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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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- Mintek Dendrill Indonesia
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Sinarmas Energy and Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Ministry of Finance - Indonesia
- LBH Netherlands Bv - Netherlands
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- MS Steel International - UAE
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Goldman Sachs - Singapore
- Energy Link Ltd, New Zealand
- Eastern Energy - Thailand
- Coastal Gujarat Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Indian Oil Corporation Limited
- Thai Mozambique Logistica
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Billiton Holdings Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- Bhatia International Limited - India
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Manunggal Multi Energi - Indonesia
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Wilmar Investment Holdings
- Planning Commission, India
- Asmin Koalindo Tuhup - Indonesia
- Power Finance Corporation Ltd., India
- Economic Council, Georgia
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- Mjunction Services Limited - India
- Bangladesh Power Developement Board
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- ASAPP Information Group - India
- OPG Power Generation Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Anglo American - United Kingdom
- IHS Mccloskey Coal Group - USA
- Vizag Seaport Private Limited - India
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Africa Commodities Group - South Africa
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Merrill Lynch Commodities Europe
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Banpu Public Company Limited - Thailand
- Binh Thuan Hamico - Vietnam
- South Luzon Thermal Energy Corporation
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sindya Power Generating Company Private Ltd
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Energy Development Corp, Philippines
- GVK Power & Infra Limited - India
- Ambuja Cements Ltd - India
- Interocean Group of Companies - India
- Electricity Generating Authority of Thailand
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Antam Resourcindo - Indonesia
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parliament of New Zealand
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Orica Australia Pty. Ltd.
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- Uttam Galva Steels Limited - India
- Jaiprakash Power Ventures ltd
- Malabar Cements Ltd - India
- Port Waratah Coal Services - Australia
- Australian Coal Association
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Dalmia Cement Bharat India
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Semirara Mining and Power Corporation, Philippines
- Latin American Coal - Colombia
- Deloitte Consulting - India
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Coal and Oil Company - UAE
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Aditya Birla Group - India
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- Bukit Makmur.PT - Indonesia
- Siam City Cement PLC, Thailand
- Edison Trading Spa - Italy
- Romanian Commodities Exchange
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- SMC Global Power, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Australian Commodity Traders Exchange
- Bharathi Cement Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Trasteel International SA, Italy
- Toyota Tsusho Corporation, Japan
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Grasim Industreis Ltd - India
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- White Energy Company Limited
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- The University of Queensland
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Minerals Council of Australia
- Global Coal Blending Company Limited - Australia
- Georgia Ports Authority, United States
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- India Bulls Power Limited - India
- Meenaskhi Energy Private Limited - India
- Tamil Nadu electricity Board
- Petrochimia International Co. Ltd.- Taiwan
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Bhushan Steel Limited - India
- Jindal Steel & Power Ltd - India
- Maheswari Brothers Coal Limited - India
- Directorate Of Revenue Intelligence - India
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