There are five basic methods of obtaining payment for export orders, and according to the order of the exporter's preference they are:
1.Cash in advance
2.Documentary letter of credit
3.Documentary collection
4.Open account
5.Payment against goods on consignment
1.Cash in Advance
Cash in advance means that the exporter is paid either when the importer places his order or when the goods are ready for shipment. Cash with order or cash payment before shipment is the exporter's dream,it rarely occurs,although in certain circumstance it is wise and even customary to ask for it.This state of affairs may be only likely in a seller's market as it is naturally very unpopular in the eyes of importers.
Nevertheless,it may be essential to ask for at leat part of the purchase price with the order or before shipment in case where orders are from politically unstable countries or financially unstable customers, or where goods are specifically custom made for a new customer who has no long-term "good faith" relationship with you,or where the exporer may be looking up considerable capital in the preparation of the goods. In practice,compromise are often sought.For example, the exporter might arrange to receive one-third of the purchase price with the order when the contract is signed, one-third when the consignment is ready for shipment and the balance when the goods have arrived.
When cash in advance is used, the importer usually remits the payment to the exporter. Remittance means the transfer of money through banks from one party to another. Of course, remittance is not confined to cash in advance.It also applies to "open account","installment",and "deposit payment " etc. There are three ways of remitting the money: mail transfer (M/T),telegraphic transfer (T/T), and demand draft (D/D).
M/T refers to the transfer made between banks by mail,with the advantage of low charges.T/T means the transfer made by telecommunication system such as telex or telegraph.It is faster than M/T,but more expensive.Under D/D ,the importer buys a check from a bank in the importing country, called a banker's demand draft, and send it to the exporter (the payee) so that the exporter can get money by presenting the demand draft to a bank (drawee) in the exporter's country.D/D is transferable,which is different form M/T and T/T.
2. Documentary Letter of Credit
Frequently,in international trade an exporter is,for some reason, not entirely satisfied with the credit or reputation of a foreign buyer.Foeign credit reports are often sketchy and do not give sufficient ( adequate) information for the seller to assess his chances of ultimate payment.This applies particularly to the vast majority of foreign companies that are small-and medium-sized and,therefore,not internationally known.Additionally,the country in which the foreign importer is located may be in a weak financial position with limited hard exchange to meet foreign exchange requirements.Thus,even if the importer is financially strong and reputable,conditions beyond his control may prevent him from fulfulling his foreign obligation.Sometimes,even an importer with a good credit standing may be tempted not to accept a shipment if there has been a significant drop in the price of the merchandise involved.
To make sure that an obligation will be met, a seller or other beneficiary may wish a large financial institution with superior credit standing to stand between him and a buyer or other party who is expected to perform obligations.This can be done by means of a documentary letter of credit.
A documentary letter of credit is defined as an instrument by which a bank promises to pay the seller for his goods providing the seller conforms exactly to the conditions laid down in the letter of credit. Apart from requiring 'cash with order', the most satisfactory method of obtaining payment is by means of a documentary letter of credit.It provides security of payment to exporter and enables the buyer to ensure that he receives the goods as ordered and delivered in the way he requires.Specifically, it is an arrangement whereby the banks requires a bank to establish a credit in favor of the seller.The buyer's bank undertakes, or authorize its correspondent bank in the exporterer's country, to pay the exporter a sum of money (normally the invoice value of the goods) against presentation of specified shipping documents.
(1) Parties involved
The parties involved in a letter of credit transaction include: applicant,opening bank,advising bank,beneficiary,negotiating bank,paying bank and confirming bank.
*Applicant is the party who applies for the opening of a letter of credit ,that is ,the importer.
*Opening bank is the bank located in the importer's country that opens a letter of credit on behalf of the importer.By issuing a credit, the bank assumes full responsibility for payment after the proper drafts and documents have been presented.
*Advising bank is the bank located in the exporter's country who informs the exporter that a letter of credit has been opened in his favor and transfers the L/C to the exporter.It is usually the correspondent of the issuing bank.
*Beneficiary is the part in whose favor the letter of credit is issured, and who is entitled to receive the payment,that is , the exporter.
*Negotiating bank is the bank who buys an exporter's draft submitted to it under a letter of credit and then forward the draft and documents to the opening bank for reimbursement.Usually the advising bank is also the negotiating bank.
