The International Chamber of Commerce (ICC) is working to publish new Incoterms later this September to take effect early next year. According to the ICC, this publication will include an update to the regulations that define the liability of buyers and sellers operating in global trade.
About Incoterms
Incoterms is the acronym for “International Commerce Terms”. Incoterms were designed by the ICC in 1936 to avoid miscommunication that abounded in international trade. At the time they were born under the name “International Rules for the Interpretation of Trade Terms”.
The introduction of standardized rules and interpretations has greatly improved international business transactions. From then on these rules were adjusted and evolving in line with international trade.
Expected Changes in Incoterms 2020
The current Incoterms (which you can find here) are from 2010. With the changes felt in the world trade, the adjustment to the new reality becomes urgent. In order to make these adjustments in line with actual needs, the International Chamber of Commerce has joined a development group consisting of 5 elements representing the main world trade zones – the European Union, the United States of America, Australia and China.
This working group has as its action plan the simplification of the rules as well as the adaptation to the current reality. With this, they intended to provide a clearer text without superfluous or confusing information. This group should also be aware that English will not be the native language for many Incoterms users.
There are, however, aspects such as VAT, Customs Unions or VGM where no changes are expected. This is because this update seeks to standardize global rules, leaving aside local issues of intrinsically distinct characteristics.
Changes expected from Incoterms include:
- Elimination of EXW (Ex Works), DDP (Delivered Duty Paid) and FAS (Free Alongside Ship);
- Extending the scope of the Free Carrier Arrangement (FCA);
- Updates on FOB (Free on Board) and CIF (Cost, Insurance & Freight);
- The arrival of CNI (Cost and Insurance).
Cyber security will also be a factor and take into consideration in the new Incoterms. In recent years, with the increasing use of these systems, there has also been a growing increase in computer attacks involving the deletion, theft or corruption of data, as well as the theft of financial information. Therefore, the creation of an Incoterm to protect against these new dangers is expected. In addition, clarification work is expected from international trade companies so that they become more aware of the potential dangers that may arise, and help them to take precautions.
Conclusion
International trade has seen significant changes in the last decade, the present reality is different from that of 2010. In this sense, the ICC, based on the accumulated knowledge of this decade, has joined a team that brings together elements from the most important world markets to update the new Terms for the World Trade – Incoterms 2020. With this it is expected:
- Clarification and attribution of risks and responsibilities;
- Packaging, marking and inspection of products;
- Safety Certificate;
- Stakeholder Responsibility
New Incoterms 2020 will be launched later this month, to become effective on January 1, 2020.
To learn more about the rules of the new Incoterms 2020, see the page of the International Chamber of Commerce.
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