Series note: This is Part 2 of a four-part series on the legal fault lines of trading with Lebanon. Part 1 examined why a customs delay is a legal matter from day one. Part 3 covers what happens when Lebanese Customs formally challenges a shipment's value, classification, or origin. Part 4 looks at cross-border disputes spanning multiple contracts and jurisdictions.
A dispute arrives in a familiar shape. The sale contract specifies CIF Beirut. The goods are damaged in transit, or arrive short, or are held by customs pending a valuation query the buyer insists falls outside its responsibility. Each side points to the Incoterm as though it resolves the question. Neither side is entirely right.
The short answer: Incoterms allocate cost, risk, and certain delivery obligations between buyer and seller. They do not determine legal liability for a loss, they do not govern customs valuation, and they do not resolve a payment or insurance dispute on their own. Treating them as though they do is one of the most persistent and avoidable sources of trade litigation involving Lebanon.
What Incoterms Actually Answer and Where the Analysis Stops
An Incoterm answers a defined set of questions: at what point risk transfers from seller to buyer, who arranges and pays for carriage and insurance, and who handles export and import clearance. It is an effective shorthand for a narrow band of obligations, and the ICC's own Incoterms® 2020 rules are explicit that the rules are not, and are not a substitute for, a contract of sale in full.
What an Incoterm does not answer is who is liable when goods are damaged and the cause is disputed. It does not resolve a customs valuation challenge, which falls on the importer of record regardless of the commercial terms chosen. And it does not fill an insurance coverage gap that neither party thought to check before shipment. A Lebanese court or arbitral tribunal analysing the underlying dispute will look considerably further than the three-letter term in the sale contract.
Customs Valuation Sits Entirely Outside the Incoterm
This is among the most consequential gaps in practice. Lebanese customs valuation is an administrative question, and the importer of record typically bears responsibility for the declared value regardless of whether the contract is FOB, CIF, or EXW.
This produces a specific and recurring problem: a buyer who has negotiated a CIF contract, on the assumption that the seller's arrangements govern the shipment comprehensively, can still find itself the subject of a valuation challenge, penalty exposure, or delay — entirely independent of what the Incoterm allocates commercially between the parties. We cover the mechanics of these valuation challenges, and how to respond to one, in Part 3 of this series.
Risk Transfer Is Not the Same Thing as Liability
This distinction is where a substantial proportion of Incoterm-related disputes originate. Risk transfer under an Incoterm determines, broadly, at what point a loss falls economically on the buyer rather than the seller — for instance, on loading at the port of shipment under FOB terms. It does not determine legal liability for the cause of a loss.
If goods are damaged due to a carrier's negligence, a packing defect attributable to the seller, or mishandling by a customs authority, the Incoterm's risk-transfer point doesn't by itself establish who is at fault, nor does it resolve a claim against a third party such as a carrier or insurer. Parties frequently discover this only once a dispute is underway — at which point they find that the "risk" they believed had transferred under the Incoterm has left them holding a loss with no clear path to recovery against the party actually responsible.
Payment Disputes and the Documentary Inconsistencies Behind Them
A recurring pattern: the buyer refuses payment, citing a customs delay, a valuation challenge, or an alleged non-conformity, while the seller insists payment is due strictly according to the documentary terms — particularly where payment is structured through a letter of credit. These positions are rarely automatically reconcilable, and the Incoterm rarely settles which prevails.
Documentary inconsistencies compound the problem. A bill of lading, commercial invoice, packing list, and certificate of origin that don't align precisely can, on their own, trigger a customs query or a bank's refusal to honour a documentary credit — entirely independent of whether the underlying goods conform to the contract. These inconsistencies are frequently treated as clerical matters. In practice, they are one of the most common triggers of the extended customs holds we discussed in Part 1 of this series.
The Insurance Gap Nobody Checks Until It Matters
Cargo insurance is generally arranged by whichever party bears risk at the relevant stage under the chosen Incoterm — but the scope of that cover, the named beneficiaries, and the exclusions are rarely reviewed with the same rigour as the sale contract itself. A buyer relying on a seller's CIF-arranged insurance may discover, only once a claim arises, that the policy's coverage doesn't extend to the specific loss experienced, or that the buyer isn't a named party with standing to claim directly. This gap is entirely foreseeable, and almost never addressed until it becomes expensive.
Frequently Asked Questions
Does the Incoterm in a Lebanese sale contract determine who pays customs penalties? No. Customs valuation and any resulting penalty exposure generally falls on the importer of record under Lebanese customs procedure, independent of whether the contract is FOB, CIF, or another Incoterm.
If risk transferred to the buyer under an Incoterm, does that mean the buyer has no claim if the goods arrive damaged? Not necessarily. Risk transfer determines who bears the loss economically, not who is legally at fault. The buyer may still have a claim against a carrier, seller, or insurer depending on the cause of the damage — that question sits outside the Incoterm.
Should a Lebanese sale contract specify governing law separately from the Incoterm? Yes. The Incoterm is a narrow, standardised shorthand for cost, risk and delivery obligations — it is not a governing-law or dispute-resolution clause, and a properly drafted contract addresses those separately.
Practical Legal Observations
The Incoterm should be treated as one input among several, not the operative answer to a dispute. A properly structured cross-border contract addresses risk allocation, customs valuation responsibility, documentary requirements, insurance scope, and governing law as distinct questions, each requiring its own drafting attention rather than being assumed to follow automatically from the Incoterm selected.
Incoterms are a highly effective shorthand for a narrow set of commercial questions. They are frequently mistaken for a complete risk-allocation framework, and that mistake tends to surface at the worst possible moment — once a dispute has already crystallised and the parties discover, simultaneously, how much the contract actually left unaddressed.
DISCLAIMER: This article is intended to provide general information on Incoterms and Lebanese trade practice and does not constitute legal advice. Businesses structuring or disputing a cross-border contract should seek advice specific to their circumstances.
Next in the series: When Lebanese Customs formally challenges a shipment's declared value, tariff classification, or country of origin, most importers treat it as an administrative process to be managed by their broker. Part 3 examines why the earliest stage of a customs challenge — often before any formal notice is issued — determines the outcome more than anything argued on appeal.