Incoterms 2020: Why are they Important? What has Changed?

A follow up to our posting on October 22, 2019, ‘Do You Know Your Incoterms? Incoterms 2020 Is Coming’, Incoterms 2020 will be effective January 1, 2020. Please continue reading to understand why Incoterms are important and what has changed.

It’s important to keep the following in mind when preparing to use Incoterms:

• Choose the right rule;

  • Note: Despite an ‘effective’ date of the 1st January 2020, Incoterms 2020 can be used now. However, there is still no obligation to use Incoterms 2020.  If you haven’t made it clear in your contract which Incoterms version to refer to or have a flexible contract which states that when the contract is effective, the latest rules will apply. 

• Specify the place / port precisely

• Incorporate them into the contract as well as the LC and invoice

• Incoterms beginning with an E: are Departure Incoterms, i.e. the buyer takes care of everything while the seller simply makes the goods available. For example: EXW.

• Incoterms beginning with an F: are Incoterms whose main transport is not paid for by the seller, it is the buyer who must pay for them. For example: FOB, FCA or FAS.

• Incoterms beginning with a C: are Incoterms whose main transport is paid by the seller. For example: CIF, CIP, etc.

• Incoterms beginning with a D: are said to be Incoming Incoterms, i.e. the buyer takes care of nothing, everything is managed and paid for by the seller. For example: DAP, DDP, etc.

Now that you have that in your toolbox, here are the anticipated changes for Incoterms 2020:

DPU: renaming of DAT

In the Incoterms 2020 a new Incoterm DPU (Delivered at Place Unloaded) is created replacing the DAT (Delivered at Terminal). This change of acronyms is a simple renaming given that the obligations and functions of both terms are the same.

DPU is the only Incoterm in which the goods are delivered unloaded at the place of destination. The change of name is substantiated as the goods cannot only be unloaded at a transport terminal or infrastructure (port, airport, dock etc.) but likewise at any other point in the destination country which has facilities for the unloading of the goods from the means of transport, such as for example a factory or warehouse.

FCA: option of Bill of Lading (BL) with on-board notation

In the Incoterms 2020 version, this option is specified, for maritime transport, so that the buyer may instruct the carrier (shipping company or its agent) which has been contracted in order to issue a Bill of Lading (B/L – Bill of Lading) on behalf of the seller with the annotation of “aboard” (on-board), which specifies that the goods have been loaded aboard the ship. This is the most common shipment document which is used in the letter of credits transactions in order to substantiate the delivery of the goods and, thereby, payment of the credit to the seller.

CIP and CIF: different coverage of transport insurance

Under Incoterms CIP, the seller is under the obligation to take out under contract transport insurance in favor of the buyer with extensive coverage, which corresponds to Clause A of the Institute Cargo Clauses (IUA/LMA). Nevertheless, the parties may agree to take out insurance which offers reduced coverage (Clause C of the Institute Cargo Clauses).

Under Incoterms CIF, the seller is only under the obligation to take out under contract insurance with minimum coverage, which corresponds to Clause C of the Institute Cargo Clauses (IUA/LMA). This difference with CIP is justified on the basis that as the CIF is commonly used for bulk maritime transport (raw materials, minerals etc.) whose price per kilo is very low and the requirement of insurance with maximum coverage which would drive up considerably the policy premium, making it much more expensive, and which is detrimental to margin for negotiation of the sellers. In either event, just like in Incoterms CIP the parties may agree to take out insurance which offers broader coverage (Clause A of the Institute Cargo Clauses) which will be compulsory, if the payment of the sale is made by means of a letter of credit.

Customs clearance: export, transit and import

In Incoterms 2020, it’s more precisely explained which party, seller or buyer, is responsible for carrying out customs formalities and clearance, assuming the costs and risks thereof. And the release of goods in transit is included for the first time. For the latter, the rule which is used is that the liability is assigned to whoever assumes the risk of transport to the place of delivery. Therefore in the Incoterms EXW, FCA, FAS, FOB, CPT, CFR, CIP and CIP wherein the risk of transport is transferred at origin (country of the seller) the liability in the customs transit clearance is assumed by the buyer; on the contrary, in Incoterms DAP, DPU and DDP the risk is passed on at the destination (country of the buyer), the seller bears the liability. This change may be significant in international sales wherein the goods must pass through customs of complex countries prior to arriving at the customs of the import country.

Transport security requirements

Under Incoterms 2020, liability as regards security is addressed more precisely under two circumstances: transport from the country of origin to that of the destination and customs clearance formalities and procedures (export/transit/import).

