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Issue 1 2020 - Freight Business Journal Insurance Know your Incoterms
Incoterms® determine the point at which the goods are delivered, the point at which risk in the goods for loss or damage is transferred from seller to buyer and the various costs associated with the transport of the goods. TT Club’s Peregrine Storrs-Fox assesses the importance of the latest review.
New Year 2020 saw the introduction of Incoterms 2020. Revised every decade by the International Chamber of commerce (ICC), this latest revision has been assessed against current business practices, taking into account new technologies and challenges faced through the intervening period. The aim is to optimise global
trade, clearly defi ning the obligations of buyers and sellers of goods by encouraging self- regulation and providing a rules- based framework to facilitate trade. With each revision, the ICC to advance standards
aspires
and improve the outreach to businesses whose compliance with Incoterms is poor. It is recognised that many businesses do not correctly use Incoterms; businesses should, where appropriate, challenge and encourage trade partners to utilise the correct or most appropriate rules to adopt at the outset of contractual negotiations and before a dispute arises. Incoterms are ‘soſt ’ rules
- they are not mandatory. There are number of common misconceptions surrounding them. In line with earlier editions, Incoterms
2020 cover the
parties’ obligations to arrange for the carriage and insurance of the goods. They determine
the point at which the goods are delivered, the point at which risk in the goods for loss or damage is transferred from seller to buyer and the various costs associated with the transport of the goods. Incoterms however do not
cover: ownership or who retains the title to the goods; quality of goods; breaches of contract; method or terms of payment; responsibility
to insure the
goods (except CIF & CIP); other services contractually provided; issues around sanctions; governing law and jurisdiction of contract; regulatory compliance requirements such as the provision of verifi ed gross mass (VGM); or remedies in respect of disputes or breaches of contract. Incoterms per se are not legally
binding, unless express reference to the specifi c Incoterm is incorporated into an agreement. The ICC suggests the following template for incorporation: “[the chosen Incoterms rule]
[named port, place or point] Incoterms® 2020” e.g. FCA (Winsford, Cheshire,
United Kingdom) Incoterms 2020® e.g. DAP (Unit 15, ABC Business
Park, Winsford, United Kingdom) Incoterms 2020® Whilst it is not necessary to
use the trademark symbol, it is essential to state the version of the Incoterms used; not doing so may give rise to disputes and unintended outcomes.
It is important to accurately
insert the correct named port, place or point of delivery, destination or both. This again will increase certainty and avoid potentially costly disputes. Since 1980 Incoterms have consisted of four main groups of terms: E – Terms – Ex Works; F –
Terms – “Free” goods for export; C – Terms – Carriage (similar to F – Terms but seller contracts the carriage and invoices the buyer); and D – Terms – Delivered. Delivers goods into the buyer’s country (transit and risk remains with the seller).
Key changes for 2020
Incoterms 2020 consist of 11 defi ned terms. There are four seafreight-only rules and seven rules that can be used for any mode, with 15 available options in total, since FOB, FCA, CIF and CIP can be assigned one of two named delivery places. Whilst this revision has witnessed only a small number of substantive changes, it is still important to understand the impact of these changes. Delivery place – Seeking
to remove the confusion historically arising between DAT (delivered at terminal) and DAP (delivered at place), the former has been replaced by DPU (delivered
at place
unloaded). This serves to clarify that delivery is eff ected once the goods have been unloaded from the ship and made available to the buyer at a specifi ed place in the terminal. Insurance - Only two
Incoterms obligate insurance, in each case requiring the seller to purchase insurance in the buyer’s name. CIF Seller buys the insurance in the name of the buyer at Cargo Institute clauses ‘C’ (which are restricted). CIP Seller buys the insurance in the name of the buyer at Cargo
Institute clauses ‘A’. Parties can expressly
agree alternative
levels of insurance cover under both CIF and CIP. Costs – Incoterms 2020
provides much more detail around costs and their allocation; this can be found under clause A9. In general costs up to delivery are for the seller and the costs thereaſt er are for the buyer. Security – The 2020 text
provides more detail around security. A4/ B4 and A7/ B7 consider security aspects. Own transport – Incoterms 2010 assumed that all transport would be undertaken by a third party. Incoterms 2020 recognises the concept of own transport. FCA, FOB and bills of lading
– FCA obligates the seller eff ectively up to the point that the goods are delivered to the quayside; FOB is still widely used (incorrectly) to undertake the same function. FCA is preferential for the seller given that it does not include the risk associated with loading the cargo onto the ship. Delivery is assumed at the point that the cargo is delivered to the named place.
This can in practice give rise to
diffi culties in terms of payment, however, for example where a letter of credit requires an on- board bill of lading. Incoterms 2020 adopts further language under the FCA term to allow the seller to require the buyer to procure an on-board bill of lading to alleviate this issue. The Incoterms® Rules are
protected by copyright owned by ICC. Further information on the Incoterm Rules may be obtained from the ICC website
iccwbo.org. Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifi cally stated above.