*Paying bank is the bank that makes payment to the beneficiary against presentation of stipulated documents. It is usually the opening bank but can also be a third designated bank.
*Frequently,an advising bank is requested to add its own commitment to the letter of credit .In this case, it is called the comfirming bank.
(2) Procedures
The procedure leading to opening a letter of credit starts with the foreign buyer agreeing with the exporter that payment will be by a documentary credit.The buyer then instruct his bank at his place to open a documentary credit of the exporter on the terms and conditions agreed upon by the buyer and the exporter.This issuing bank,not being exporter in the product, will require very detailed instructions covering product decriptions:quantities,agreed unit prices and total shipment values,terms of trade,date payment is due after presentation of the correct documents,packing,shipping period and so on.It is very common for a buyer to clearly specify a period of validity of the letter of credit.
After issuing the L/C,the issuing bank sends it to the advising bank,usually his correspondent bank in the exporter's country and asks the bank to advise the exporter of the establishing of the L/C and pass the credit to the exporter for study prior to release of the goods.If the seller requires a confirmed letter of credit ,them the correspondent bank may be asked to confirm the L/C opened by the issuing bank,and a fee will be charged to the buyer for this service.After the seller receives the L/C and is satisfied with the stipulations he will be in a position to load the goods.
After shipment of the goods,the seller will send the draft accompanied by all the necessary documents to the negotiation bank for negotiation within the validity of the L/C.If the documents are full and correct,the bank will pay,or accept the draft and then send the documents to the paying bank(issuing bank).After careful checking of the documents,and no problems are found,the paying bank will reimburse the money to the negotiating bank in accordance with the terms of the credit.The issuing bank (paying bank) then presents the documents to the buyer for payment or acceptance.Documents will be handed over to the buyer upon buyer's payment of the amound due or acceptance of the draft.With the documents,the buyer can take delivery f the goods.
(3)Types of L/C
Letters of credit can be classified into different types:
*Revocable L/C and Irrevocable L/C
Revocable L/C, as the name suggests,means that it can be canceled or modified by the issuing bank usually at the will of the buyer without prior approval of the exporter at any time before the documents have been paid or accepted. The exporter's losses could be substantial if the credit were revoked halfway throught the manufacturing process or just before shipment.As it does not provide adequate security for the exporter,revocable L/C is not used very frequently.They are,however,used effectively for shipments between affiliated companies and in other instances when there is no doubt concering creditworthiness and mutual trust between the parties.
Irrevocable L/C is the one that cannot be modified or rescinded by the opening bank without express permission of all parties,including the exporter,importer and intermediary banks.The opening bank is irrevocably committed to honor the exporter's drafts provided all the stipulations of the credit are met. Most credits are of the irrevocable type.
*Confirmed and Unconfirmed L/C
Comfirmed L/C represents the obligation of the confirming bank in the exporter's locality,usually the advising bank. It means the confirming bank guarantees payment if the issuing bank in exporter's country is often is often requested by a seller who has little confidence in or does not know the financial strength of the foreign opening bank.
Unconfirmed L/C means that the L/C doesn't have any payment guarantee by a bank in the exporter's country.It contains the obligation of the issuing bank only.This type is usually used when the opening bank of the undoubted reputation and financial strength or the transaction is small.
*Sigh L/C and Usance L/C
Sigh L/C means payment is immediately made to the beneficiary on presentation of the stipulated documents and on condition that all the terms of the credit have been complied with. It is advantageous to the exporter as he can get the payment quickly.
Usance L/C or Time L/C implies that the seller is paied in a specified number of days after the presentation of the stipulated documents. It can be further divied into:Banker's acceptance credit and Deferred payment credit.
Banker's acceptance credit calls for usance drafts to be drawn on and accepted by the opening paying bank.Under this type,the paying bank guarantees to make payment in a specified number of days after its acceptance of the time draft.
Deferred payment credit doesn't call for a time draft drawn on and accepted by the paying or opening bank.Under this type, a period of credit is agreed by buyer and seller.When documents are presented " in order " by the seller,the bank does not accept a bill of exchange,but instead gives a letter of undertaking to the seller advising him when he will receive his money.It is similar to banker's acceptance credit except that under deferred payment credit the seller cannot make use of discounting facilities and therefore cannot get poayment in advance.
