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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, 26 February 19
THE RELATIVELY DISAPPOINTING SCENE PORTRAYED IN THE DRY BULK MARKET RIGHT NOW - ALLIED SHIPBROKING
The relatively disappointing scene portrayed in the dry bulk market right now (especially in the Capesize segment) is undoubtedly one of the prevai ...
Friday, 22 February 19
AUSTRALIAN HIGH CV THERMAL COAL PRICES AT 19-MONTH LOW, BUT NOT FOR LONG - WOOD MACKENZIE
The benchmark Newcastle high energy thermal coal price has fallen from US$100/tonne at the turn of the new year to US$88/tonne. Thermal coal has be ...
Wednesday, 20 February 19
EFFECTIVE NOTICES OF ARBITRATION - AVOIDING WASTED COSTS AND A POTENTIALLY TIME-BARRED CLAIM
KNOWLEDGE TO ELEVATE
In a recent case, The Amity [2017], charterers successfully set aside an arbitration award on the basis that ow ...
Wednesday, 20 February 19
SHIPPING MARKET INSIGHT - INERMODAL
Market experts mostly agree that the recent dry bulk market downtrend was caused by seasonal slowdown amid the Chinese New Year celebrations in com ...
Tuesday, 19 February 19
AUSTRALIA'S COAL FUTURE UNDER THREAT AS MORE CHANGES HIT FOSSIL FUELS GLOBALLY - ABC
Two disparate decisions from opposite corners of the world have sounded warnings for the future of Australia’s coal industry.
...
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- Australian Coal Association
- Vizag Seaport Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- Trasteel International SA, Italy
- Siam City Cement PLC, Thailand
- Indika Energy - Indonesia
- Ambuja Cements Ltd - India
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- The State Trading Corporation of India Ltd
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- CNBM International Corporation - China
- Sakthi Sugars Limited - India
- Kartika Selabumi Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- OPG Power Generation Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Georgia Ports Authority, United States
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Samtan Co., Ltd - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Xindia Steels Limited - India
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Posco Energy - South Korea
- International Coal Ventures Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Oldendorff Carriers - Singapore
- Toyota Tsusho Corporation, Japan
- Indonesian Coal Mining Association
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Petron Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Vijayanagar Sugar Pvt Ltd - India
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Attock Cement Pakistan Limited
- Medco Energi Mining Internasional
- LBH Netherlands Bv - Netherlands
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- PNOC Exploration Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bharathi Cement Corporation - India
- Electricity Authority, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Planning Commission, India
- Africa Commodities Group - South Africa
- Minerals Council of Australia
- Parry Sugars Refinery, India
- Larsen & Toubro Limited - India
- Mintek Dendrill Indonesia
- Intertek Mineral Services - Indonesia
- Agrawal Coal Company - India
- Global Business Power Corporation, Philippines
- Ministry of Transport, Egypt
- Dalmia Cement Bharat India
- Bayan Resources Tbk. - Indonesia
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Indian Oil Corporation Limited
- Neyveli Lignite Corporation Ltd, - India
- Coalindo Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- Eastern Coal Council - USA
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Gujarat Mineral Development Corp Ltd - India
- Altura Mining Limited, Indonesia
- New Zealand Coal & Carbon
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Mercuria Energy - Indonesia
- Energy Link Ltd, New Zealand
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Kideco Jaya Agung - Indonesia
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Savvy Resources Ltd - HongKong
- Wood Mackenzie - Singapore
- Salva Resources Pvt Ltd - India
- Makarim & Taira - Indonesia
- Grasim Industreis Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Simpson Spence & Young - Indonesia
- Tata Chemicals Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Globalindo Alam Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
- Marubeni Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Energy Development Corp, Philippines
- South Luzon Thermal Energy Corporation
- Kohat Cement Company Ltd. - Pakistan
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Ministry of Mines - Canada
- Star Paper Mills Limited - India
- San Jose City I Power Corp, Philippines
- Bhushan Steel Limited - India
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Mjunction Services Limited - India
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Petrochimia International Co. Ltd.- Taiwan
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