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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, 15 May 19
SHIPPING MARKET INSIGHT - THEODORE NTALAKOS
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Thursday, 09 May 19
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- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Riau Bara Harum - Indonesia
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Latin American Coal - Colombia
- Bhoruka Overseas - Indonesia
- Xindia Steels Limited - India
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- New Zealand Coal & Carbon
- Asmin Koalindo Tuhup - Indonesia
- Samtan Co., Ltd - South Korea
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- Australian Coal Association
- Aboitiz Power Corporation - Philippines
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Intertek Mineral Services - Indonesia
- London Commodity Brokers - England
- Standard Chartered Bank - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kaltim Prima Coal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Meralco Power Generation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Marubeni Corporation - India
- LBH Netherlands Bv - Netherlands
- Bangladesh Power Developement Board
- International Coal Ventures Pvt Ltd - India
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- MS Steel International - UAE
- Global Coal Blending Company Limited - Australia
- TeaM Sual Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- IHS Mccloskey Coal Group - USA
- Rio Tinto Coal - Australia
- Tata Chemicals Ltd - India
- Oldendorff Carriers - Singapore
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- Aditya Birla Group - India
- PNOC Exploration Corporation - Philippines
- Orica Australia Pty. Ltd.
- Central Electricity Authority - India
- Gujarat Mineral Development Corp Ltd - India
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- The University of Queensland
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- ICICI Bank Limited - India
- SMG Consultants - Indonesia
- Global Green Power PLC Corporation, Philippines
- Lanco Infratech Ltd - India
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Renaissance Capital - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Bharathi Cement Corporation - India
- Indonesian Coal Mining Association
- Petron Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- Energy Development Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Carbofer General Trading SA - India
- Semirara Mining Corp, Philippines
- Port Waratah Coal Services - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Simpson Spence & Young - Indonesia
- Georgia Ports Authority, United States
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- Bhushan Steel Limited - India
- White Energy Company Limited
- ASAPP Information Group - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Baramulti Group, Indonesia
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Bayan Resources Tbk. - Indonesia
- Kideco Jaya Agung - Indonesia
- Posco Energy - South Korea
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Indian Oil Corporation Limited
- Orica Mining Services - Indonesia
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Karbindo Abesyapradhi - Indoneisa
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Savvy Resources Ltd - HongKong
- Gujarat Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- Timah Investasi Mineral - Indoneisa
- Videocon Industries ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Billiton Holdings Pty Ltd - Australia
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