*Transferable and Non-transferable L/C
Transferable credits arise where the exporter is obtaining the goods form a third party,say the actual manufacturer,and, as the middleman,does not have the resources to buy outright and await payment from his overseas customer.The credit is established in favor of the middleman (the prime beneficiary) and authorizes the advising bank to accept instructions from the prime beneficiary to make the credit available in whole ,or in part,to one or more third parties (the secondary beneficiaries).No letter of credit is transferred unless specifically authorized in the credit and this kindof credit can be transferred only for one.When the credit is transferred,all confitions must remain as in the original credit except that the amount of the credit ,quantity of goods called for and the unit price may be reduced,or the period of validity and/or shipment may be shortered.
Non-transferable credit is one that can not be transferred. If a letter of credit is not indicated with "Transferable",it is a non-transferable credit.
*Revolving L/C
Frequently, in internatonal trade a buyer will purchase regularly from a foreign supplier. To facilitate such repeat shipments between the same buyer and seller, a revolving letter of credit may be used, Instead of issuing several letters of credit,the bank issues only one,with a fixed amount available for each defined calendar period.When a shipment has been made and documents presented and paied for,the credit is automatically renewed in its original form so that another shipment can be made. This eliminates the need to establish a new credit for each shipment.Such credits can be revocable or irrevocable,and are usually subject to a time limitation. They can also be cumulative or non-cumulative.With a cumulative revolving credit,any amount unused during a given preiod can be carried forward to the next period.When a credit is noncumulative,any amount not used during a given period is automatically canceled at the end of that period.
*Back to Back Credit
Back to back credit arise in circumstances similar to those of the transferable credit.It means that the middleman receives a credit in his favor from the buyer and ask his bank (usually the advising bank of the primary credit) to establish a second credit in favor of his supplier against the security of the credit in his own favor.The second credit is similar to the first except that the amount may be lower and it will have a shorter validity to allow time for substitution of invoices and other contingencies.The opening of the second credit should be based on an irrevocable L/C.Since there are two separate credits instead of one as in the case of a transferable credit,there may appear some problems in the matching of documents and credit terms.
*Red Clause Credit
Red clause credits are also called anticipatory credits.this instrument similar to a normal letter of credit axcept that it contains a clause (originally typed or printed in red) authorize the negotiating bank to make clean advances of a certain percentage or the total amount of the L/C to the exporter.The clean advances are based on the guarantee of the opening bank and the importer,which means that the opening bank or the importer is liable for repayment plus interest in cases where no shipment is made unter the letter of credit or when the loan is not repaid by the beneficiary.Due to the high risk or the importer,before permitting red clause advances,the importer must have a considerable amount of confidence in capacity and integrity of the beneficiary.In addition to assuming a credit risk,the importer also takes on the exchange risk,since red clause advances are usually in the local currency.
*Standby L/C
This type is different from other types in that the buyer and seller hope it will never be drawn upon.They are ofter used as a kind of "back up" in the event of the buyer not paying for the goods.They normally require the issuing bank to make payment to the seller upon presentation of documents evidencing non-payment by the importer.Standby L/C can only be used when the applicant fails to fufill it payment obligation.
3.Documentary Collection
Documentary collection is a method by which the exporter authoriazt the bank to collect money from the importer. Title documents are only handed over to the buyer when the amount of draft is paid or when the draft is accepted by a specified date.
When such payment terms are used,the exporter obtains the usual shipping documents,such as a bill of lading,insurance policy,commercial invoice,inspection certificate and so on. Simultaneously,he draws a draft on the importer for the total amount due which was previously agreed in the sales contract.After the draft and all documents are properly assembled,the exporter attaches the documents to the draft and submits everything to his bank,accompanied by detailed instructions as to how the bank is to proceed in obtaining payment from the importer.The bank,acting as agent for the exporter,checks to make sure all the documents are in order and are complete as stated in the instructions.Then,based on the customer's instruction,the bank types his own collection letter and sends it,together with the drafts and documents,to one of its foreign correspondents in the importer's country.The foreign correspondent,again acting as agent,notifies the importer that it has title documents available for his to be picked up provided he either pays the draft if it is a sigh draft or accepts it if it is a time draft.After a sight draft has been paid,the money is remitted back to the exporter's bank.The latter either credits the exporter's account or send him a check for the proceeds.An accepted time draft generally remains with the overseas correspondent,who will present it to the acceptor for payment as maturity.
