The international trade rules, widely known as Incoterms have come into force this month, changing how the international trade of goods is conducted potentially having a major impact on importers and exporters across the globe.
Incoterms, also known as International Commercial Terms were initially drawn up by the International Chamber of Commerce as a way of governing trade movements across the globe and to prevent confusion in foreign trade contracts by clarifying the obligations of buyers and sellers. They are changed every 10 years.
The new updated rules which came into effect on 1st January 2020 identify the responsibilities of buyers and sellers for the delivery of goods in international trade and also identify when the risk for those goods transfer to the buyer.
Chadd Blunt, Managing Director of Millennium Cargo, suggests that markets such as e-commerce should be especially wary of these rule changes as he predicts a rise in companies failing to adhere to them as more and more new entrants to the market emerge.
It is predicted that by 2021 roughly 93 percent of UK internet users are expected to shop online, the highest online shopping penetration rate in Europe – meaning that Britain will have one of the top three largest e-commerce markets in the world.
Further estimates suggest that the internet is expected to account for 53% of retail sales in 10 years time, up from around a fifth at present, as the younger generation who have grown up with the internet will account for more than half of the UK’s total population by 2028.
He commented: “This is the first time in a decade since the last set of Incoterms have been rewritten therefore businesses and organisations need to become aware of the new changes swiftly if they are directly involved in the international trade of goods.
“Indeed this change should in fact reduce the uncertainties arising from different interpretations in different countries and provide greater transparency and understanding for businesses and organisations alike when using them as a guide. For instance, The DAT rule Delivered at Terminal has been changed to DPU Delivered at Place Unloaded to underline the fact that delivery can happen anywhere, and not just at a transport terminal.
“The purpose of Incoterms is to act as a guide for the most commonly used trade terms in foreign trade, and thus reducing the risk of confusion/misinterpretation in different countries to a considerable degree – whether you are purchasing an order, packaging and labelling a shipment or preparing a certificate of origin – and these changes should go a long way in improving their use as a guide for businesses.
“Whilst these minor changes are welcome it is crucial that companies are not only aware of these regulatory adjustments, but recognise their existence as there as been a trend in recent years of start-up companies who are directly involved in the importation or exportation of goods and yet are blissfully unaware of international trade rules.
“It is important that industries such as the e-commerce market which is predicted to rise dramatically over the next decade – and particularly those new to the sector – do their research when looking to import or export goods as if parties are to be found in breach of Incoterms they will leave themselves vulnerable to severe financial penalties.
“Having 30 years of experience in freight forwarding, Millennium Cargo is able to provide advice and support an effective import and export strategy that is both tailored to its customers’ bespoke needs whilst at the same time ensuring that it is compliant with the recent Incoterm rule changes.”