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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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Thursday, 24 October 19
AUSTRALIA'S HOPES TO EXPAND COAL EXPORTS IN SOUTH-EAST ASIA 'DELUSIONAL', EXPERTS SAY - THE GUARDIAN
The number of new coal-fired power plants starting construction across south-east Asia has fallen markedly over the past two years as Australia has ...
Thursday, 24 October 19
PANAMAX: NEGATIVE SENTIMENT IN THE MARKET AS IT CONTINUES TO WEAKEN - FEARNLEYS
Capesize
The market has continued to slide the last week, as lack of fresh requirements and a slight oversupply of tonnage heading towards Sout ...
Wednesday, 23 October 19
CHINA'S 2019 COAL IMPORTS SET TO RISE MORE THAN 10%: ANALYSTS - REUTERS
China, the world’s top coal buyer, is on track to boost imports of the fuel by more than 10% this year, traders and analysts said on Tuesday, ...
Wednesday, 23 October 19
SHIPPING MARKET INSIGHT - INTERMODAL
Moving closer to the end of the year, we are facing what the market was expecting for quite a while, the ship repair sector booming with the shipya ...
Tuesday, 22 October 19
DRY BULK: DESPITE THE DOWNWARD CORRECTION NOTED OVER THE PAST MONTH, RATES ARE STILL HOLDING OFF AT FAVORABLE LEVELS - ALLIED SHIPPING
Despite the downward correction that has been noted in the dry bulk market over the past month, rates are still holding off at favorable levels. Ev ...
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- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Mjunction Services Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Merrill Lynch Commodities Europe
- Cigading International Bulk Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Savvy Resources Ltd - HongKong
- Petrochimia International Co. Ltd.- Taiwan
- Global Green Power PLC Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Wilmar Investment Holdings
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- Central Electricity Authority - India
- OPG Power Generation Pvt Ltd - India
- Cement Manufacturers Association - India
- Interocean Group of Companies - India
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- Mintek Dendrill Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Minerals Council of Australia
- Larsen & Toubro Limited - India
- Kalimantan Lumbung Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Sojitz Corporation - Japan
- MS Steel International - UAE
- SN Aboitiz Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Maheswari Brothers Coal Limited - India
- Pendopo Energi Batubara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Globalindo Alam Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- PTC India Limited - India
- Therma Luzon, Inc, Philippines
- Commonwealth Bank - Australia
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kumho Petrochemical, South Korea
- Anglo American - United Kingdom
- McConnell Dowell - Australia
- Bhatia International Limited - India
- Eastern Energy - Thailand
- Australian Commodity Traders Exchange
- Bukit Baiduri Energy - Indonesia
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Sindya Power Generating Company Private Ltd
- Antam Resourcindo - Indonesia
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Tata Chemicals Ltd - India
- Chamber of Mines of South Africa
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- The University of Queensland
- ICICI Bank Limited - India
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Bhushan Steel Limited - India
- Ministry of Transport, Egypt
- Meralco Power Generation, Philippines
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Central Java Power - Indonesia
- Electricity Authority, New Zealand
- Lanco Infratech Ltd - India
- Leighton Contractors Pty Ltd - Australia
- PowerSource Philippines DevCo
- London Commodity Brokers - England
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Kohat Cement Company Ltd. - Pakistan
- Vedanta Resources Plc - India
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Attock Cement Pakistan Limited
- Karaikal Port Pvt Ltd - India
- Standard Chartered Bank - UAE
- VISA Power Limited - India
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Goldman Sachs - Singapore
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Indogreen Group - Indonesia
- Port Waratah Coal Services - Australia
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- Ind-Barath Power Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Coal and Oil Company - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Carbofer General Trading SA - India
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- Australian Coal Association
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Thai Mozambique Logistica
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Coastal Gujarat Power Limited - India
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Kaltim Prima Coal - Indonesia
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
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