International Commercial Terms between 2000-2011 - Essay Example

Introduction The changes which are made in society are based on the continuous alterations in supply and demand. The current shift to globalization with various exports and imports has also changed the terms and agreements which are expected to exist at an international level. The main alteration is one which is being seen in the terms and legalities that are created for the product and service values. These are defined not only through basic legalities, but also combine with the international commercial terms that are applied to the transactions and expectations within various businesses. Defining the changes which have been made between the different years and associating this with the terms regulated by the ICC, or international chamber of commerce organization, can also redefine what is now expected when working with trade agreements across nations. The current changes which are being initiated are based on redefining the terms of trade, specifically to open different regions while protecting businesses that are associated in different regions of the world. The purpose of this research paper will be to redefine the amount of supply and demand between regions while creating a different set of terms and agreements with the new international commercial terms. It has been noted that a large variety of changes have been made between the year 2000 and 2011. These are being redefined to open the trade of import and export and to protect businesses with arbitration and mediation. More important, these are changing the way in which different businesses associate with legalities, arbitration and mediation in various countries. By examining the redefinition of terms, the paper will be able to redefine what the terms may lead to as well as how this is changing the outlooks that are associated with business imports and exports among various countries. History of International Commercial Terms to 2000 Import and export terms have been growing since the beginning of the Industrial Revolution, specifically because both quality and quantity can be maintained through basic manufacturing agreements. To ensure that the export and import terms are met and qualified, legalities and representation of both sellers and buyers have also been noted. The first representation was in 1936 with the development of the International Chamber of Commerce, or ICC. The main objective of the ICC was to regulate trade and to ensure that there were fair agreements which were made across national borders. The development of the ICC led to the Inco terms, which were rules and agreements which defined the responsibilities of buyers and sellers in the delivery of goods. The main application was to clarify costs, risks and responsibilities which were associated with the exchanges which were taking place (Huneke, 1). This main concept then began to grow with changes and opening of borders that led into the current century. The international commercial terms were first identified in the year 2000 when there was an increase and substantial set of changes in logistics and services. The terms defined were created specifically to identify how to regulate trade through imports and exports across various nations. The terms were based on custom – free zones, use of electronic communications and changes in transport practices. The application of these practices is based on the foundation of the contract of carriage, as opposed to the contract of sale. The terms and definitions which have been created from the contract of carriage are able to identify exactly what is needed in terms of international commercial systems. The categories which apply to this include four categories, including the seller making goods available to the buyers, delivering goods to a carrier to deliver to a buyer, the seller carrying a contract to carriage and terms which are associated with damage, costs and risks with the transfer of goods to a different region (INCO, 1). These specific definitions were the basis of agreements and were also the prime way in which arbitration and mediation was focused with disagreements between businesses. The main association was to create an understanding between the legalities that were a part of the system and to alter the economic openness between nations. These changes have provided more opportunity for those that are in business while creating regulations that match with the national terms and expectations of economy. The main association with creating the terms of agreement was based on the ability to open the different areas in terms of export and import regulations. This was followed with the ability to have guidelines for arbitration if problems arose between nations. Since the different nations could not have applicable laws for the sending and receiving of products, there was the need to create an exchange which good be used with international terms. If legalities, regulations or policies were broken, then arbitration could be opened. The mediator associated with the arbitration could then use the different agreements, terms of the international commercial terms and could respond according to the expectations which were associated with these specific agreements. Settlements with disputes could then be easily confronted with a foundation based on legalities and specific terms of agreement that are a part of the expansion of international trade (Born, 5). The terms and agreements which were created also were divided according to specific regions and their association with the export and import agreements. Sub – committees and organizations have branched from the ICC, specifically to incorporate the legalities and national standards within specific nations. These changes are used specifically to control the economic and political climate within given regions while ensuring that the corporations and businesses in various regions are able to alter the global economy in a positive direction. The difference in political and economic standards in different countries has led the policies to be written with specific standards for each national area. Interpretations that may arise from disputes, disagreements and other problems can then be interpreted according to the country in which one is. The main terms can combine with the specific legalities needed for a given country, all which help to balance and mediate the export – import agreements within a given nation (Huneke, 1). Changes in Terms for 2011 While there is a direct association with the terms and agreements that are applicable for various countries, the year 2000 – 2010 also saw several complexities. Arbitration, mediation and negotiations all created complexities between nations. The ability to change