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1. The purpose of 《lncoterms》 is to Provide a set of international rules for
the interpretation of the most commonly used trade terms in foreign trade. Thus,
the uncertainties of different interpretations of such terms in different countries
can be avoided or at least reduced to a considerable degree.
2. Frequently parties to a contract are unaware of the different trading practices
in their respective countries. This can give rise to misunderstandings, disputes
and litigation with all the waste of time and money that this entails. In order
to remedy these problems the International Chamber of Commerce first published
in 1936 a set to international rule, for the interpretation of trade ",,terms.
These ruless were known as <incoterms 1936>. Amendments and additions
were later made in 1953, 1967, 1976 , 1980 and presently 1990 in order to bring
the rules in line with current international trade practices.
3. The main reason for the 1990 revision of Incoterms was the desire to adapt terms to the increasing use of electronic data interchang (EDI). Inthe present 1990 version of Incoterms this is possible when the parties have to provide various documents (such as commercial invoices, documents needed for customs clearance or documents in proof of delivery of the goods as well as transport documents). Particular problems arise when the seller has to present a negotiable transport document and notably the bill of lading which is frequently used for the purposes of selling the goods while they are being carried. In these cases it is of vital importance, when using EDT messages, to ensure that the buyer has the same legal position as he would have obtained if he had received a bill of lading from the seller.
4. A further reason for the revision stems from changed transportation techniques,
particularly the unitisation of cargo in containers, multimodal transport and
roll on-roll off traffic with road vehicles and railway wagons in 《short-sea》
maritime transport. In Incoterms 1990 the term《Free carrier ... named point》
(FCA)has now been adapted to suit all types of transport irrespecof the mode
and combination of different modes. As a consequence, the terms which appear
in the previous version of Interms dealing with some particular modes of transport
(FOR/FOT and FOB Airpor0have been removed.
5. In connection with the revision work within the ICC Working Party, suggestions were made to present the trade terms in another manner for the purpose of easier reading and understanding. The terms have been grouped in four basically different categories; namely starting with the only term whereby the seller makes the goods available to the buyer at the seller's. own premises (the《E》 -term Exworks) ;followed by the second group whereby the seller is called upon to deliver the goods to a carrier appointed by the buyer (the《F》 - terms FCA, FAS and FOB); continuing w.ith the 《C》-terms where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch .,(CFR,CTF,CPT and CIP)., and finally, the《D》-terms whereby the seller has to bear all costs and risks needed to bring the goods to country of destination (DAF, DES, DEQ, DDU and DDP). A chart setting out this new classification is given hereafter.
INCOTERMS 1990
|
Group E Departure |
EXW |
EX Works |
|
Group F Main carriage unpaid |
FCA |
Free Carrier |
|
FAS |
Free Alongside Ship |
|
|
FOB |
Free On Board |
|
|
Group C Main carriage paid |
CFR |
Cost and Freight |
|
CIF |
Cost, Insurance and Freight |
|
|
CPT |
Carriage Paid To |
|
|
CIP |
Carriage and Insurance Paid To |
|
|
Group D Arrival |
DAF |
Delivered At Frontier |
|
DES |
Delivered EX Ship |
|
|
DEQ |
Delivered EX Quay |
|
|
DDU |
Delivered Duty Unpaid |
|
|
DDP |
Delivered Duty Paid |
Further, under all terms,the respective obligations of the*parties have been grouped under 10 headings where each heading on the seller's side 《mirrors》 the position of the buyer with respect to the same subject matter. Thus, if for instance according to A. 3. the seller has to arrange and pay for the contract of carriage we find the words《No obligation 》under the heading《Contract of carriage》in B. 3. setting forth the buyer's position. Needless to say, this does not mean that the buyer would not in his own interest make contracts as may be needed to bring the goods to the desired nation, but he has no 《obligation》to the seller to do so.However, with respect tothe division between the parties of duties,taxes and other official charges, as well as the costs of carrying out customs formalities, the terms explain for the sake of clarity how such costs are divided between the parties although, of course, the seller might not have any interest at all in the buyer'further disposal of the goods after they have been delivered to him.Conversely, under some terms such as the 《D》-terms, the order is not interested in costs. which the seller might incur in order to bring the goods all the way to the agreed destination point.
