Article

by the Incoterms Drafting Group

The ICC's Commercial Law and Practice (CLP) Commission supported the proposal to revise Incoterms 2000 at its meeting in November 2007. The decision came after months of in-depth debate and, in the spirit of ICC comity, former opponents have joined the revision effort, thereby ensuring that the new version will retain all the practical utility found in Incoterms 2000.

Recommendations for specific revisions were solicited directly from ICC national committees and their stakeholder organizations. Some 20 national committees provided comments in time for the first Drafting Group meeting in May 2008. Many included multiple suggestions, and the total exceeded 100 pages of text and diagrams.

Drafts

A preliminary rough first draft was completed for discussion at a November 2008 Drafting Group meeting. In another first for this revision process, a small ad hoc group of experts from the ICC Transportation and Banking Commissions will be consulted ahead of a February 2009 Drafting Group meeting. A revised first draft taking these consultations into account will then be circulated to the CLP Commission and national committees for comments due before the May 2009 CLP Commission meeting. Comments from the Panel of Incoterms Experts will also be solicited at that time.

Since national committees will undoubtedly have further comments to the first draft, a second and perhaps a third will be prepared and circulated until a consensus is reached. As another first, each successive draft will include Drafting Group comments on why certain recommendations could not be accommodated. For example, several insurance-related suggestions appeared attractive on their face until insurers reported that they would be difficult or impossible in practice.

The final draft will be submitted to the CLP commission and the ICC Executive Board for approval, with a published product expected in 2011.

Principles

It's much too soon to guess at details since we are still early in the revision process, but there are some general characteristics that have strong support and are likely to appear somewhere in the upcoming version.

- Presentation: Somehow this must be made more user-friendly. Professor Jan Ramberg has provided excellent introductions for previous Incoterms versions, but these help only when they are read. Too often, Incoterms users dive directly into the individual terms and, lacking the essential guidance found in the introduction, the results often cause the very misunderstanding and controversy that Incoterms were created to avoid. Examples include using marine-specific terms for containerized vessel cargo or air freight, using the Ex Works term for international contracts and inadequately insuring.

- Grouping the marine-only Incoterms together, diagrams and expanding the preambles that accompany the matching columns for each Incoterm: There's even a recommendation for a new computer program for selecting an Incoterm by inputting transaction-specific circumstances. As usual, there will also be a separate comprehensive Guide to Incoterms publication.

- Domestic use: The ever-expanding European Community single market and the deletion of the former US domestic terms from the US Uniform Commercial Code make a strong case for domestic Incoterms use. A little tweaking will work for most of the current terms, but a new one may be required.

- Revision title: There's strong support to avoid the expectation that Incoterms will be revised every ten years whether they need it or not. Reliance on this can have unfortunate and unintended consequences. For instance, a number of US companies had considered switching their domestic purchases and sales to Incoterms in the mid-2000s, but decided to await an anticipated 2010 revision, which, at a certain point, was not sure to happen. To change this mindset, future titles will not include the revision year, but will use some other identification method.

- UCP 600: The Drafting Group is carefully noting the changes in descriptions of documentation and responsibilities to more closely align Incoterms with commercial documentary credit practice. The economy of words found in UCP 600 provides us with a good example of clear drafting. A set of definitions similar to the ones found in UCP 600 but containing terminology used with Incoterms is another possibility.

- Changes in regulations and trade practice: Since Incoterms are designed to reflect rather than set trade practice, each revision must take any significant changes into account. For instance, cargo security regulations have become an increasingly important task in international trade and should somehow be addressed. These regulatory changes have been coming fast and furiously since 9/11 and are largely countryspecific. The revision will need to take a very generalized approach to avoid instant obsolescence.

- Chronic trade problems: Some attempts will be made to resolve issues such as the division of various handling charges between sellers and buyers, which continually raise questions. As with cargo security regulations, the best approach will likely be some general guidelines that can be applied to these port, airport and carrier-specific charges.

Other issues

There are other issues too numerous to mention here, particularly as some solutions raise new problems of their own. Following good medical practice, the Drafting Group promises to "do no harm" to the many benefits Incoterms have provided over the years. We will keep DCInsight readers informed of our progress as we come closer to the finished product.