Approximately a year ago, an eerie incident occurred as a client was arranging to transport a container of components to Mumbai Port in India, using a Letter of Credit.
In early August 2022, a Letter of Credit was received for a UK business from a company in India to supply 23 tonnes of a product. The latest date for shipment on the Letter of Credit was 30^th September, 2022. The value of the Letter of Credit was more than £150,000.

The UK company had been advised by the Letter of Credit to contact the UK freight forwarder and arrange collection of the freight from their premises. As there was enough freight to make up a full container load (FCL), a 20-foot container was sent to the premises. The delivery terms in the Letter of Credit were stated as DAP India Incoterms® 2020, which is incorrect. The UK company had made a fatal mistake by not challenging the Incoterms® 2020 reported in the Letter of Credit with their customer, nor did they ask for an amendment to the Letter of Credit. The sales department of the UK company advised that they needed the sale for the month-end sales figure, which is a regular event in most companies, and therefore decided to ship the goods, believing that everything would be fine.

The UK-based company provided shipping instructions to the UK-designated freight forwarder to collect the goods. Given the importer's location in Mumbai, the UK company specified the Incoterms as DAP Mumbai Incoterm® 2020 within the shipping instructions.
Every piece of documentation had been finalised, and the terms of the Letter of Credit had been fully satisfied, or so everyone thought... 

The documentation was presented to the bank on the last date of presentation advised on the Letter of Credit, which spookily was the 31st of October 2022 (Halloween). The shipment arrived in Mumbai port on 22^nd October, 2022 and the Indian customs clearance agent/freight forwarder contacted the Indian company for import clearance instructions, only to be told that the goods were not only at the wrong port but also on the wrong side of India. The Indian company would not accept responsibility as the UK company should have requested an amendment to the Letter of Credit and instructed that the goods needed to be shipped to the correct port of Kolkata.

At the same time, the Indian company stopped the payment of the Letter of Credit until the goods had arrived at Kolkata port. The UK company was notified of this and agreed they should have checked the delivery point within the Incoterms® used. They failed to do so. They accepted the responsibility and arranged for the goods to be delivered to the correct location in Kolkata port.

After all these issues around the incorrect use of the Incoterms® 2020, declaring DAP “India” instead of naming the actual port or place within the port, the shipper was met with not only the additional transport costs from Mumbai to Kolkata but also demurrage charges and the additional customs clearance charges in Kolkata.

The delivery of the container to the correctly advised place in Kolkata port was made on 31^st October, 2022 (Halloween). The scary thing was that when off-loading the container at the port and driving it one mile to the named place within the port, the importer checked the seal number before opening and realised the seal had been changed, so the doors were opened. The container was found to be empty.

There was disbelief all around between the UK seller and the Indian buyer, and the worst thing was that no one could identify where the theft of goods had taken place, whether it was in the UK or India, and to this day, the whereabouts of the goods remains a complete mystery.
The UK exporter then spoke to their insurance company about claiming £150,000 loss of goods, only to be told their claim was not valid as the Incoterms® 2020 rule used (DAP India) was not correct under the ICC Incoterms® 2020 rules. In addition, the Indian importer stopped the payment against the Letter of Credit.

The UK company had to replace the goods free of charge and had a late delivery clause in their contract with the Indian importer, so the total amount of money eventually received by the UK exporter was just short of £100,000 from a contract value of £150,000. As already stated, they had to replace all the goods free of charge, effectively making the UK company’s loss a total of £250,000 for the incorrect use of an Incoterms® 2020 rule.

Don't have nightmares, but think about the Incoterms® 2020 and use the correct ones. Otherwise, your goods could mysteriously disappear in a puff of smoke next time.