The parties concerned in a documentary collection transaction are principal (usually the exporter),remitting bank in the exporting country as the agent of the exporter,collecting bank in the importing country and drawee(usually the importer).
There are two types of the documentary collection:Documents Against Payment (D/P) and Documents Against Acceptance(D/A).
*Documents Against Payment
Documents against payment means documents can only be handed over to the buyer when he paid the amount of the draft. It can be further divided into Documents Against Payment At Sight and Documents Against Payment After Sight.
D/P at sight means that the buyer shouls pay the draft amount as soon as he is presented the sight draft by the bank
D/P after sight means the buyer will pay the draft amount in a specified number of days after the time draft drawn by the seller is presented and accepted.Still the documents can be released to the buyer when payment is made.
*Documents Against Acceptance
D/A means that the title document will be handed over to the buyer once the buyer has accepted the usance draft drawn by the seller.Payment will be made when the usance period is due.Under this term, as the importer gets the goods before making payment,the importer's credit standing is important to the exporter.It is therefore not as secure as D/P since the seller might not be paid at all.
Although banks are involved in documentary collection, they just act as agents and offer no bank guarantee to either the buyer or the seller,which is different from L/C payment terms.
4.Open Account
The open account system is one of the principal methods of settlement in international trading practice.This mechanism has the advantage of simplicity.There is no special procedure.The exporter dispatches goods,sends teh appropriate documents of title,e.g. bills of lading,together with an invoice,and then has to wait for payment.The goods thus pass into the customer's possession before the payment is made and the exporter has only the protecton of the particular contract of sale.Due to the high risk to the exporter,open account is usually adopted when the exporter is well acquainted with the financial status of the buyer and has no doubt about his solvency,or when the exporter sells goods to his own overseas branch or subsidiary.
Sales on this basis are usually settled by periodic remittances. With open account,the actual mechanics and speed of remitting money is of vital importance.Funds might be transfered by T/T,M/T or D/D.etc..
5.Payment Against Goods on Consignment
Consignment sales are usually used as a way of expanding overseas sales and especially opening up markets for new products.Goods shipped on consignment enable the exporter to place stocks in the importing country without actually giving up the title of ownership.The consignee sells the goods on behalf of the consignor and gets a certain percentage of commission.Normally,the exporter will not receive any payment until sales are made in the overseas country and the goods may alsways be sent back without liability on the part of the importer/consignee.Stocks therefore might represent a considerable amout of capital locked up in the overseas market and exposed to all the normal commercial,plus political and climatic risks.Due to the hign risk,the exporter should have a clear understanding of the credit of the agent before using the method and be fully aware of the risks involved.Such consignment operations are best based on a consignee who is well known and committed to the exporter.Under this item,the exporter gets the money after the goods have been sold out. The consignee would render monthly accounts of sales and sent the consignor the payments due after deducting expenses,and an agreed rate of commission.
The above methods of payment including cash in advance,L/C,documentary collection,open account and so on are all used in exporting and all have their drawbacks and advantages.From the exporter's point of view,the ideal method of payment whould be by cash,either on confirmation of order or when the goods are ready for shipment.The other extreme is presented by the methods of open account and payment against consignment and these are the most favorable methods from the point of view of the importer.But these two extreme are rarely adopted in international trade because of the high risks involved. So far documentary L/C and documentary collection are the most common ways.Exporters favor L/C because of the guarantee it offers while importers would prefer D/A or D/P payment terms. In many cases,tow or more methods are adopted for on transaction.For example,collection may be combined with remittance,L/C with collection etc.Sometimes,under installments or deferred payment for large equipment transactions, a combination of payment methods including L/C,remittance and collection is used.
Monday, July 23, 2007
Sunday, July 22, 2007
International payment of goods- Instruments of Payment
No export transaction can be said to be successful until the payment has been received for the goods delivered oversea,and the proceeds have been safely credited to the exporter's account.Compared with payment arrangement for domestic transaction,international payment arrangement are much more complicated and difficult.