the international commercial terms was based on the need to change the associations which businesses had between different nations. More important, there is now a need to begin to assist with the continuous growth in globalization and the ways in which individuals are involved in business. Those who are looking into trade agreements are now interested in a combination of legal protection and flexibility that is associated with the growth of business. The ICC is able to provide this by changing terms so businesses have more abilities to grow as a business while being protected legally and economically from the fluctuations that are associated with different environments and trade agreements (Ayad, 17). The past ten years of trade agreements have led to several alterations, negotiations and lessons in terms of trade with commerce and the way in which the policies should develop for different needs. The main reason for the change in terms is based on the fluctuation and opening of different areas that are interested in selling different commercial products and services. The opening of different countries from the year of 2000 has drastically increased, specifically because of the use of the Internet and closed gaps from expansion of corporations into a global level. The consumer law is one which doesn’t match with this, specifically because it is still combined with the state and national laws in various regions. For instance, in the European Union, the consumer and legal regulations still are applicable first to the state and national expectations. Even though there are several trade agreements that want to have a more open arena for exchange, there isn’t the ability to create the right legalities for exchange to protect trade agreements and the commercialization of various aspects within a corporation (Flesner, Micklitz, 201). While international trade and commerce continued to grow, it was noted that consumer law, a lack of combined efforts for globalization and overall regulations created a gap for trade. More important, the regulations from the state and national laws couldn’t match with the expected regulations for international trade. The use of the Internet and trade agreements that allowed countries to open toward the distribution of products and services then altered the free trade which could be agreed to. The gap was then noted through the need to create a global center for the free trade from technology, while lessening the gap from the national and state policies which were prohibiting the trade and transfer of specific international products. The theory of comparative advantage became a main concept considered for trade. The opening of specific territories caused many consumers to find lower priced products with higher value by exchanging internationally. However, there were no legal expectations with the trade and there was a gap in the expected trade that was occurring. These two extremes then led to inabilities to regulate and open the trade at an international level, even with the basic international commercial terms which had been established (Trebilock, Howse, 3). Another lesson which is applicable to the trade terms is based on the gap in understanding contract terms and processes. While there were specific agreements which were noted through the terms, there were often gaps associated between cultures. The practices of different companies, expectations for delivery and the quality of products as well as the practices with soft contract terms are some of the ways in which the models alter. The legal contracts then were not as binding, specifically because of a lack of similarities in definition as well as a change in the expectations for terms and agreements. Each of these was further divided by model contracts and contract models that were divided by regions. The gap with legal definitions, contractual expectations and the implications which were associated with this then led to a lack of practicality in being able to open the international commercial trades. The lack of standards incorporated with the trade agreements became a main fault that was found within the system (Haarala, Lee, Lehto, 462). The different developments and gaps which were created were associated specifically with research, studies and evaluations of the arbitration methods which were required when changing the trade agreements. International and national expectations have combined to create the changes, specifically because of the gaps, legal proceedings and lack of standards that have been noted on various levels. The United Nations is one of the organizations which is creating a different understanding of what the international commercial terms should be as well as how these affect different corporations with open agreements. Other organizations include those who are designated to monitor and work with international trade. If there are mediations which occur, then the organizations will record what has happened and why. This moves into various other international organizations who have noted that there are continuous gaps and patterns in trying to incorporate the international trade. When relooking the commercial codes, it is noted that the alterations are needed, specifically to create uniform codes that can be used with the exchange of products and services (Kettering, 34). Another relationship that is a part of the changes is based on the mixed jurisdictions which have occurred within legal arenas. It is noted that Europe, Australia and the United States have all created different legal implications, specifically to begin to unite with the international commercial terms and to change the necessary regulations. The laws and contractual agreements which are applied are no longer valid under one national agreement. The jurisdictions in different nations are combining the national law with the laws of those who are in different countries and under specific commercial terms. Intertwining the two jurisdictions is one which is creating an alternative approach to the legalities that are required among those in various regions. The jurisdictions are also being noticed by organizations and those who are responsible for the international commercial terms. The changes are then deigned to incorporate a global outlook that is associated with the main concepts and legalities within a given region (Fiorini, 89). A third component which is initiating change in the commercial terms is based on the banking systems and the association with fair trade across borders. There are several gaps that banks are noting with the profit and loss margins which are coming into the country. The push from various lenders and those who are responsible for the trade agreements is to create a sense of equality and balance within