FTNX HOME
PROCEDURES
PAYMENTS
DELIVERY MODES
 PRODUCT LIST
FTNX CONSULT
Contact Us
FTNX ADVICE
FTNX Download
e-mail me


“All laws are rules but not all rules are laws”


A general insight is given about the Incoterms 2020 below. Incoterms 2020 booklet can be purchased from the ICC website. Incoterms has been around since 1936 and just like ICC DLC UCP rules, incoterms is a universal delivery application, recognised by jurisdictions all around the world. FTNX applies Incoterms intently in all its contracts. ICC Paris, France, has a consultative status via the Charter of the U.N. to administer incoterms. It is very rare to find a contract that does not apply to use Incoterms delivery rules. The law books are “busting at the seams,” with articles depicting on  how the wrong interpretations of Incoterms delivery terms had resulted in huge financial losses. On this page, we take a look at current Incoterms 2020 as released in January 2020. Delivery rules are about the obligations of the maligned term “buyer or seller” but what it ultimately refers to are the obligations of the “Supplier in possession of goods and End buyer taking possession of goods ” when these two entities are concluding a deal amongst themselves applying their in-house terms of reference. This ‘buyer/seller’ aspect has confused many ‘traders’ and of which hopefully ICC will change in the future to reflect the full account of such a term–as FTNX has done over decades. FTNX is a ‘buyer/seller’ of commodities who must also observe rules such as incoterms. 


INCOTERMS 2020 DELIVERY RULES AND OBLIGATIONS.

There are Eleven main Incoterms in this 2020 release, of which a PCT can only use 7 such delivery modes.  The least obligation is served via EXW. Most obligations are applied under DAP and DDP delivery term. Those who want to learn more about Incoterms can buy a booklet from the ICC website. A PCT including FTNX can only apply the following Incoterms as per 2020 Edition. 


  1. Any carriage mode:  FCA and CIP: 
  2. Carriage by ocean-going vessel: CFR, FOB, FAS and CIF 
  3. CPT may also be used for Aircraft delivery of precious metals and the likes.


Incoterms 2010 apply similar aspects except for a few minor differing and ‘trivial’ details.The delivery term CPT may also be used at times, mostly for special transactions applied under air cargo deliveries where the supplier accompanies the goods being sold i.e: Deep storage gold bullion carrying no current assay. FOB ‘Freight and Collect’ allowable variable (FOB&F) may also be used by FTNX, and well as ‘CIF&C ’(and commission.) In all cases a Charter Party BOL (Bill of lading) cannot be used by FTNX or any PCT because, under UCP, the FTNX has to produce a more expensive BOL which is endorsed by the Shipowner is another unseen security feature.  


 

