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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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Tuesday, 06 August 19
SHIPPING MARKET INSIGHT - INTERMODAL
On the 12th of May four tankers were attacked near the coast of Fujairah. The tankers hit were waiving international flags such as that of No ...
Monday, 05 August 19
SUPRAMAX: COAL FROM INDONESIA TO CHINA PAID AT MID $8,000S ON A 57,000-TONNER DELIVERY SOUTH CHINA - BALTIC BRIEFING
Capesize
Having hit a high of $32,963 early last week, the Capesize 5TC now stands at $25,749. This is over 20% of its value lost in 10 days. C ...
Thursday, 01 August 19
PANAMAX: THE SENTIMENT IN THE MARKET IS STILL POSITIVE FOR THE LONGER TERM - FEARNLEYS
Capesize
Two weeks ago the 5TC index was at 33,000 USD pd. Since then it has fallen off a bit and has stayed around 27,000 USD pd the last week ...
Thursday, 01 August 19
INDIKA ENERGY REVENUES DECLINE DUE TO LOW COAL PRICES
One of the largest Indonesian integrated energy companies PT Indika Energy Tbk posted revenues of US $ 1,380.4 million, down 4.6% compared to US $ ...
Wednesday, 31 July 19
INDIA'S 2019 THERMAL COAL IMPORTS SEEN AT 180-185 MLN T - WOODMAC
India is expected to import 180-185 million tonnes of thermal coal in 2019, said Dale Hazelton, head of thermal coal at consultancy Wood Mackenzie. ...
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- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Krishnapatnam Port Company Ltd. - India
- Electricity Authority, New Zealand
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- The Treasury - Australian Government
- Barasentosa Lestari - Indonesia
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- Sindya Power Generating Company Private Ltd
- Carbofer General Trading SA - India
- Economic Council, Georgia
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Deloitte Consulting - India
- Gujarat Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- The University of Queensland
- Malabar Cements Ltd - India
- Riau Bara Harum - Indonesia
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Parliament of New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Intertek Mineral Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Price Waterhouse Coopers - Russia
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- MS Steel International - UAE
- Mjunction Services Limited - India
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- CNBM International Corporation - China
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Tata Chemicals Ltd - India
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Kartika Selabumi Mining - Indonesia
- Wilmar Investment Holdings
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Central Java Power - Indonesia
- Bukit Baiduri Energy - Indonesia
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- Madhucon Powers Ltd - India
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Lanco Infratech Ltd - India
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- ICICI Bank Limited - India
- Sinarmas Energy and Mining - Indonesia
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Orica Mining Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- European Bulk Services B.V. - Netherlands
- Meralco Power Generation, Philippines
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Salva Resources Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- SMG Consultants - Indonesia
- Star Paper Mills Limited - India
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- Anglo American - United Kingdom
- Thai Mozambique Logistica
- Bulk Trading Sa - Switzerland
- Uttam Galva Steels Limited - India
- Antam Resourcindo - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bhoruka Overseas - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Cigading International Bulk Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Siam City Cement - Thailand
- Australian Coal Association
- Samtan Co., Ltd - South Korea
- Bharathi Cement Corporation - India
- Tamil Nadu electricity Board
- Chettinad Cement Corporation Ltd - India
- Mintek Dendrill Indonesia
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- Vizag Seaport Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Coalindo Energy - Indonesia
- Central Electricity Authority - India
- AsiaOL BioFuels Corp., Philippines
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petron Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- Siam City Cement PLC, Thailand
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- Manunggal Multi Energi - Indonesia
- Latin American Coal - Colombia
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
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