Intellectual trade barriers

Intellectual trade barriers On Second Thought …
Dietmar Jost,
Dietmar Jost Consulting

      In September, the International Chamber of Commerce (ICC) in Paris will publish the next version of the international commercial terms, in short Incoterms 2010.
      These terms will enter into force Jan. 1. This is the first revision since 2000 and the seventh overall since Incoterms were first published in 1936.
      Incoterms provide an international standard for buyers and sellers to determine their obligations in international cross-border trade (i.e. at which stage in the supply chain the commercial risk and liability for the goods move from the seller to the buyer).
      Currently there are 13 commercial terms, the most commonly used being 'CIF' (cost, insurance and freight), 'FOB' (free on board) or 'DDP' (delivered duty paid).
      Incoterms play a very important role in international trade. Every exporter and importer, big or small, uses these terms and relies on them being understood and identically applied by both parties of a contract. Customs authorities worldwide use them for risk assessment and customs valuation, the basis for the calculation of duties and taxes. Incoterms also help in calculating trade balances in foreign trade statistics.
      There are usually a wealth of sources where information on Incoterms can be found. However, at this time of change, information sources have become very limited. It is exactly at this moment in time, though, when access to the new Incoterms and an explanation of the changes is most critical.
      Experts of the ICC and its member organizations, such as the U.S. Council for International Business or the Association of Chambers of Industry and Commerce (DIHK) in Germany, have worked out the new release of the Incoterms. They are a small elite group of people in international trade with knowledge about the changes. The ICC has announced that the new revision will be released in September and that the changes will be significant. However, the changes are not being made public.
      The only information made public so far is the number of terms have been reduced from 13 to 11. Two new terms have been added and some older, little-used terms have been deleted.
      Every participant in international trade and transport knows that knowledge about the amendments and the assessment of the potential impact on the business operations will be critical. Small changes in the wording of a term can bear significant business risk and financial implications. In the case of the Incoterms 2010, the changes are said to be big.
      The ICC and its member organizations must have seen this and turned the situation into a business opportunity. For any interested party wanting to learn about the new terms, you first have to buy the new release of the Incoterms from one of the official ICC bookshops (e.g. $55 in the United States or 39.95 euros in Germany). To learn about the changes and to be able to make the impact assessment on your business operations, you are encouraged to sign up for one of the many training courses offered by the ICC and its member organizations (e.g. $350 in the United States, 390 euros in Germany).
      At the moment there seems to be no other way to learn first-hand about the changes and to make any necessary adjustments to trade and transport contracts prior to the terms taking effect on Jan. 1.
      It has become quite common for international and non-profit organizations to turn to such means to generate additional revenue, as their main source of funding ' annual member contributions ' are under constant review. Likewise these organizations are asked to do more and more with less and less. However, why use easy access to critical information in international trade as a way to make a few dollars?
      Customs administrations have to follow Standards 9.1 and 9.2 of the General Annex of the Revised Kyoto Convention, requiring them to ensure that all relevant information of general application, and any amendment, is readily available to any interested person. This key principle of trade facilitation should equally apply to those organizations that constantly demand trade facilitation from governments.
      It goes without saying that Incoterms are relevant information and that they should be readily available as requested by the Revised Kyoto Convention.
      Note: Trade facilitation is a constant political and business goal to identify improvements in the international trade supply chain. In times of economic crisis it helps to reduce the impact and to initiate economic recovery and in times of economic growth it helps to increase the impact on the national economies. This is the first column that I am writing for the American Shipper as an independent consultant. As from September, I have started a customs and trade consultancy business to assist governments in implementing World Customs Organization standards and other trade facilitation measures, as well as to assist international businesses in trade data management and trade compliance capabilities.