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Friday, 27 September 19
LOWDOWN ON INCOTERMS 2020 OVERHAUL - BALTIC EXCHANGE
 KNOWLEDGE TO ELEVATE
This ninth revision of Incoterms is changed in style and substance. The revisions improve certain aspects of Incoterms 2010 and address issues which were not prevalent in 2010. The introduction to Incoterms 2020 includes a detailed explanation of how to choose the most appropriate Incoterms rule for a sale contract.
Incoterms are a collection of internationally recognised standardised trade terms published by the ICC and widely used in domestic and international sales. Incoterms cover various practical elements of a sale contract such as the primary obligations of the seller and the buyer; the responsibilities of each; time of delivery and the transfer of risk. They also deal with insurance, export and import clearance and the division of other costs pertaining to the delivery of goods.
The ICC’s revision of Incoterms aims to respond to changes in the market so that they continue to be relevant and useful to global trade. With this particular revision, the ICC aims to take account of:
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The growth of the global economy and greater access to markets worldwide
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Increasing attention to security in the transportation of goods
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The need for flexibility when considering insurance coverage, depending on type of goods and transport
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Calls from banks for an on-board bill of lading in some financed sales under the Free Carrier (FCA) rule
For existing contracts, Incoterms 2010 will continue to apply even if performance of the contract will take place in 2020 unless the contract says otherwise. For contracts entered into between September 2019 and January 2020, it is prudent for the parties to state which set of Incoterms is to apply, especially if performance will take place after 1 January 2020.
After 1 January 2020, courts and arbitrators can be expected to assume that any reference to Incoterms in new contracts is intended to be a reference to Incoterms 2020, unless there is evidence to the contrary.
The relevance of Incoterms 2020 depends on the contract terms used. For example, GAFTA, FOSFA and sugar (SAL and RSA) contracts do not incorporate Incoterms. Any parties trading only on those contract terms without amending them to incorporate Incoterms will obviously be unaffected by the changes in Incoterms 2020. Standard petroleum product contracts refer to Incoterms, as do many ethanol, coal and metals contracts. Parties dealing with such contracts will need to:
• Check their standard contract forms
• Consider the changes introduced by Incoterms 2020 and whether they wish their contracts to incorporate Incoterms 2020 or an earlier version of Incoterms (or none)
• Make any necessary consequential changes in the standard forms for new contracts (for example, changing ‘DAT’ (Delivered at Terminal) to ‘DPU’ (Delivered at Place Unloaded))
• Inform counterparties and trading/execution departments of the changes to Incoterms and any revisions to contract documentation
Main changes
1. Bills of lading with an on-board notation in FCA deliveries
2. Different levels of insurance cover between Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP)
3. Acknowledging the use by parties of their own transportation in FCA, Delivered At Place (DAP), DPU and Delivered Duty Paid (DDP) deliveries
4. The inclusion of security-related requirements within carriage obligations and costs
5. Detailed Explanatory Notes for Users
6. The arrangement of provisions relating to costs
7. Change of ‘DAT’ to ‘DPU’
The detail
The table below sets out the substantive changes in more detail:
1. Bills of lading with an on-board notation in FCA deliveries
Amendments to Incoterms 2020
In FCA deliveries, parties (or their financing banks) often require a bill of lading with on-board notation but, given that delivery on FCA terms is completed before goods are loaded onto the vessel, the seller may not always be able to obtain an on-board bill of lading from the carrier.
Under the new Incoterms, the buyer and the seller may agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller after the goods have been loaded. The seller will then be obliged to tender the bill of lading to the buyer.
The ICC emphasises that, where the above option is exercised, the seller does not take on an obligation to the buyer in respect of the terms of the contract of carriage.
2. Different levels of insurance cover in CIF and CIP
Amendments to Incoterms 2020
Incoterms 2020 provide for different minimum insurance cover for CIF and CIP deliveries.
Previously, both CIF and CIP required minimum insurance cover at the level of Clause (C) of the Institute Cargo Clauses.
In the new revision, for CIF deliveries, the default position remains the same (that is, Clause (C) of the Institute Cargo Clauses). Parties may agree higher levels of cover if they wish.
However, for CIP deliveries, the seller is now obliged to obtain insurance cover at the level of Clause (A) of the Institute Cargo Clauses (that is, “all risks”).
Minimum insurance cover for CIP deliveries has therefore been increased for the benefit of the buyer. Parties are free to agree to have lower levels of insurance cover if they wish.
3. Acknowledging transportation by own transport in FCA, DAP, DPU and DDP deliveries
Amendments to Incoterms 2020
Incoterms 2010 were drafted on the assumption that, when goods are carried from the seller to the buyer, they would be carried by a third-party carrier engaged by the seller or the buyer. That did not account for situations, particularly in FCA, DAP, DPU and DDP deliveries, where a third-party carrier was not, in fact, required or contracted because the seller or the buyer would use its own transportation.
