Words Matter: Why the ICC Created Incoterms, a Lingua Franca for Global Commerce
Let's say your new love interest announces on Facebook that they’re in a relationship with you. Then a week later, they post a pic of their romantic evening with someone else. Naturally, you’re furious. But are you overreacting? After all, it may be perfectly obvious to you to that the definition of "relationship" includes monogamy—but did you ever ask your partner if they do, too?
In global commerce, these kinds of misunderstandings come up all the time, and can lead to serious conflicts, even when both parties think they are acting in good faith. It’s what makes corporate litigators rich.
In the world of global trade where often parties don’t share a native language, the possibilities for misunderstanding only multiply.
To overcome this challenge, international traders have over the centuries employed many different lingua francas, i.e. a common languages. Their goal: to provide clarity, predictability and trust in commercial transactions. When Rome ruled the seas, merchants had to learn Latin. When Venice dominated Eastern Mediterranean trade, Arabs, Greeks and Turks often did business in the Venetian language.
And in the 20th century, the International Chamber of Commerce (ICC) created Incoterms, short for international commerce terms. Founded just after WWI, the ICC immediately went to work to create this official lingua franca. Today, it remains is the most important system of its kind in the world.
Languages Must Evolve Over Time—And So Does Incoterms
As trade, technology and business practices have changed over time, a lingua franca must evolve too, and Incoterms is no exception.
For example, in the 2020 update of Incoterms, the term Delivered at Terminal (DAT) has been changed to Delivered at Place Unloaded (DPU), since the buyer and/or seller may also want goods delivered somewhere other than a terminal.
Perhaps the change with the most impact in the 2020 update is Free Carrier (FCA). Under this term, a seller is required to make the goods available at its own premises or other specified place—and is responsible for loading the goods on the buyer's transport.
A Common Language for Customs Clearance
At Zeus Logics, we are working hard on a goal that in many ways emulates Incoterms. We are creating a customs clearance platform that allows all the key players in international commerce to communicate—shippers, carriers, suppliers, importers, freight forwarders, etc.—among each other and, most critically, with the United States Customs and Border Protection (CBP).
This digital lingua franca is the necessary first step to are digitizing the end-to-end customs clearance process, which until now has been a Babel of information spread across disconnected people, processes and systems—phone calls, paper documents, emails, faxes, etc.
By creating a common global language for trade, the ICC removed much of the friction in commercial transactions and helped accelerate growth and prosperity. By speeding and automating customs clearance, we expect the Zeus Logics platform to contribute to the same goal for its customers.