The International Chamber of Commerce (ICC) has recently announced the launch of new rule changes to Incoterms® 2010. This revision, the first since 2000, will aim to incorporate changes that have taken place in global trade in the course of the last 10 years, including electronic documentation and developments in cargo security.

Incoterms® are international rules, developed more than 70 years ago by the ICC in Paris, that are accepted by governments, legal authorities and traders worldwide for the interpretation of the most commonly used terms in international trade. The main objectives of Incoterms® revolve around foreign trade contracts concerned with the loading, transportation, insurance and delivery of goods. Incoterms® rules also describe the tasks, costs and risks involved in the delivery of goods from sellers to buyers.

Although the ICC’s publication is not due for official release until mid-September, details on the ICC website show that some key changes to Incoterms® 2010 will be the elimination of 4 Incoterms® including:

  • DDU – delivered duty unpaid
  • DEQ – delivered ex-quay
  • DES – delivered ex-ship
  • DAF – delivered at frontier

and the addition of two new terms:

  • DAT – delivered at terminal
  • DAP – delivered at place

The official implementation of Incoterms® 2010 is scheduled to take place in January 2011.  

Carriage of Solid Bulk Cargoes – new mandatory Code

The past 7 years have seen a number of reported cases where crews and their ships have been put at risk or have suffered harm from fire/explosion or have been lost because of ‘dangerous’ bulk cargoes including ilmenite clay, Chinese fluorspar, hot coal and iron ore fines.

The high price of minerals has in recent years made the trading of some solid bulk cargoes viable which would otherwise be uneconomic. One such trade is the shipment of unprocessed nickel ore from remote locations in the Philippines and Indonesia. As with many minerals containing fine particles, including mineral ore concentrates, these ores have the propensity to liquefy and shift if their inherent moisture level is too high.

The International Maritime Solid Bulk Cargoes Code 2009 and Supplement (IMSBC Code) will come into force on 1 January 2011. The IMSBC Code (like its predecessor the BC Code 2004) sets out testing and sampling procedures for shippers’ certification obligations under International Convention for the Safety of Life at Sea (SOLAS) 1974. SOLAS in its successive forms is generally regarded as the most important of all international treaties concerning the safety of merchant ships.

In summary, the IMSBC Code addresses:

  1. Identification of hazards posed by materials that may shift, liquefy, heat spontaneously or deplete atmospheric oxygen;
  2. Certification of moisture content; and
  3. Certification of Transportable Moisture Limit (TML).

SOLAS and the IMSBC Code requires that the shippers of bulk cargoes provide the master of a vessel in writing sufficiently in advance of loading with information on any special properties of the cargo, including the likelihood of shifting, and for concentrates and other cargoes which may (in certain circumstances) liquefy, additional information in the form of a certificate on the moisture content of the cargo and its TML.

The documentary requirements set out in the IMSBC Code forms the basis of the information on the dangerous cargo, which the carrier needs as evidence that the cargo is safe for carriage. Their purpose is also to alert the carrier and crew to the relevant hazards, and to guide the carrier and crew on safe carriage and how to react in the case of an emergency.

Frequently issues arise between shippers and carriers about whether or not a cargo is safe to carry when the cargo in question is not listed in one of the appendices to the BC Code. The IMSBC Code seeks to address this, to a certain extent, by requiring shippers to provide the competent authority at the loading port with information about the cargo. It is then for the competent authority to decide whether the cargo is safe to carry, and for the shippers to then notify the relevant authorities at the intended destination for discharge and the vessel’s flag state. If it is decided that the cargo may present a hazard to the vessel, shippers will then be obliged to reach an agreement with the load port authorities, the discharge port and the vessel’s flag state. How this will actually work in practice remains to be seen.

In other news

Regulation and risk management, whilst upholding transparency and efficiency, continue to be hot topics in commodities markets in the wake of the global financial crisis.

In the UK last month the Financial Services Authority (FSA) published a discussion paper that considers fundamental changes to the regulation of trading activities1. This follows on from recommendations in the Turner Review and the Basel Committee on Banking Supervision’s (BCBS) agreement on a range of amendments to the Basel II market risk framework.

In the US, as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commodity Futures Trading Commission (CFTC) has been authorised to regulate over-the-counter (OTC) derivatives dealers, increase transparency and improve pricing in the derivatives marketplace and lower risk to the American public. OTC derivatives, which have not previously been regulated in the US, were at the heart of the 2008 financial crisis.

With its presidency of the G20 starting in November, France has recently sent detailed proposals to the European Commission calling for coordinated EU action to regulate volatile commodities markets. The derivatives markets identified in France’s proposals include metals, oil, gas, CO2 quotas, grains and other agricultural products.

And most recently, senior regulators and central bank governors have reached an agreement on new regulations (Basel III) to strengthen global capital standards in order to provide a more stable banking system.

As Asian commodity markets continue to grow and evolve (and with the Hong Kong Mercantile Exchange (HKMEx) due to go live later this year), no doubt the regulatory developments in the US and Europe will be followed with interest.