During the transport of the goods the security liability is assumed by the party who executes the carriage of goods contract:  Seller (CPT, CFR, CIP, CIF, DAP, DPU and DDP) or buyer (EXW, FCA, FAS and FOB).  As customs clearances are concerned, the safety liability lies with the party which must undertake the clearance.

Be sure to order yourself a copy and review the full details about Incoterms 2020 here:  International Chamber of Commerce

If you have any questions regarding this posting or any other logistics matter, please contact your South East World Wide, Ltd. Sales Representative.

China List 3 Tariff: Additional Exclusions Announced

The Office of the U.S. Trade Representative announced additional exclusions from the Section 301 tariff on List 3 goods from China.

The new exclusions will be retroactive to Sept. 24, 2018, and remain in place to Aug. 7, 2020. Exclusions must be claimed using new HTSUS subheading 9903.88.33.

It is suggested as that all Importers review the list of affected goods and apply for refunds of any tariffs paid on such goods since Sept. 24, 2018. These exclusions are available for any product that meets the specified product description, regardless of whether the importer filed an exclusion request.

The new exclusions list can be downloaded here.

If you have any questions regarding the exclusions, filing for refund or any other concern relating to International Logistics, please contact a South East World Wide, Ltd. Sales Representative.

Do You Know Your Incoterms? Incoterms 2020 Is Coming

Incoterms, short for International Commercial Terms. A trademark of ICC, Incoterms were established to guide those working in global trade. Updated every 10 years or so, they offer a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts.

The last set of incoterms were published in 2010. A modified set of rules are to be effective January 01, 2020.

Incoterms are a critical component of your global trade and should be considered and decided carefully at the beginning each transaction. Choosing the wrong term or simply misunderstanding the term, can largely complicate and create unnecessary costs to your operation.

Considerations

• When the goods you import or export arrive at their destination, the importing country requires that all applicable tariffs (import taxes levied by the destination country) and local taxes, including value-added tax (VAT), be paid.

• Buyers typically want to know the final price, with shipping and taxes included (known as the “landed cost”), before they agree to buy, but you might not be able to provide it—tariffs and taxes vary widely throughout the world, so determining those rates before you ship can be difficult. Be clear about your policy on tariffs—specifically, who pays and when payment will be due.

• The shipping companies you select often act as freight forwarders, helping you complete shipping documents, helping you estimate duties and taxes, pre-paying them for you, and then invoicing you.

For a current listing of Incoterms, reference our Resources Page

An updated listing for 2020 will be posted soon.

For more information on Incoterms in general; review ICC

For questions regarding your specific Incoterms or if you are requiring assistance in establishing new terms for your shipments, please contact a South East World Wide, Ltd. Sales Representative.

Section 301 Tariffs on Goods from China; Increases Delayed and Exclusions Granted

List 1
List 1 products, were subject to an additional 25% tariff as of July 19, 2018. They were set to increase to 30% on October 15th, 2019, but they will not, as per an agreement reached on Friday, October 11th. Tariffs on List 1 will remain at 25% unless a Federal Register notice is published announcing an increase. There is no such notice at this time.   

All exclusion requests from List 1 have been reviewed and 726 HTS exclusions were granted. All exclusions granted are retroactive to July 6, 2018, and remain in place for one year after the exclusion determination is published in the Federal Register. 

List 2
List 2 products, were subject to an additional 25% tariff as of Aug. 23, 2018. They were set to increase to 30% on October 15th, 2019, but they will not, as per an agreement reached on Friday, October 11th. Tariffs on List 2 will remain at 25% unless a Federal Register notice is published announcing an increase. There is no such notice at this time.  

All exclusion requests from List 2 have been reviewed and 269 HTS exclusions were granted. All exclusions granted are retroactive to Aug. 23, 2018, and remain in place for one year after the exclusion determination is published in the Federal Register.

List 3
List 3 products, are subject to an additional 25% tariff that began in May 2019. They were set to increase to 30% on October 15th, 2019, but they will not, as per an agreement reached on Friday, October 11th. Tariffs on List 3 will remain at 25% unless a Federal Register notice is published announcing an increase. There is no such notice at this time. 

USTR granted 48 HTS exclusions from August - September 2019. All exclusions granted will be retroactive to Sept. 24, 2018, and will expire August 7, 2020. 

List 4A & List 4B 
Goods on List 4A and 4B are subject to a 15% additional tariff effective Sept. 1, 2019, for List 4A products and Dec. 15, 2019, for List 4B products. The exclusion process for items on List 4A will open October 31, 2019 and close January 31, 2020.