1>Instruments of Payment
There are different means of payment including Draft,Promissory Note,Check,Credit Card and Cash,etc..Cash and Credit card are rarely used for large transactions in international trade.The common payment instruments of internation trade are Draft, Promissory Note,Check,among with Draft is the most frequently used one.
1.1 Draft/Bill of exchange
A draft is an unconditional written order addressed by one person to another and signed by the person giving it, requiring the person to whom it is addressed to pay at sight or at fixed or determined furture time the sum of money clearly specified to,or to the order of ,a specified person, or to bearer.
There are usually three parties to a draft:the drawer who issues,signs,and sends the draft to the second party,the drawee.The draft is addressed to the drawee or the payer,asking him either to pay or to accept and pay when the amounte indicated on the draft is due.Lastly,there is the payee who is to receive the payment made by the drawee.The payee and the drawer may be the same person,that is the exporter in the context of international trade and the payer and the drawee the importer.The payee may also be a third part,or,most typically,the bank at which the drawer has his account.
Draft is a negotiable money instrument,which means that the ownership of the draft may easily be transferred from one person to another either in exchange of value or merely as a gift.If the draft is transferred for value rather than as a gift,negotiation takes effect only when the endorsement is made and only then is the transferee considered the new owner.
From the different aspects draft can be divied into the following types:
*Bank's Draft and Commercial Draft
Bank's Draft is an order from on bank (the drawer) to another (the drawee) with whom it normally maintains a correspondent relationship,to pay to the named person (the payee) a specified sun of money on demand.
Commercial Draft ,the most commonly used instrument in world trade,is drawn by a firm or an individual.the drawee can be a firm, an individual or a bank.
*Clean Draft and Documentrary Draft
Clean Draft is the one to which no other documents are attached.A banker's draft is usually clean.
Documentary Draft is the one that can be honored only when certain other documents have been attached to.Commercial drafts are usually documentary.
*Sight Draft and Time Draft
Sight Draft is the one that is payable on sigh of the documents of title or on first presentation of the title documents to him by his bank.
Time Draft (usance draft, term draft ) is the one that is payable in a specifed number of days after sight,the date of issue or acceptance,or at a fixed future time.For example,"At ** days after sight","At ** days after the date of issue","At ** days after date of Bill of Lading" etc. may be clearly specified on the draft.
Issuance,presentation,acceptance,endorsement,discount and dishonor are some of the terms related to draft and need to be grasped:
**Issuance means the act of the drawer in filling up the draft with particulars including the name of the drawee ( or payer),the amount payable,the date and the place of payment and the name of the payee,etc..
**Presentation means that the holder of the draft presents the draft to the drawee (or payer) asking the latter either to pay or accept the bill.The drawee's seeing the bill is called "sight".If the draft is sight draft,the drawee has to pay the amount immediately as the sight of the draft;if it is usance or time draft,the drawee should accept the draft first and pay the amount on the date due.
**acceptance is required for a usance draft. It means if a usance is presented,the drawee takes up his responsibility by accepting the draft for paymnet as a fixed future date through putting the word "accepted",his signature and the date of acceptane on the face of the draft.
**In the international money market, draft is a circulative and transferable instrument.Endorsement serves to transfer the title of a draft to the transferee.An effective endorsement must be on the back of the draft itself and consists of a signature,or plus the name of the endorsee and related comments by the owner of the draft.
**Discount : If the holder of a usance draft wants to get money before payment,the draft can be discounted through a discounting back at the prevailing discount rate.
**Dishonor:When a draft is duly presented for acceptance or payment,but teh acceptance or payment is refused,the draft is said to be dishonored.Upon dishonor, the holder of a draft can exercise the right of resources asking the drawer or the endorser to pay the draft amount.However,the holder has to obtain a "Certificate of Protest" from a notary public,a law court,a bank or other institutions with authority of issuing it to certify the dishonor of the draft.Sometimes,to avoid the possibility of recourse,the drawer or the endorser may mark the draft with "without recourse" when issuing or endorsing the draft.But a draft with " without recourse" can hardly be discounted in the money market.