6. Since the trade terms must necessarily be possible to use in different trades and regions it Is impossible to set forth the obilgations of the parties with precision. To some extent it is therefore necessary to refer to the custom of the particular trade place or to the practices which the parties themselves may have established in their previous dealings (of Article 9 of the 1980 United Nations convertion on Contracts for the International Sale of Goods). It is of course desirable that sellers and buyers keep themselves duly informed of such customs of the trade when they negotiate their contract and that, whenever uncertainty arises clarify their legal position by appropriate clauses in their contract of sale. Such snecial provisions in the individual contract would supersede or vary anything which is set forth as a rule of interpretatoin in the various Incoterms.
7. In some situations, it may not be possible at the time when the contract of sale is entered into to decide precisely on the exact point or even the place where the goods should be delivered by the seller for carriage or at the final destination. For instance reference might have been made at this stage merely to a (range) or to a rather large place, e. g. seaport , and it is then usually stipulated that the buyer'can have the right or duty to name later on the more precise point within the range or the place. If the buy er has a duty to name the precise point as aforesaid his failure to do so might result in liability to bear the risks and additional costs resulting from such failure. In addition, the buyer's failure to use his right to indicate the point may give the seller the right to select the point which best suits his purpose.
8. It is normally desirable that customs clearace is arranged by the party
domiciled in the country where such clearance should take place or at least
by somebody acting there on this behalf. Thus the exporter should normally clear
the goods for export, while the importer should clear the goods for import.
However,under some trade terms, the buyer might undertake to clear the goods
for export in the seller's country (EXW, FAS) and in other terms, the seller
might-undertake to clear the goods for import into the buyer's country (DEQ
and DDP). Needless to say in their cases the buyer and the seller respectively
must assume any risk of export and import prohibition. Also they must ascertain
that a customs clearance performed by, or, on behalf of, a party not domiciled
in the respective country is accepted by the authorities. Particular problems
arise when the seller undertakes to deliver the goods into the buyer's country
in places which cannot be reached until the goods have been cleared for import
but where his ability to reach that place is adversely affected by the buyer's
failure to fulfil his obligation to clear the goods for import (see further
the comment to DDU below).
It may well be that a buyer would wish to collect the goods at the seller's
premises under the term EXW or to receive the goods alongside a ship under the
trade term FAS, but would like the seller to clear the goods for export. If.
so, the words 《cleared for export》 could be added after the respective trade
term. Conversely,It may be that the seller is prepared to deliver the goods
under the trade term DEQ or DDP, but without assuming wholly or partly the obligation
to pay the duty or other taxes or official charges upon importation of the goods.
If so, the words 《duty unpaid》might be added after DEQ; or the particular taxes
or charges which the seller does not wish to pay may be specifically excluded,
eg. 《VAT unpaid》.
It has also been observed that in many countries it is difficult for a foreign
company to obtain not only the import licence, but also duty reliefs (VAT deduction,
etc. 《Delivered, Duty Unpaid》removes these obligations from the seller.
In some cases, however, the seller whose obligation of carriage extends to the
buyer's premises in the country of import, wants to carry out customs clearance,
without paying the duties. If so, the DDU term should be added with word (DDU,cleared).
Corresponding additions may be used with other 《 D》terms,e. a. 《DDP,VAT
unpaid》, 《DEQ, duty unpaid》
9. In most cases, the parties would know beforehand which packaging is required for the safe carriage of the goods to the destination. However, since the seller's obligation to pack the goods may well vary according to the type and duration of the transport envisaged, it has been felt necessary to stipulate. that the seller is obliged to pack the goods in such a manner as is required for the transport, but only to the extent that the circumstances relating to the transport are made known to him before the contract of sale is concluded (cf. Articles 35. 1. and 35. 2b. of the 1980 United Nations Convention on Contracts for the International Sale of Goods where the goods, including packaging, must be (fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that It was unreasonable for him to rely, on the sellers skill and judgement.
10. In many cases, the buyer may be well advised to arrange for inspection of the goods before or at the time they are handed over by the seller for carriage (so - called pre - shipment inspection or PSI). Unless the contract stipulates otherwise, the buyer would himself have to pay the cost for such inspection which is arranged in his interest. However, if the inspection has been made in order to enable the seller to comply with any mandatory rules applicable to the export of the goods in his own country he would have to pay for that inspection.