New packing guide is required reading poor decisions and practices
With mandatory enforcement of the latest version of the IMDG Code, (Amendment 39- 18) from 1 January, insurers are urging the container shipping industry and shippers to give more attention to the causes and consequences of ship fi res. They have issued a joint guide outlining the responsibilities of all stakeholders. Book it Right and Pack it
Tight is available free and gives an overview of the practical
duties and responsibilities under the IMDG Code for each stakeholder. Stuart Edmonston, UK
P&I’s loss prevention director, commented: “Our chief aim is to minimise risk for our members and the industry we serve. The recent spate of container ship fi res with the consequent loss of life, damage to ships and cargo, and trade disruption has been a major concern. UK P&I continues to participate in
initiatives which focus on the capability to detect, suppress and extinguish fi res at sea. However we share our sister organisation’s desire to tackle the causes of such fi res at source.” Peregrine Storrs-Fox, risk
management director at insurers the TT Club, said: “There are far too many errors in classifi cation and declaration of commodities to be transported. These are oſt en amplifi ed by
relating to packaging, packing, segregation and securing. Such errors severely compromise safety in a variety of ways, but most critically when the goods should rightly be described as dangerous in a regulated sense and, here, in compliance the IMDG Code.” Head of cargo management
at Maersk Line and chairman of the shipping line CINS network adds: “If people only read one book this year it should be this one.”
///NEWS
A rail industry for a climate-aware future
By iPort Rail managing director, Steve Freeman, and commercial director, David Cross The Australian bushfi res that
continue to savage the country, destroying landholdings and ecosystems, are reinforcing an increasing trend in the logistics industry to reach beyond the climate emergency. That country is one of the world’s
biggest exporters of coal, and protestors are taking to the streets by the thousands to call for action to stem the fl ow of greenhouse emissions, which
are The fi nal one is freight to and
from Europe via the Channel Tunnel. This area also grew in 2019 and is recovering from the migrant crisis in 2016-17, which halted the fl ow of cargo for a while. Customs agreements allowing, this part of the sector off ers more opportunities in the year ahead for those wanting to look again at their supply chains. Short term, the question right
being
blamed for the continent’s sharp temperature rise. Thankfully, the demand for coal
in many sections of the world is in decline already, due in part to a rise in renewable energy use, nuclear and gas, as well as a slowing or negative demand for electricity. Indeed, according to research body Moody’s, global demand for coal is expected to drop by more than 50% by 2030 from 2019 fi gures. The rail freight industry, itself
long dependent on the coal trade, is shiſt ing its focus too, taking increasing measures towards reducing its dependency on this commodity and moving towards a ‘greener transport’ role. Given that an average train
can remove as many as 76 long- distance lorries from our roads this is a clear advantage, even before you calculate that every tonne of freight carried by rail produces at least 70% less carbon dioxide than if it was moved by road. Despite the decline in coal
demand, the amount of freight moved in 2019 was static year-on- year when compared with 2018. Rail freight operators saw a decline in coal demand, which means focussing on other sectors. Here in the UK, that shiſt in rail
freight users has been led by the construction and intermodal services sectors, which from 2000 have grown by 120% and 92% respectively. The intermodal sector can
be seen as having three aspects, with the largest being ‘deep sea’ – international import and export containers through the main seaports, including Felixstowe, Southampton, and London Gateway. The fastest-growing element is
domestic freight, thanks mainly to our supermarkets, and we expect this popularity to continue into 2020 and beyond.
now must be how Brexit is going to further impact rail services. Trade route patterns are already shiſt ing, as a result of concerns over congested ports and roads in the south east. The UK’s East Coast ports are already handling more containers from the continent, and in particular Antwerp, Rotterdam, and Zeebrugge. Last year, Teesport actively
developed this traffi c and now operates daily trains to Scotland, Felixstowe, Daventry, and iPort Rail in Doncaster, which is located on the 800-acre iPort logistics park, developed by Verdion. This last train runs twice in 24 hours and creates a fi rst in the UK’s intermodal sector by performing two round trips each day, or 10 trains per week with one set of wagons. It has taken 560 container movements a week off the busy A19 and A1 trunk roads, demonstrating how the benefi ts of these alternative routes are twofold – both helping to avoid delays and also environmentally responsible. Indeed, Ikea, which uses the
service, has said its switch to rail in this instance connects directly with its decarbonising agenda aimed at reducing the company’s environmental impact wherever possible. This initiative to switch traffi c from road to rail is very much what modern intermodal rail freight is about and will help the country meet important carbon reduction targets. Teesport’s ongoing success has
encouraged other East Coast ports to upgrade and improve their rail access for the largest containers. To compete with road transport these containers are now typically 13.6m long, 2.9m high, and pallet wide – the so-called ‘hi-cube’ container. This initiative and other improvements to the rail lines to Hull and Immingham means that the Humber ports are now able and willing to facilitate the movement of all container types to and from a number of large warehouses and distribution centres in the North of England and Scotland.
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