Incoterms are standards for international trade that provide a consistent interpretation of agreements included in global business contracts. Every ten years, the International Chamber of Commerce makes updates to the standards based on changes in the global business environment. As of January 1, 2011, the new Incoterms 2010 are officially in effect. The revisions listed below are a reflection of widespread changes in international business markets over the past decade.
What major shifts have caused the Incoterms to change since 2000?
Customs Free Zones-With the growth of trade organizations such as the European Union, there has been an increase in the number of free trade zones. This shift caused some of the language in Incoterms 2000 to be outdated.
Electronic Communication-While electronic communication systems such as electronic data interchange (EDI) were once only accessible to large corporations, they are now widespread throughout the business world. Some of the language in the Incoterms was adjusted to reflect that technology has become a very acceptable form of communication for many businesses.
Transport Practices-Integrated supply chains using multiple modes of transportation are becoming more common. Past Incoterms were not easily relatable to such a system.
Security-With the increased threat of terrorism, improved security of goods crossing international borders has become a larger emphasis for many countries. This is integrated into the standards.
Gender-As the role of women in international business has expanded, the masculine bias of the Incoterms was outdated. Now gender-neutral pronouns have been inserted.
How has overall organization of the Incoterms changed?
Grouped in two categories (rather than four)-These new categories are “Rules for Any Mode of Transport” and “Rules for Sea and Inland Waterway Transport Only”.
Adjusted term names-Two new terms have replaced four outdated terms to consolidate them and improve clarity. “Delivered at Place” (DAP) replaces “Delivered at Frontier” (DAF), “Delivered ex Ship” (DES) and “Delivered Duty Unpaid” (DDU). “Delivered at Terminal” (DAT) replaces “Delivered ex Quay” (DEQ).
As always, it is important to stress that Incoterms are intended to be used as guidelines rather than as stand-alone contracts. They should be integrated into business agreements and applied based on the specifics of a business partnership.