a given region. Export and import companies are limited by the amount of borrowed money which can be received or given, all which limits the fluctuations in the economy. At the same time, there isn’t an association with costs that are given in return, specifically because of subsidy costs and administrative expenses. The legislation that many are trying to adopt is based on having more free trade agreements, specifically which equate to the needed commercial adaptation, equality of the various trades and which provide a balance among institutions. Since the international currency systems differ, banks are trying to find new ways to legislate and lift regulations on the trade agreements that are now a part of the economy (Jackson, 98). The changes that have altered since 2010 are also dependent on changes in various environments and how this affects the main sources of trade. The events of 9/11 in the United States tightened the security and lessened the amount of exports and imports that could be given to and from the states. This was followed by revisions in the U.S. Uniform Commercial Code, as well as Institute Cargo Clauses. These each regulated the types of exports and imports which could be given as well as how these were applicable to types of products and services that were traded within the United States. At the same time, it was noted that individuals were finding various ways of export and import, specifically through electronic communications, custom free zones and by working with trade blocs for higher amounts of exports and imports. The implications of these created a different understanding of the gaps which were a part of the changes, specifically with tightened security as well as the exchanges of products and services that were in free zones. Combining these two with a balance in the economy is one which is the main agenda of those in national governments, all which are designed to alter the trade levels within the economy (IncoTerms, 1). New International Commercial Terms There are eleven main terms that are being defined for 2011, all which are defined on the types of exports and imports that are moving through various types of frequencies within the environment. The terms are applicable in two main categories. The first is the mode of transport which is used, as well as how different rules apply for transfer, legalities and consumption. The second is based on sea and inland waterway transports, specifically because they change the approach and main way in which individuals approach the commercial terms. These each are able to define the specific applications and associations with the way in which exports and imports are handled. The terms include: 1 EXW: The seller fulfils obligations to deliver when the goods are available at the seller premises. The buyer carries the costs for the transport and takes the risk of having the transport completed. 2 FCA: FCA is also known as a free carrier. The seller obligation is to deliver the goods, clear them for export and to charge the carrier accordingly which is then transferred to buyer obligations. 3 CPT: This also means carrier paid to and includes a transfer of goods to a given destination. The seller pays for the freight to move to the given destination. If there is damage or loss, than the buyer is at risk, as opposed to the seller. 4 CIP: Carriage and insurance paid is the main application of this legality. It is the seller’s responsibility to pay for the carriage and insurance, specifically which protects the buyer from the risk of loss and damage. 5 DAT: Delivered on terminal means that the buyer is responsible for any loss or damage which may occur with the goods, specifically when they arrive at the terminal for delivery. 6 DAP: The DAP also stands for delivery at place and leaves the buyer responsible only when the goods are placed in a center for transport. 7 DDP: Delivered duty paid is applicable when goods go to a space for importation, all which make the seller responsibly for delivery. This includes responsibility for duty fees, taxes and custom fees. 8 FAS: Free alongside ship is the first application to sea and water transfers. The seller is only responsible for placing the goods in the vessel for transfer. After this time, the buyer is responsible for risks. 9 FOB is free on board and means that the buyer is responsible for all risks and costs once the ship has left for export. 10 CFR is the cost of freight and is applicable when a seller is responsible for paying the costs of transport. The risk of loss is the responsibility of the buyer, specifically applicable when the goods are transferred over the port of shipment. 11 CIF: Cost, insurance and freight is required when the seller has obligations for risk and damage as well as the need to meet specific insurance applications under the responsibility of risk for transport (Incoterms, 1). The processing which is included for these different laws are applicable specifically because it changes the value of transport and doesn’t leave exporters at the sole responsibility of the commercial interchange. More important, there is the ability to create a higher value and process quality that won’t injure a business. The main points can be considered by the seller, specifically so there is an understanding of the risk which is involved in the transport. The importance and validity of these specific legalities were included as recommendations from over 130,000 different organizations. The applications vary specifically according to country because of the national legalities that are continuing to alter the export and import agreements. The 2000 international commercial regulations are also associated with this, specifically because of the legalities, restrictions and balance of economy that is required through the regulations. By only changing the main components to offer more flexibility for transport, there is the ability to alter the main approach to export and import trade. The concern which was approached was based on liabilities and who was responsible for the trade which occurred. It was noted through the business recommendations and other applications of legalities that the main regulations were altered specifically because of the business associations losing money from trade, specifically because of risk, loss and political associations and legalities which changed the agreements. This was furthered by the financial organizations which noted the same loss. To alter this, the new policies focus on the buyer having the primary responsibility for the goods and services, specifically with the need to allow the businesses to save money and to continue to grow and export with a change in economics (INNO, 1). The main concept that is now associated with the new terms