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