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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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Wednesday, 04 December 19
FITCH RATINGS: CASH FLOW GENERATION TO SLOW DOWN FOR INDONESIAN COAL MINERS
Fitch Ratings' negative outlook on the Indonesian coal-mining sector reflects our view of weaker cash flow generation on account of declining c ...
Wednesday, 04 December 19
SHIPPING MARKET INSIGHT - INTERMODAL
Dry bulk freight rates rebounded last week, a development that came as a relief following the recent negative sentiment that prevailed in the marke ...
Wednesday, 04 December 19
INDONESIA REVIEWING RULES MANDATING COAL SALES TO LOCAL BUYERS: OFFICIAL - REUTERS
Indonesia is reviewing rules that require coal miners to sell a portion of their coal to local buyers, a government official said on Monday, as sup ...
Tuesday, 03 December 19
STABILITY AND COMPATIBILITY OF VERY LOW SULPHUR FUEL OILS - GARD
In order to meet increasing restrictions on the sulphur content in marine fuel as defined by MARPOL Annex VI Regulation 14.1.3, the characteristics ...
Monday, 02 December 19
COAL PRODUCTION IN INDIA UP BY 164.58 MT IN 5 YEARS - BUSINESS LINE
Raw coal production in the country has increased from 567.77 million tons (MT) in 2013-14 to 730.35 MT in 2018-19, Union Coal and Parliamentary Aff ...
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- Semirara Mining Corp, Philippines
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
- Indika Energy - Indonesia
- Agrawal Coal Company - India
- Karbindo Abesyapradhi - Indoneisa
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Central Electricity Authority - India
- Formosa Plastics Group - Taiwan
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Attock Cement Pakistan Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Banpu Public Company Limited - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
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- Global Business Power Corporation, Philippines
- Baramulti Group, Indonesia
- Planning Commission, India
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- Indian Energy Exchange, India
- London Commodity Brokers - England
- Australian Coal Association
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- The Treasury - Australian Government
- New Zealand Coal & Carbon
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- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- PTC India Limited - India
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- Manunggal Multi Energi - Indonesia
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- The University of Queensland
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- Tamil Nadu electricity Board
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- Bangladesh Power Developement Board
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- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
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- Globalindo Alam Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Orica Australia Pty. Ltd.
- Altura Mining Limited, Indonesia
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rio Tinto Coal - Australia
- White Energy Company Limited
- Indonesian Coal Mining Association
- Kalimantan Lumbung Energi - Indonesia
- Uttam Galva Steels Limited - India
- Mjunction Services Limited - India
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Leighton Contractors Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- Madhucon Powers Ltd - India
- Indo Tambangraya Megah - Indonesia
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
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- SMC Global Power, Philippines
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
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- Bhushan Steel Limited - India
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- Sical Logistics Limited - India
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Bhatia International Limited - India
- Deloitte Consulting - India
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Trasteel International SA, Italy
- Interocean Group of Companies - India
- Bukit Baiduri Energy - Indonesia
- Renaissance Capital - South Africa
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
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- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- Therma Luzon, Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- ICICI Bank Limited - India
- Alfred C Toepfer International GmbH - Germany
- Eastern Energy - Thailand
- Star Paper Mills Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Gujarat Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Electricity Generating Authority of Thailand
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Aditya Birla Group - India
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Malabar Cements Ltd - India
- Jindal Steel & Power Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Posco Energy - South Korea
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- VISA Power Limited - India
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- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
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- Petrochimia International Co. Ltd.- Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Independent Power Producers Association of India
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- Indian Oil Corporation Limited
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- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- Videocon Industries ltd - India
- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- IHS Mccloskey Coal Group - USA
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- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
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- Parliament of New Zealand
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