is based on the ability to alter the way in which the agreements are built while lowering the economic and legal risks which are associated with the main transfers. The amount of risk is dependent on the agreement which the buyers and sellers agree to. Instead of carrying liabilities that are strictly enforced from the legal implications and seller, the exchange is modified to make both the seller and buyer responsible for the transaction. This is dependent on the number of payments which are made through the buyer and the seller as well as what is expected. The transfer of risk which is associated with this is one which is dependent on the payments and transfers made; however, this is now dependent on the decision to transfer the risk at a specific level. In Table 1, the number of risks can be seen with the expected type of transfer from the year 2000. Table 1: (Inno, 1). The changes which were made for 2011 were based on lowering the risk. It was noted that the highest risks came when the transport, insurance and other applications were paid by the seller. When this occurred, buyers would often return with a breach of contract or agreement that would leave the business at loss. The changes for 2011 are based on the contract withholding while making the seller responsible for the main contractual agreements and payments for delivery. The importance of the changes and the lowering of risks which can be seen between the 2000 and 2011 policies are based not only on redefining fair trade and open borders. The different national agreements that are associated with this are also incorporated into the new version, specifically which alters the policies according to the region in which one is in. This is similar to the 2000 version of the agreement made. The main legalities by nation are also similar with the expected terms and contractual agreements that are used to define the economy as well as the way in which different individuals associate with a given component of the nation. The importance of this is based on the arbitration and mediation which took place from 2000 – 2010. The lack of definition, unfair rulings and the difference in the political realms because of legalities all made arbitration and mediation more complex than necessary. The new terms are designed to change these complexities while creating a global ruling that can be used with free exchange between countries. International arbitration can now be used with these specific definitions, all which will change the openness of exchange between nations while setting the businesses apart from the national legalities which are associated with the export and import agreements which are made (Branson, Willems, 1). Another change with the old and new policies is one which directly affects the economy and the amount of trade that is expected to be defined. The policies from 2000 were known to limit the amount of trade, specifically because of the risk involved from businesses as well as the political legalities which were associated with the risk. It is expected that the new regulations will open the investor relationships to other corporations outside of various nations while allowing businesses to begin opening to multinational developments and shipping between nations. The commercial law which is being created in association with this is one which is providing those involved in trade to have more options for building in the economy while lessening the risk that is associated with trade. The policies of 2000 restricted this option, as opposed to opening the different trade regions. The new regulations which have been created are designed to open the legalities, consumer options and the trade regulations that are associated with the main policies. The result is one that will highlight the export and import trade with the goal of widening the amount of trade that occurs from the policies (Ayad, 21). Conclusion The various concepts that are associated with the trade policies are changing, specifically to open the different borders and associations with various countries. The main agreements began to open as early as 1936 with direct associations to the ICC and the development of the Incoterms to regulate trade among countries. In recent developments, there is a stronger association with the export and import trade. This is combined with the development of the economy, associations with policies and arbitration that is being used for complexities which are occurring between nations. The gaps which have been created are based on the economic, legal and political implications that vary between nations. To change this, the Inco Terms have developed from the year 2000 – 2011. The objective which is being determined is based on changing the amount of trade which is associated with various regions, combined with the ability to change policies and rules. The outcome which is expected is to begin to open the transfer of imports and exports as well as goods between different regions. This is combined with the trade regulations and economic changes which are expected to support businesses and to develop the globalized regions for higher levels of trade among differing regions. References Ayad, Mary. “Harmonised Commercial Law Principles in Investor – State International Commercial Arbitrations Amongst Euro – Med Partners.” Dritt Law Journal 21, 2010. Born, Gary. International Commercial Arbitration: Commentary and Materials. Transnational Publishers: New York, 2001. Branson, David, Jane Willems. “2011 Arbitration and Mediation.” International Law Institute 2010. Fiorini, Aude. “The Codification of Private International Law in Europe – Could the Community Learn from the Experience of Mixed Jurisdictions?” Tunlane European and Civil Law Forum, 2008. Flesner, Christian, Hans Micklitz. “Think Global – Towards International Consumer Law.” Journal of Consumer Policy 33 (3), 2010. Haarala, Soili, Nari Lee, Jukka Lehto. “Flexibility in Contract Terms and Contracting Processes.” International Journal of Marketing Projects in Business 3 (3), 2010. Huneke, Jonathan. “Incoterms 2010: Revised Trade Rules for an Interconnected World.” USCB 2010. INCO. “Inco Terms: International Commercial Terms.” The Waco System, 2010. Inco Terms. “INCOTERMS 2010 Takes Effect on January 1, 2011.” International Business Training 2010. INNO. “Incoterms 2010 – International Commercial Terms: FOB, CIF, CFR, CNF, EXW.” INNO 2010. Jackson, James. “Export – Import Bank: Background and Legislative Issues.” CRS Report for Congress, 2007. Kettering, Kenneth. “Harmonizing Choice of Law in Article 9 with Emerging International Norms.” Gonzaga Law Review46 (2), 2010. Trebilock, MJ, Robert Howse. The Regulation of International Trade. 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