For information regarding the Section 301 Tariffs or the granted exclusions, please refer to the Federal Register or contact South East World Wide, Ltd. Global Sales.

CBP Proposes Amendment to Importer Identity Verification

On August 14th, 2019, Customs and Border Protection published a proposal to amend the regulations that require customs brokers to collect certain information from importers to enable the customs brokers to verify the identity of importers, including nonresident importers.

The amendment suggests adding a add a new section, 111.43, entitled Importer Identity Verification. The proposal is an effort to create and standardize the process by which customs brokers verify the identity of importers.

Brokers would be required to collect and verify the following, but not limited to, information concerning each importer:

• the client’s name;

• for a client who is an individual, his/her date of birth;

• for a client that is a partnership, corporation or association, the grantor’s date of birth;

• for a client that is a partnership, corporation or association, the client’s trade or fictitious names;

• the physical address and phone number (for a client that is a partnership, corporation or association, the physical location is the client’s headquarters);

• the client’s e-mail address and business website;

• a copy of the grantor’s unexpired government-issued photo identification;

• the client’s Internal Revenue Service, employer identification or importer of record number;

• the client’s publicly-available business identification number;

• a recent credit report;

• a copy of the client’s business registration and license with the state; and

• the grantor’s authorization to execute a power of attorney on behalf of the importer.

Prior to transacting customs business on behalf of a client, the customs broker would be required to verify the foregoing information and determine whether the client is a sanctioned or restricted person or entity, or if the client is suspended or disbarred from doing business with the U.S. Government.

The new rule would extend the verification requirement to existing clients and specific rules outlining the effective dates and process.

The rule would also impose penalties on customs brokers for noncompliance. The proposed penalty consists of a monetary penalty not to exceed $10,000 per client, or revocation or suspension of the customs broker’s license or permit.

The full notice in the Federal Register can be found here.

Comments to the proposed rule must be received by CBP on or before October 15, 2019. Federal eRulemaking Portal at http://www.regulations.gov. Follow the instructions for submitting comments via Docket No. USCBP-2019-0024.

We are aware of how time consuming and challenging it may be to manage these efforts. When the program is finalized, South East World Wide, Ltd. will do their utmost to streamline the process and ask for your support in assisting you with compliance.

President Trump Announces Tariff Delay on Certain Section 301 Goods from China

Although nothing official has been published, President Trump announced that “as a gesture of good will” he will delay from Oct. 1 to Oct. 15 the planned increase from 25 percent to 30 percent of the Section 301 additional tariff on List 1, 2, and 3 goods from China.

This comes on the heels of China releasing schedule of exclusions from its list of tariffs on US Goods.

Additional Exclusions Announced for Section 301 Goods

Additional exclusions from the Section 301 additional 25 percent tariff on List 1, 2, and 3 goods from China have been announced by the Office of the U.S. Trade Representative.

The new exclusions will be effective as follows.

- exclusions for List 1 goods will be retroactive to July 6, 2018, and remain in place through Sept. 20, 2020, and must be claimed using new HTSUS subheading 9903.88.14

- exclusions for List 2 goods will be retroactive to Aug. 23, 2018, and remain in place through Sept. 20, 2020, and must be claimed using new HTSUS subheading 9903.88.17

- exclusions for List 3 goods will be retroactive to Sept. 24, 2018, and remain in place until Aug. 7, 2020 and must be claimed using new HTSUS subheading 9903.88.18

Exclusion Lists can be found here:

List 1

List 2

List 3

All importers should evaluate the lists to determine if any of their goods qualify for refunds of any tariffs paid since the applicable retroactive effective date.

If you have any questions regarding this and other international logistics mattes, please contact your South East World Wide Sales Representative.

Stay Informed and In Compliance

If your reading this, you understand the need to stay on top of the changing market conditions in our industry, as well as the law and regulations governing International Trade.   Especially with the impacts of the recent tariff changes, expiration of GSP, impending update to NAFTA and the rise in Anti-dumping cases over the past year, it is critical for importers to stay informed and in compliance.

First thing first. It is important to remember that it is the legal responsibility of the importer of record, to properly declare the value, verify the classification and rate of duty applicable for all entered merchandise.  It is also the responsibility of the importer of record, to understand and abide by the latest regulations. However, you don’t have to go it alone.

Along with having candid and open conversations regarding your imports with your freight forwarder and broker; the US Government, under the Department of Homeland Security, has provided a website which is helpful to all Importers, new and old.

