As the January 1 deadline looms for the introduction of Incoterms 2020, shippers have been reassured that the new Incoterms are far more understandable and accessible and are aimed at reducing some of the costly mistakes made daily in the process of shipping goods. According to Andy Connell of A-bar-C Services, shippers often used the wrong Incoterms rule for their transaction or used Incoterms incorrectly. Addressing the Exporters Club Western Cape recently, Connell said previous versions of the Incoterms had been far too complicated. “The amendments in the 2020 Incoterms were designed to make the trading terms more understandable to everyone. He said Incoterms 2020 included more detailed explanations and enhanced graphics to illustrate the responsibilities of importers and exporters for each rule. The latest version also includes a more detailed explanation of how to choose the most appropriate rule for a given transaction, or how a sales contract interacts with ancillary contracts. According to Connell, the usage of FOB (Free on Board) in containerised cargoes has been one of the biggest problem areas around the world, exposing cargo sellers to unnecessary risk and cost. It specifies at what point respective obligations, cost and risk involved in the delivery of goods shift from the seller to the buyer. “The first mistake that is often seen is the term used on its own. That is not an Incoterm,” said Connell. “The place and port must be named for it to be an Incoterm.” He said South African fruit exporters had suffered the consequences of only using the term FOB instead of FOB and the port name. This pushed up costs as vessels were only picking up at one port and not necessarily two as the shippers were expecting them to do. “Because they had only used the term FOB there was no option for them but to pay freight debt for not having their cargo at the port where the vessel was loading or pay the transport costs to get the products from one port to the other as quickly as possible before the vessel departed.” He said under the new version of Incoterms a matrix had also been developed to assist importers and exporters to identify the correct Incoterm to use for a specific shipment. “If this process is used properly we will be seeing the term FOB used far less than what is currently the case,” he said.
INSERT: The amendments in the 2020 Incoterms were designed to make the trading terms more understandable to everyone. – Andy Connell