11. As has been said, the FCA-term could be used whenthe seller should fulfil
his obligation by handing over the goods to a carrier named by the buyer. It
is expected that this term will also be used for maritime transport in
all cases where the cargo is not handed to the ship in the traditional method
over the ship's rail.Needless to say, the traditional FOB -term is inappropriate
where the seller is called upon to hand over the goods to a cargo termianl before
the ship arrives, since he would then have to bear risks and costs after the
time when he has no possibility to control the goods or to give instructions
with respect to their custody.It should be stressed that under the 《F》 terms,
the seller should hand over the goods for carriage as instructed by the buyer,
since the buyer would make the contract of carriage and name the carrier. Thus,
it is not necessary to spell out in the trade term precisely how the goods should
be handed over by the seller to the carrier. Nevertheless, in order to make
it possible for traders to use FCA as an 《overriding》《F》-term, explanations
are given with respect to the customary modalities of delivery for the different
modes of transport.
In the same manner, it may well be superfluous to introduce a definition of
《carrier》,since it is for the buyer to instruct the seller to whom the goods
should be delivered for carriage. However, since the carrier and the document
of transport are of great importance to traders, the preamble to the FCA - term
contains a definition of《carrier》. In this context, it should be noted that
the term 《carrier》not only refers to an enterprise actually performing the carriage
but it also includes an enterprise merely having undertaken to perform or to
procure the performance of the carriage as long as such enterprise assumes liability
as a carrier for the carriage. In other words, the term 《carrier》 comprises
performing as well as contracting carriers.
Since the position in this respect of the freight forwarder varies from country to country and according to practices in the freight forwarding industry, the preamble contains a reminder that the seller must, of course, follow the buyer's instructions to deliver the goods to a freight forwarder even if the freight forwarder would have refused to accept carrier liability and thus fall outside the definition of 《carrier》.
12. Under the 《C》terms, the seller must contract for carriage on usual terms
at his own expense. Therefore, a point up to which he would have to pay transportation
costs must necessarily be indicated after the respective 《C》 -term. Under the
CIF and CIP terms the seller also has to take out insurance and bear the inSurance
cost.
Since the point for the.division of costs refers to the country of destination,
the 《c》-terms are frequently mistakenly believedto be arrival contracts, whereby
the seller is not relieved from any risks or costs until the goods have actually
arrived at the agreed point. However, it must be stressed over and over again
that the-《c》-terms are of the same nature as the《F》- terms in that the seller
fulfils the contract in the country of shipment or dispatch.Thus, the contracts
of sale under the 《C》terms, like the contracts under the 《f》-terms, fall under
the category of shipment ,~,Contracts. While the seller would have to pay the
normal transportation cost for the carriageof the goods by a usual route and
in a customary manner to the agreed place of destination, the risk for loss
of or damage to the goods, as well as additional costs resulting events occurring
after the goods having been handed over for e,.fall upon the buyer. Hence, the
《c》-terms as distinfrom all other terms contain two 《critical》 points, one for
division of costs and another one for the division of risks. For this reasoning
greater caution must be observed when adding obligations of the seller to the
《C》-terms referring to a time after the aforementioned (critical) point for
the division of risk. It is the very essence of the 《c》-terms to relieve the
seller from any further risk and cost after he has duly fulfilled his contract
by con~ enacting for carriage and handing over the goods to the carrier and
by providing for insurance under the CIF-and CIP-terms.
It should also be possible for the seller to agree with the buyer to collect
payment under a documentary credit by presenting the agreed shipping documents
to the bank. It would be quite contrary to this common method of payment in
international trade if the seller were to have to bear further risks and costs
after the moment when payment had been made under documentary credits or otherwise
upon shipment and dispatch of the goods. Needless to say, however., the seller
would have to pay every cost which is due to the carrier irrespective of whether
freight. should be pm -paid upon shipment or is payable at'destination (freight
collect), except such additional costs which may result from events occurring
sub.sequent to shipment and dispatch.
