B-6-38- The transfer of ownership, the ownership reserve clause and the Incoterms


There should not be any confusion between the transfer of risk and the ownership transfer. Indeed, an Incoterm does not specify the transfer of ownership, in contrast to risk transfer. Transfer of ownership is governed by the laws of the country where the import or export transactions take place.

6-38-1- ICC: International Chamber of Commerce

The transfer of ownership is governed by the contract between the importer and the exporter. It is understandable that the ICC and the United Nations have not wished to legislate on all aspects of the contractual relationship between two companies internationally.

6-38-2- Example

The use of Incoterms takes place before transfer of ownership. For example, in the case of the sale of a manufacturing plant, the transfer of ownership occurs when equipment is delivered and installed. The transport and the customs clearance of the goods had already been carried out according to the Incoterms selected.

This lack of legislation can lead to payment problems. Another example can be a problem with title retention, exhibited by its namesake clause. In fact, this clause provides that the importer, the buyer, obtains possession of the goods only when the amount indicated in the invoice has been paid in full. This clause is problematic.

What happens, for example, if the importer for whatever reason is not able to pay, and the exporter is compelled to repatriate the goods? Or, what happens in case of fire? Who owns the goods if they have not been fully paid for? The ownership reserve clause is therefore a source dispute for insurers.

One solution is to specify, in all commercial contracts of great importance, the conditions for carrying out the transfer of ownership. For smaller contracts that that lack complexity, it is advisable for the importer to send the exporter an order confirmation document. This document will be accompanied by the general purchasing conditions to be signed and agreed to. In fact, in this type of transaction the general export sales conditions are in opposition to general purchasing conditions.

6-38-3- Bill of lading and transfer of ownership

The bill of lading is a transfer of title in exchange of "paper documents". It is negotiable unless otherwise designated. Its role is to transfer rights as soon as the goods are available.

It should therefore not be confused with the transfer of ownership.