into Iraq is frequently structured through letters of credit issued by Iraqi banks under the supervision of the Central Bank of Iraq, with confirmation by international correspondent banks. The legal framework for letters of credit engages the Uniform Customs and Practice for Documentary Credits (UCP 600) published by the International Chamber of Commerce, incorporated by reference into the credit terms, and the Commercial Code provisions on payment instruments. The documentary discipline of letters of credit—where the bank’s obligation to pay is conditional on the strict conformity of the presented documents to the credit terms—imposes substantial precision requirements on the supplier’s documentation.
Cargo Insurance
Cargo insurance covers the loss or damage of goods during transit. The allocation of responsibility for procuring insurance is determined by the chosen INCOTERM; under CIP and CIF, the seller is obliged to procure insurance for the buyer’s benefit, while under EXW, FCA, CPT, FOB, CFR, and the D terms, the parties allocate insurance responsibility differently. The insurance should be procured with adequate cover, in a form responsive to the route and mode of transport, and from insurers of sufficient standing. The interaction between cargo insurance and the carrier’s liability under the contract of carriage should be addressed at the contract structuring stage.
How We Can Help
Etihad Law Firm advises on shipping and delivery terms in Iraqi supply contracts, including the selection and drafting of INCOTERMS provisions, the alignment of risk and title transfer with Iraqi Civil Code provisions, the structuring of documentation requirements, the integration of payment instruments including letters of credit, the structuring of cargo insurance, and the resolution of disputes arising in international supply transactions.