If it is customary to procure several contracts of carriage involving transhipment
of the goods at intermediate places in order to reach the agreed destination.
the seller would have to pay all these costs, including any costs when the goods
are transhipped from one means of conveyance to the other. If, however,
the carrier exercised his rights under a transhipment-or similar clause-in order
to avoid 'unexpected hindrances (such as ice, congestion, labour disturbances,
government orders, war or warlike operations) then any additional cost resulting
therefrom would be for the account of the buyer.
13.It happens quite often that the Parties wish to clarify to Thich extent
the seller should Procure a contract
carriage including the costs of discharge. Since such costs are normally coy~red
by the freight when the goods are carried by regular shipping lines, the contract
of sale would frequently stipulate that the goods would- have to be -so carried
or at least that they should be carried under (liner terms). In other cases,
the word (landed) is added . after CFR or CIF. Nevertheless. it is advisable
not to use abbreviations added to the 《C》-terms unless, in the relevant trade,
the meaning of the abbreviations is
clearly understood and accepted by the contracting parties or tinder any applicable
law or custom of the trade.. In any event, the seller should not - and indeed
could not - without changing the very nature of the 《c》-terms undertake any
obligation with respect to the arrival of the goods at destination, since the
risk for any delay during the carriage is borne by the buyer. Thus, any obligation
with respect to time must necessarily refer to the place of shipment or dispatch,
e. g.《shipment (dispatch) not later than...》. An agreement
e. g. 《CFR Hamburg not later than... 》is really a misnomer and thus open to
different possible interpertations. The parties could be taken to have meant
either that the goods must actually arrive at Hamburg at the specified
date, in which case the contract is not a shipment contract but an arrival contract
or, alternatively, that the seller must ship the at such a time that they would
normally arrive at Hamburg ore the specified date unless the carriage would
have been debecause of unforeseen events.
14. It happens in commodity trades that goods are bought while they are carried
at sea and that. in such cases, the word 《afloat》 is added after the trade term.
Since the risk for loss of or damage to the goods would then, under the CFR
-and CIF -terms, have passed from the seller to the buyer, difficulties of interpretation
might arise. One possibility would be to maintain the ordinary meaning of the
CFR -and CIF -terms with respect to the division of risk between seller and
buyer which would mean that the buyer might have to assume risks which had is
already occurred at the time when the contract of sale has entered into force.
The other possibility would be to let the passing of the risk coincide with
the time when the contract of sale is concluded. The former possibility might
well-be practical, since it is usually impossible to ascertain the condition
of the goods while they are being carried.
For this reason the 1980 UN Convention on Contracts for the International Sale
of Goods Article 68 stipulates that 《if the circumstances so indicate, the risk
is assumed by the buyer from the time the goods were handed over to the carrier
who issued the documents embodying the contract of carriage》. There is, however,an
exception to this rule when 《the seller knew or ought to have known that the
goods had been lost or damaged and did not disclose this to the buyer》. Thus,
the interpretation of a CFR-or CIF-term with the addition of the word 《afloat》
will depend upon the law applicable to the contract of sale. The parties are
advised to ascertain the applicable law and any solution which might follow
therefrom. In case of doubt, the parties are advised to clarify the matter in
their contract.
15. It should be stressed that Incoterms only relate to trade terms used in the contract of sale and thus do not deal with terms sometimes of the same or similar wording - which may be ,Used in contracts of carriage, particularly as terms of various charterparties. Charterparty terms are usually more specific with re-. spect to costs at loading and discharge and the time available for these operations (so - called 《demurrage》 - provisions). Parties to contracts of sale are advised to consider this problem by specific stipulations in their contracts of sale so that it is made clear as ex#etly as possible how much time would be available for the seller to load the goods on a ship or other means of conveyance provided by the buyer and for the buyer to receive the goods from the carrier at destination, and, further, to specify to which extent the seller would have to bear the risk and cost of loading operations under the M-terms and discharging operations under the (0-terms. The mere fact that the seller might have procured a contract of , carriages. g. under the charterparty term (free out) whereby the carrier in the contract of carriage would be relieved from the discharging operations, does not necessarily mean that the risk and cost for such operations would fall upon the buyer under the contract of sale, since it might follow from the stipulations of the latr contract, or the custom of the port, that the contract of car riage procured by the seller should have included the discharging operations.