The new rules now cater for such situations by expressly providing for the arrangement of carriage as well as referring to the making of a contract of carriage.
4. Inclusion of security-related requirements within carriage obligations and costs
Amendments to Incoterms 2020
Incoterms 2020 aims to establish stronger security-related requirements than its predecessors. Now that security-related concerns are more prevalent in trade, this revision expressly provides for security-related obligations at A4 and A7 of each rule. As mentioned above, costs for these obligations will feature under A9/B9 of each rule.
5. Explanatory Notes for Users
Amendments to Incoterms 2020
The Guidance Notes that previously featured at the start of the individual Incoterms have now been amended to ‘Explanatory Notes for Users’. The Explanatory Notes set out the fundamentals of each of the relevant Incoterms, specifically:
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When it should be used
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When risk transfers
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How costs are allocated
The Explanatory Notes aim to help users choose the most appropriate Incoterms and provide guidance for interpretation if disputes arise.
6. Arrangement of provisions relating to costs
Amendments to Incoterms 2020
Costs have been rearranged in the 2020 revision. All costs relating to the various aspects of the sale are now listed at A9/B9 under each of the Incoterms, as well as under the relevant article within the Incoterms to which they apply.
The intention behind this change is to provide users with a complete list of costs in one place, so that the seller and the buyer are more aware of the costs for which each will be responsible under particular Incoterms.
7. Change from ‘DAT’ to ‘DPU’
Amendments to Incoterms 2020
There is a change to the order of the individual Incoterms in the new revision, so that DAP now appears before DAT to reflect the fact that delivery on DAP terms occurs before delivery on DAT terms.
The term ‘DAT’ has been changed to ‘DPU’, reflecting the fact that the destination for a DAT/DPU delivery could be at any place and not just a terminal. Of course, the place of delivery, if not a terminal, must be appropriate for the unloading of the goods.
As John W.H. Denton, General Secretary of the ICC, said when Incoterms 2020 were released: “Incoterms 2020 rules make business work for everyone by facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world to understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions, and help build confidence in our valuable global trading system.”
The importance of Incoterms to trade is beyond doubt, even if many contracts do not incorporate them. To avoid uncertainty and disputes, trading companies should ensure they know the new Incoterms rules and make any amendments to their contracts and general terms and conditions that are necessary. It is important to ensure that the most appropriate Incoterms are selected for each contract and that they are fully understood before they are incorporated. These points are especially important now, as the changes take root.
Source: Baltic Exchange
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Friday, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
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Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
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Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
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Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
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Friday, 02 August 24
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The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
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- Global Coal Blending Company Limited - Australia
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Petron Corporation, Philippines
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Singapore Mercantile Exchange
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining and Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Latin American Coal - Colombia
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mjunction Services Limited - India
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- AsiaOL BioFuels Corp., Philippines
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Grasim Industreis Ltd - India
- Coalindo Energy - Indonesia
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Essar Steel Hazira Ltd - India
- OPG Power Generation Pvt Ltd - India
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Aditya Birla Group - India
- Orica Mining Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Pendopo Energi Batubara - Indonesia
- Mintek Dendrill Indonesia
- Heidelberg Cement - Germany
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sojitz Corporation - Japan
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- Madhucon Powers Ltd - India
- PTC India Limited - India
- Africa Commodities Group - South Africa
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Interocean Group of Companies - India
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Kobexindo Tractors - Indoneisa
- Australian Coal Association
- Ministry of Mines - Canada
- Kapuas Tunggal Persada - Indonesia
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Tamil Nadu electricity Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- Trasteel International SA, Italy
- Vizag Seaport Private Limited - India
- MS Steel International - UAE
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- GVK Power & Infra Limited - India
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Romanian Commodities Exchange
- Kideco Jaya Agung - Indonesia
- Orica Australia Pty. Ltd.
- Thai Mozambique Logistica
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Planning Commission, India
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Energy Link Ltd, New Zealand
- PNOC Exploration Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Baramulti Group, Indonesia
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- Samtan Co., Ltd - South Korea
- New Zealand Coal & Carbon
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Meenaskhi Energy Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Marubeni Corporation - India
- Kumho Petrochemical, South Korea
- ICICI Bank Limited - India
- Billiton Holdings Pty Ltd - Australia
- Deloitte Consulting - India
- Electricity Authority, New Zealand
- IEA Clean Coal Centre - UK
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Coal and Oil Company - UAE
- Eastern Energy - Thailand
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Ministry of Transport, Egypt
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- ASAPP Information Group - India
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Videocon Industries ltd - India
- The Treasury - Australian Government
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Ceylon Electricity Board - Sri Lanka
- GAC Shipping (India) Pvt Ltd
- SMG Consultants - Indonesia
- Parry Sugars Refinery, India
- Bhushan Steel Limited - India
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- GMR Energy Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- International Coal Ventures Pvt Ltd - India
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Star Paper Mills Limited - India
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
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