Please find following the link containing valuable insight and assistance to anyone importing product from another country.  This site is a great resource for the latest information on specific laws, regulations or procedures that may affect your import transactions. CBP Import/Export

U.S. Customs and Border Protection (CBP) has a number of Informed Compliance publications (ICPs) in the "What Every Member of the Trade Community Should Know About: ..." series that can be found here: Informed Compliance Publications.

Additionally, you can find more guides and references on the South East World Wide, Ltd. website under the Resources page.

If you have any detailed questions considering your classifications, documentation or general import/export questions, please contact South East World Wide Global Sales to schedule an appointment.

Notice of Modification of Section 301 Action on Goods from China

Official notice of the modification of Section 301 tariffs on goods from China has been published in the Federal Register.

• For List 1, 2 and 3 Goods, changes in duty rate from 25% to 30%, details can be found here.

• For List 4 Goods, changes in duty rate from 10% to 15%, details can be found here.

If you have any questions or wish to discuss how this may affect your imports, please contact your South East World Wide, Ltd. Sales Representative.

Trump Increases Tariffs Another 5%

On August 23, 2019, President Trump advised he will be imposing another 5% tariff increase on the Section 301 goods from China.

The 25% tariffs will increase to 30% effective October 1, 2019. The 10% tariffs announced earlier this month will be raised to 15%.

Additional information will be published in the Federal Register as it becomes available.

The USTR press release can be found here.

The Office of the U.S. Trade Representative Announces Delayed September Tariffs for Some Chinese Imports

The Office of the U.S. Trade Representative announced this morning that it will exclude some Chinese imports from 10 percent tariffs and delay duties on others until mid-December 2019.

Most of the Section 301 tariffs will go into effect on Sept. 1, as announced by President Trump earlier this month, however “Certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent,” USTR said in a statement.

“Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles,” the statement added. “Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

The USTR is conducting an exclusion process for products and will provide details today on the USTR’s website as well as in the Federal Register.

The full USTR press release can be found here.

China Holiday Preparation

Hong Kong and China National Holidays

As a friendly reminder, China’s National Holidays and Mid-Autumn Festivals are just around the corner.  Most of the factories in Hong Kong and China will be closed in observation of the holidays September 13-15 and from October 1, 2019 to October 7, 2019.

An overall increase of export bookings in Asia is anticipated considering the September 1 tariff increases, as well as in preparation for the 2019 holiday shopping season.   South East World Wide, Ltd., as always, will do its best to maintain capacity, but we encourage you to book shipments as early as possible to avoid shipping delays.   Please remain in close contact with your local SEWW representatives to keep them informed of any urgent shipments.

Also note:  Chinese New Year ‘YEAR OF THE RAT’ begins January 25, 2020 and will last for 15 days.

If you have not done so already, please plan and prepare for space/shutdown related issues.  Customers should advise their Production Schedule and pre-book their freight to ensure space is secured.

South East World Wide is committed to keeping our customers informed and updated with any breaking news relevant to logistics.  We will continue to keep you posted on any future updates as it relates to international logistics.

If you have any questions concerning how the upcoming holidays may impact you and/or your business please give your local South East World Wide, Ltd. Sales Representative a call.

ITC Online HTS Reference Tool-A Valuable Resource

Reminder or News to You?

Maybe you have forgotten or perhaps you didn’t know, on November 20, 2008, U.S. Customs and Border Protection (Customs, CBP) published Cargo Systems Messaging Service (CSMS) message #08-000315 announcing that a new tool is available for referencing the Harmonized Tariff Schedule (HTS) online. The tool is published and maintained by the U.S. International Trade Commission (ITC).

In today’s volatile international trade market, you can never have enough tools in your tool box!

One of the key features of the HTS reference tool is the ability for users “to jump from an item to the related chapter 99 item showing temporary and seasonal rates when needed.” Hyperlinks on certain tariff numbers also allow users to immediately access the Customs Rulings Online Search System (CROSS) for help in locating any rulings related to the selected tariff number.

The tool also allows searches, including by CAS numbers and has a thesaurus feature which allows searches by modern terms for products. Other buttons on the interface allow ready access to chapter notes, and a print-friendly version of the HTS.

The HTS Online Reference Tool can be accessed online here. 

Please contact your local South East World Wide, Ltd. Sales Representative to learn more about this article and/or to discuss any other ongoing challenge you may be facing in managing your inbound freight.

CBP Increases Custom User Fees for FY2020

CBP reviews annually and determines if certain user fees and limitations established by the Consolidated Omnibus Budget Reconciliation Act (COBRA) shall be adjusted for inflation. For the FY2020, CBP has determined that the factor by which the base fees and limitations will be adjusted is 7.167% and are required as of October 1, 2019.

