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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, 15 October 19
INDIA READIES POLICY TO ATTRACT FOREIGN INVESTMENT IN COAL MINING - REUTERS
India expects to have formulated a policy within the next two weeks to attract foreign investment to its coal mining industry, the country's Co ...
Monday, 14 October 19
WINTER OIL MARKET OUTLOOK - OPEC
Product markets in the last two months have benefitted from seasonal maintenance which have led to a tighter product market environment, providing ...
Sunday, 13 October 19
INDONESIA: PANAMAX VESSELS OPEN SOUTH CHINA WERE REPORTEDLY FIXED AT $14,000 LEVEL, WITH REDELIVERY BACK IN CHINA - BALTIC BRIEFING
Capesize
The Capesize market managed to find a floor and rally a little this week after several weeks of declines. While the West Australia to ...
Friday, 11 October 19
INDIAN MINERS REJECT PLAN TO LINK NATIONAL COAL INDEX TO FOREIGN PRICES - REUTERS
India’s miners are rejecting a government proposal to establish a national coal index that would be linked to international prices, documents ...
Friday, 11 October 19
THE OCTOBER BENCHMARK PRICE OF INDONESIAN THERMAL COAL DECLINES TO LOWEST SINCE OCTOBER 2016
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
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- Economic Council, Georgia
- Planning Commission, India
- Eastern Coal Council - USA
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Sical Logistics Limited - India
- Carbofer General Trading SA - India
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Timah Investasi Mineral - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Jindal Steel & Power Ltd - India
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- Kobexindo Tractors - Indoneisa
- Mercator Lines Limited - India
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- Salva Resources Pvt Ltd - India
- Mjunction Services Limited - India
- Semirara Mining Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- PTC India Limited - India
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Orica Mining Services - Indonesia
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Chamber of Mines of South Africa
- Coastal Gujarat Power Limited - India
- Videocon Industries ltd - India
- Wilmar Investment Holdings
- Bharathi Cement Corporation - India
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- ICICI Bank Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Sojitz Corporation - Japan
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- Trasteel International SA, Italy
- Directorate Of Revenue Intelligence - India
- Bukit Baiduri Energy - Indonesia
- Standard Chartered Bank - UAE
- Price Waterhouse Coopers - Russia
- Indian Energy Exchange, India
- Minerals Council of Australia
- Mintek Dendrill Indonesia
- Energy Development Corp, Philippines
- Bangladesh Power Developement Board
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Coalindo Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Electricity Regulatory Commission - India
- MS Steel International - UAE
- Globalindo Alam Lestari - Indonesia
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- Vizag Seaport Private Limited - India
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Vedanta Resources Plc - India
- Grasim Industreis Ltd - India
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Ministry of Transport, Egypt
- Australian Coal Association
- Africa Commodities Group - South Africa
- Sarangani Energy Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Malabar Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- Neyveli Lignite Corporation Ltd, - India
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Larsen & Toubro Limited - India
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Aditya Birla Group - India
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Ceylon Electricity Board - Sri Lanka
- Intertek Mineral Services - Indonesia
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Straits Asia Resources Limited - Singapore
- PowerSource Philippines DevCo
- Indika Energy - Indonesia
- McConnell Dowell - Australia
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- Bhatia International Limited - India
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Oldendorff Carriers - Singapore
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- Tata Chemicals Ltd - India
- Kaltim Prima Coal - Indonesia
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- London Commodity Brokers - England
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- SMC Global Power, Philippines
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Petron Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- Orica Australia Pty. Ltd.
- Wood Mackenzie - Singapore
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- CIMB Investment Bank - Malaysia
- The University of Queensland
- Kapuas Tunggal Persada - Indonesia
- Mercuria Energy - Indonesia
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