16. The contract of carriage would determine the obligations of the shipper or the sender with respect to handing over the goods for carriage to the carrier. It should be noted that FOB, CFR and CIF all retain the traditional practice to deliver the goods on board the vessel. While, traditionally, the point for delivery of the goods according to the contract of sale coincided with the point for handing over the goods for carriage, contemporary transportation techniques create a considerable problem of (synchronisation) between the contract of carriage and the contract of sale. Nowadays goods are usually delivered by the seller to the carrier before the goods are taken on board or sometimes even before the ship has arrived in the seaport. In such cases, merchants are adivsed to use such 《f》-or 《c》-terms which do not attach the handing over of the goods for carriage to shipment on board, namely FCA, CPT or CIP instead of FOB, CFR and CIF.
17. As has been said, the 《d》-terms are different in nature from the 《C》0-terms,
since the seller according to the 《d》terms is responsible for the arrival of
the goods at the agreed place -,,or point of destination. The seller must bear
all risks and costs in bringing the goods thereto. Hence, the 《d》-terms signify
arrival contracts, while the 《C》-terms evidence shipment contracts.
The 《D》 terms fall into two separate categories. Under DAF, DES and DDU the
seller does not have to deliver the goods cleared for import, while under DEQ
and DDP he would have to do so. Since DAF is frequently used in railway traffic,
where it is practical to obtain a through document from the railway covering
the entire transport to the f trial, destination and to arrange insurance for
the same period, DAF contains a stipulation in this respect in A. Be It should
be stressed, however, that the seller's duty to assist the buyer in obtaining
such a through document of transport is done at the buyer's risk and expense.
Similarly, any costs of insurance relating to the time subsequent to the sellers
delivery of the goods at the frontier would be for the account of the buyer.
The term DDU has been added in the present 1990 version of Incoterms. The term
fulfils an important function whenever the seller is prepared to deliver the
goods in the country of destination without clearing the goods for import and
paying the duty. Whenever clearance for import does not present any problem
- such as within the European Common Market - the term may be quite desirable
and appropriate. However, in countries where import may be difficult and time
consuming, it may. be risky for the seller to undertake an obligation to deliver
the goods beyond the ., Customs clearance point. Although, according to DDU
B. 5. and B.6 the buyer would have to bear the additional risks and costs which
might follow from his failure to fulfil his obligations to clear the goods for
import, the seller is advised not to use the term DDU in countries where difficulties
might be expected in clearing the goods for import.
18. Traditionally, the on board bill of lading has been the only acceptable
document to be presented by the seller under the terms CPR and CIF. The bill
of lading fulfils three important functions, namely
-proof of delivery of the goods on board the vessel
-evidence of the contract of carriage
-a means of transferring rights to the goods in transit by the transfer of the
paper document to another party.
Transport documents other than the bill of lading would fulfil the two first-mentioned
functions,but would not control the delivery of the goods at destination or
enable a buyer to sell the goods in transit by surrendering the paper document
to his buyer. Instead, other transport documents would name the party entitled
to receive the goods at destination. The fact that the possession of the bill
of lading is required in order to obtain the goods from the carrier at destination
makes it particularly difficult to replace by SDI -procedures. Further, it is
customary to issue bills of lading in several originals but it is of course,of
vital importance for a buyer or a bank acting upon his instructions in paying
the seller to ensure that all originals are surrendered by the seller (so-called(fun
This is also a requirement under the ICC Rules for Documentary Credits (the
so - called Uniform Customs and Practice, CP),ICC Publication 400).
The transport document must evidence not only delivery of goods to the carrier
but also that the goods, as far as could be mined by the carrier,were received
in good order and condition. Any notation on the transport document which would
indicate that the goods had not been in such condition would make the -document
(unclean)and thus make it unacceptable under UCP (Art. lessee also ICC Publication
473). In spite of the particular legal nature of the bill of lading it is expected
that it will be replaced by EDT procedures in the near future. The 1990 version
of Incoterms has taken this expected development into proper -account.