The MPF minimum/maximum will be increased to $26.79/$519.76 (up from $26.22/$508.70).

For information on MPF, click here.

The full UPDATED list of fees and changes can be found here.

After reviewing the Federal Register Action Notice, if you have any questions regarding these fees and limitations, please contact you South East World Wide, Ltd. Sales Representative.

Section 301 Tariffs Exclusions for List 3 Goods from China

The Office of the U.S. Trade Representative has announced the first exclusions for List 3 goods. It is important to note that these exclusions cover 10 specially prepared product descriptions that reflect 15 exclusion requests.

The USTR will continue to accept exclusion requests for List 3 goods until Sept. 30, 2019.

Exclusions for the products are said to be retroactive to Sept. 24, 2018, and will remain in place for one year after publication in the Federal Register. They must be claimed using new HTSUS subheading 9903.88.13.

We encourage all importers to review the list carefully to determine the scope of each exclusion.

Please find the list here. List 3 Exclusions

If you have any questions regarding the Section 301 Tariffs or the Exclusions, please contact your South East World Wide, Ltd. Sales Representative.

Section 301 Tariffs Exclusions for List 2 Goods from China

The first list of products excluded from the Section 301 additional 25 percent tariff on goods from China have been announced by the Office of the U.S. Trade Representative.

The exclusions are said to be retroactive to Aug. 23, 2018 until approximately July 31, 2020. They must be claimed using new HTSUS subheading 9903.88.12.

We encourage all importers to review the list carefully to determine the scope of each exclusion.

Please find the list here. List 2 Exclusions

If you have any questions regarding the Section 301 Tariffs or the Exclusions, please contact your South East World Wide, Ltd. Sales Representative.

Section 301 Tariffs on Goods from China; List 4

Effective September 1, 2019, President Trump announced he will impose an additional 10 percent tariff on virtually all of the remaining $300 billion worth of goods imported from China that are not already subject to Section 301 tariffs (List 4 goods).

The Office of the U.S. Trade Representative has advised that the list covers all apparel, footwear, and manufactured textile products, among others, but excludes pharmaceuticals, certain pharmaceutical inputs, select medical goods, rare earth materials, and critical minerals.

Additional information will be posted here as it is released but you can stay up to date by watching the Federal Register and the USTR websites.

A Federal Register notice providing additional clarifying details is expected shortly.

USTR Issues Exclusions on the Section 301 List 2 Trade Remedies

The Office of the U.S. Trade Representative (USTR) announced a list of product exclusions on products of Chinese origin subject to the second list of Section 301 trade remedy tariffs.

The exclusions are retroactive to August 23, 2018.

The USTR’s exclusions can be downloaded here.

Tropical Cyclone Barry Affecting New Orleans Area Operations

Tropical Cyclone Barry Update

 Terminal Operations:
Container Terminal operations closed early Thursday July 11, 2019.

The Container Terminals will be closed today Friday July 12, due to floodgate closures.

The Container Terminals are not accepting any live reefer/hazardous cargo currently.

Rail Update:
Union Pacific Railroad: Effective immediately, the Union Pacific is issuing an embargo for the Avondale and New Orleans, Louisiana regions. The embargo is the result of tropical storm Barry and the impending hurricane along the Louisiana Gulf Coast. As such and effective immediately, the Union Pacific's Avondale, Louisiana intermodal terminal will be closed until further notice.

Norfolk Southern: - The New Orleans Intermodal Facility is experiencing flooding and employees have been evacuated. The facility will remain closed until the flooding dissipates and the terminal and local roads are deemed safe. All shipments billed for movement from New Orleans will experience departure delays and free time will be extended on shipments that are at destination.

As Tropical Storm 2 nears land it may become necessary to restrict shipments ingating at origin points destined to New Orleans. Norfolk Southern will continue to closely monitor the storm and will provide updates as it progresses.

As affected Customer, you are strongly advised to review local forecasts and Department of Transportation information for updates regarding local road conditions in the impacted areas.

CN - Canadian National Railway Terminal closed, CN service in/out of terminals has ceased.

Please review with your South East World Wide, Ltd. Sales Representative how these operational changes will affect your cargoes.

USTR Issues New Round of Exclusions for Sect 301 Tariff List 1

The USTR released a publication identifying the 6th round of product exclusions for the Section 301 trade remedy action on the first list of $34 billion worth of products of Chinese origin.

The Federal Register notice can be found here.