  1. FCA: FREE CARRIER: FOB is not the correct term when dealing in Full Container Loads (FCL), FCA is the correct term. FTNX as seller arranges all expenses from its supplier to Customs Freight Station (CFS) and secures the appropriate Customs/Intermodal transport documents to that point. All obligations thereafter for is for the end buyer: Furthermore, FTNX must also secure the added “Received BOL” to the documents it must present to its bank under a UCP DLC payment mode. 
  2. CIP:CARRIAGE AND INSURANCE PAID: CIF is not the correct term when dealing in Full Container Loads (FCL) CIP is the correct term. The cost for FTNX includes freight and all expenses in unloading over the ship's rails, at the port of destination. Exception: FTNX must secure a ‘shipped on board BOL’ as endorsed by the Shipowner POL to be able to collect on the DLC once delivery POL is completed is another added unseen security feature that a PCT is expected to comply with intently with, under UCP ‘at sight’ presentation rules.
  3. CPT: CARRIAGE PAID TO: Not often used or applied by FTNX except for special transactions. All expenses are for FTNX ‘over the ships rails’ port of unloading or customs terminal at the destination airport.The goods are delivered from airport to a designated place e.g; Gold depository.
  4. FAS: FREE ALONGSIDE: FTNX delivers goods to a loading port where they are placed ‘alongside’ ready for loading by a ship heading to berth or is at berth. All expenses at the port from ‘lifting’ thereon are for the end buyer. 
  5. CIF: COST FREIGHT AND INSURANCE: This delivery modes confuses the many: All expenses are for FTNX including, freight and insurance ‘over the ship rails’ POL (Port of loading). The supplier now under incoterms 2020 offers to the Buyer (PCT) Class “A” Insurance cover, where previously Class “C” cover was the minimum cover required to be offered. The end buyer may rescind this higher cover to favour the lower Class “C” insurance coverage, which the supplier must accept. So where is the difference that required the issuance of a newly revised set of incoterms so soon? I’m sure in their wisdom the ICC has reason to add such trivial matters in creating a change and new incoterms publication. FTNX cannot see what the reason may be except to say it may have something to with liabilities and the serving of ambiguous advice. If an end buyer is NOT offered Class “A” insurance by the supplier and takes the minimum cover as advised by under Incoterms 2010, in where a Class “A” event occurs during a voyage, then it could be legally held that the end buyer was not informed about other insurance coverage options. The action of the supplier in only offering the lower class insurance cover could hold the supplier liable for losses incurred by the end buyer. No change to the base trading routine applies, In closing; We offer issuance cover to the end buyer, and like insurance coverage taken all over the world, if one takes the cheaper cover not accounting for the possibilities of an adverse advent, then the insured person is not covered, should such an adverse event occur. FTNX can only advise or recommend the buyer to take ‘suitable insurance cover,’ we cannot forcibly dictate to them the type of cover to take, which is a reasonable argument. From 2018 for (the more dangerous) crude oil and fuel shipments FTNX has been offering all risk Class ‘A’ cover to its clients. From 2024 FTNX will remain offering Class “C” minimum insurance coverage to its clients adding the following clause on the offer “unless agreed upon otherwise.” By offering the class “A” cover only as we have attempted to do on a few occasions, the end buyer had often asked us for the lower cover anyway forcing the PCT (undue delay) to return to the supplier to seek class ‘C’ cover; an option which the end buyer also has, at his or her discretion anyway under incoterms 2020. For a CFR transaction, “The buyer shall secure appropriate insurance cover, before delivery taking place,” remains the standing aspect, ‘unless agreed upon otherwise’ is a term already used under ICC UCP banking rules, could certainly accommodate and support the same usage under incoterms. The freight component is marked as ‘pre paid’ to satisfy DLC  UCP matters to do with collection; even though the carriers has yet to earn such funds  by delivering the goods to the destination port. The the goods arrive at destination port, the end buyer  pays all relevant /custom charges  including freight (carriage) which has now been ‘earned’ by the carrier. The end buyer will have in its account the value of the freight component offered by the seller  as  the seller such as FTNX does not collect on there freight component, and leaves such funds in the account of the end buyer, as a credit,  to pay for carriage of good to the destination port. The ‘prepaid’ status of the BOL allows  seller to get paid for the whole contract value and with funds secured, is able to book the vessel to carry such goods. The ships operators however must wait until goods are delivered  at destination port before they get paid. This is the proper CIF aspect as per Incoterms.  A PCT such as FTNX is able to buy goods at FOB and then sell such goods at CIF by securing its own carrier. The supplier is paid at FOB as transferred by FTNX. The amount quoted for carriage is not collected by FTNX and remains as a credit in the account of this client, who then pays carriage when claiming goods at port  of destination.
  6. The PCT using incoterms CIF is reminded that 115% of the value of the goods is sought from the supplier to ensure matters of commission payments ( which must be disclosed on the invoice and cannot exceed 5.0% of good value) are not assessed for import tariffs and taxes; where a PCT has used other specialists to assist is the closing of a lucrative export deal. 
  7. CFR: COST AND FREIGHT: All expenses are for FTNX up to the port of loading including freight, ‘over the ships rails.’ Does not include insurance which the end buyer must secure priority loading operations as ‘reminded’ by the PCT. The collection process is the same as per CIF except for insurance.
  8. FOB: FREE ON BOARD: This is the most popular delivery model for whole NBC shipments. All expenses POL ‘over the ships rails’ for goods placed in good condition on board. If the end buyer asks the PCT to also secure the BOL, then the PCT may do so on the condition that the BOL does not form part of the payment process applied to the UCP 600 DLC, as secured at buyers expense as the DLC collection conditions will not accept a Charter Party BOL. In refined fuels and crude oil deal, the ships rails is replaced to means  the ships connecting  manifold.  


IN SUMMARY

Unless other arrangements have been made, under CIF proper, even though freight is marked as pre-paid, as applied for at time of booking the vessel; as served under the reference of the UCP 600 DLC held by FTNX, the freight needs to be ‘earned’ by the carrier before it can collect on any assured pre payment advice served at the time of booking. The freight value is not collected by FTNX which remains in the account of the end buyer as applied as a credit on the sellers (FTNX) invoice so that the end buyer can pay for freight. Under UCP DLC rules sellers invoice is a crucial document and it already applied under such rules that debit and credit application is in play in a matter of freight; is a very good application, as the freight component offered by the PCT must be genuinely served and that; if the total value of goods was applied on the seller's invoice as a lump sum, import duties would be applied of the ‘whole lump sum’ has been tested in international court challenges. Every detail must be entered on the invoice separately in where debits and credits must apply is another added unseen security feature that FTNX must apply when selling commodities to the end buyers. Delivery terms such as DAP (Delivery at Place) are complex, as they are confusing  and cannot be effectively applied by a PCT because the main delivery document travels with the ship.The Certificate of Origin is secured by the FTNX but its expense is applied as a debit against the end buyer account as this is an importation requirement. PSI inspection of goods is for the seller  bear and indicated on the offer; if the end buyer wants a different PSI service, then the end buyer pays for such etc. etc. The terms ‘delivery’ means delivery of documents and not physical goods is what incoterms is specifying when it comes to the collection process of the DLC. A PCT must be prepared to deal in ‘lots of documents’  when buying and selling commodities, and they must be plied internationally by using the  universal language of business–English; is a very important aspect of conducting such business..


 







|FTNX HOME| |PROCEDURES | |PAYMENTS| |DELIVERY MODES| | PRODUCT LIST| |FTNX CONSULT| |Contact Us| |FTNX ADVICE| |FTNX Download|