19. In recent years, a considerable simplification of documentary practices has been achieved. Bills of lading Are frequently replaced by non -negotiable documents similar to those which are for other modes of transport than carriage by sea. These documents are called 《seawaybills》,《liner waybills》,《freight receipts》, or variants of such expressions. These non - negotiable Documents are quite satisfactory to use except where the buyer as to sell the goods in transit by surrendering a paper document to the new buyer. In order to make this possible,the obligation of the seller to provide a bill of lading under CFR and CIF must necessarily be retained. However, when the contracting parties know that the buyer does not contemplate selling the goods in transit,they may specifically agree to relieve the seller from the obligation to provide a bill of lading, or alternatively, they may use CPT and CIP where there is no requirement to provide a bill of lading.
|
An Mode of Transport including Multimodal |
EXW |
Ex Works( ... named place) |
|
FCA |
Free Carrier( ... named place) |
|
|
CPT |
Carriage Paid To ( ... named place of destination) |
|
|
CIP |
Carriage and insurance Paid TO (...named Place of destination) |
|
|
DAF |
Delivered At Frontier( ... named place) |
|
|
DDU |
Delivered Duty Unpaid ( ... named) Place of destination) |
|
|
DDP |
Delivered Duty Paid( ... named Place of destination) |
|
|
Air Transport |
FCA |
Free Carrier(...named place) |
|
Rail Transport |
FCA |
Free Carrier(...named place) |
|
Sea and Inland Waterway Transport |
FAS |
Free Alongside Ship (...named port of shipment) |
|
FOB |
Free On Board ( ... named port of shipment) |
|
|
CFR |
Cost and Freight ( ... named port of destination) |
|
|
CIF |
Cost,Insurance and Freight(...named port of destination) |
|
|
DES |
Delivered Ex Ship (...named port, of destination) |
|
|
DEQ |
Delivered EX Quay (...named port of destination) |
20. A buyer paying for the goods under a 《c》-terrn should ensure that the seller upon payment is prevented from disposing of the goods by new instructions to the carrier. Some transport documepts used for particular modes of transport (air, road or rail )offer the contracting parties a possibility to estop the seller from. givjng such new instrctions to the carrier by providing the buyer with a particular original or. duplicate of the waybill. These waybills will have a (no-disposal) clause. However, the documents used instead of bills of lading for maritime carriage do not normally contain such an (estoppel) function. Work is-in progress within the Comite Maritime International to remedy this shortcoming of the above-mentioned documents by introducing 《Uniform Rules for Sea Waybills》. However,until this work has materialised, and been follwed through in practice, the buyer should avoid paying a~st these non-negotiable documents whenever he has any reacon to mistrust his seller.
21. The risk for loss of or damage to the goods, as well as the obligation to bear the costs relating to the goods, passes from the seller to the buyer when the seller has fulfilled his obligation to deliver the goods. Since the buyer should not be given the possibility to delay the passing of the risks and costs, all terms stipulate that the passing of risks and costs may occur even before delivery, if the buyer does not take delivery as agreed or fails to give such instructions (with respect to time for shipment and/or place for delivery) as the seller may require in order to fulfil his obligation to deliver the goods. It is a requirement for such. premature passing of risk and costs that the goods have been identified as intended for the buyer or, as is stipulated in the terms, set aside for him (appropriation ). This requiremint is particularly important under EXW, since under all. other terms the goods would normally have been identified as intended for the buyer when measures have been taken for their shipment or dispatch 《F》and 《C》-terms) or their delivery at destination 《D》-terms). In exceptional cases, however,. the goods may have been sent from the seller in bulk without identification of the quantity for each buyer and, if so, passing of risk and cost does not occur before the goods have been appropriated as aforesaid (cf. also Article 69. 3 of the 1980 UN Convention on the International Sale of Goods).
22. Merchants wishing to use these rules should now specify
that their contracts will be governed by 《Incoterms 1990》.
Contracting parties that wish to have the possibility of resor ting to ICC
Arbitration in the event of a dispute with their contracting partner should
specifically and clearly agree upon ICC Arbitration in their contract or, in
the event no single contractual document exists, in the exchange of correspondence
which constitutes the agreement between them. The fact of incorporating one
or more Incoterms in a contract or the related correspondence does NOT by itself
constitute an agreement to have resort to ICC Arbitration.
The following standard arbitration clause is recommended by the ICC:
《All disputes arising in connection with the present contract shall be finally
settled under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce by one or more arbitrators appointed in accordance with
the said Rules. 》
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