1.2>Promissory Note
The simplest kind of negotiable money paper is the promissory note. It is an unconditional promise in writing,made by one person to another,engaging to pay on demand or at a fixed or determinable time a certain amount of money to or to the order of a specifed person or to bearer. A promissory note is ,therefore, two party paper where the issurer (maker) promises to pay a second person.A promissory note can be issued by a person,a firm, or a bank.Compared with commercial promissory note issued by an individual or a firm,promissory note issued by a bank is more widely used in trade.
1.3>Check
A check is a special type of draft.The drawer is the person signing the check,the drawee is the bank where the drawer has an account,and the payee is the beneficiary,that is ,the person in whose favor the check is made out.Thus,a check is an unconditional order by the drawer or maker,asking his back to pay a certain amout of money to a third party,the payee.If a check is issued by a bank,it is called a bank's demand draft.When the drawer signs the check,he should see to it that his deposit in the bank is not lower than the amount of the check. If the drawer has not enough deposit in the bank (drawee) for the check amount, the check will be dishonored, and this kind of check is called a "bounced check",which is not allowed.
1>Instruments of Payment
There are different means of payment including Draft,Promissory Note,Check,Credit Card and Cash,etc..Cash and Credit card are rarely used for large transactions in international trade.The common payment instruments of internation trade are Draft, Promissory Note,Check,among with Draft is the most frequently used one.
1.1 Draft/Bill of exchange
A draft is an unconditional written order addressed by one person to another and signed by the person giving it, requiring the person to whom it is addressed to pay at sight or at fixed or determined furture time the sum of money clearly specified to,or to the order of ,a specified person, or to bearer.
There are usually three parties to a draft:the drawer who issues,signs,and sends the draft to the second party,the drawee.The draft is addressed to the drawee or the payer,asking him either to pay or to accept and pay when the amounte indicated on the draft is due.Lastly,there is the payee who is to receive the payment made by the drawee.The payee and the drawer may be the same person,that is the exporter in the context of international trade and the payer and the drawee the importer.The payee may also be a third part,or,most typically,the bank at which the drawer has his account.
Draft is a negotiable money instrument,which means that the ownership of the draft may easily be transferred from one person to another either in exchange of value or merely as a gift.If the draft is transferred for value rather than as a gift,negotiation takes effect only when the endorsement is made and only then is the transferee considered the new owner.
From the different aspects draft can be divied into the following types:
*Bank's Draft and Commercial Draft
Bank's Draft is an order from on bank (the drawer) to another (the drawee) with whom it normally maintains a correspondent relationship,to pay to the named person (the payee) a specified sun of money on demand.
Commercial Draft ,the most commonly used instrument in world trade,is drawn by a firm or an individual.the drawee can be a firm, an individual or a bank.
*Clean Draft and Documentrary Draft
Clean Draft is the one to which no other documents are attached.A banker's draft is usually clean.
Documentary Draft is the one that can be honored only when certain other documents have been attached to.Commercial drafts are usually documentary.
*Sight Draft and Time Draft
Sight Draft is the one that is payable on sigh of the documents of title or on first presentation of the title documents to him by his bank.
Time Draft (usance draft, term draft ) is the one that is payable in a specifed number of days after sight,the date of issue or acceptance,or at a fixed future time.For example,"At ** days after sight","At ** days after the date of issue","At ** days after date of Bill of Lading" etc. may be clearly specified on the draft.
Issuance,presentation,acceptance,endorsement,discount and dishonor are some of the terms related to draft and need to be grasped:
**Issuance means the act of the drawer in filling up the draft with particulars including the name of the drawee ( or payer),the amount payable,the date and the place of payment and the name of the payee,etc..
**Presentation means that the holder of the draft presents the draft to the drawee (or payer) asking the latter either to pay or accept the bill.The drawee's seeing the bill is called "sight".If the draft is sight draft,the drawee has to pay the amount immediately as the sight of the draft;if it is usance or time draft,the drawee should accept the draft first and pay the amount on the date due.
**acceptance is required for a usance draft. It means if a usance is presented,the drawee takes up his responsibility by accepting the draft for paymnet as a fixed future date through putting the word "accepted",his signature and the date of acceptane on the face of the draft.
**In the international money market, draft is a circulative and transferable instrument.Endorsement serves to transfer the title of a draft to the transferee.An effective endorsement must be on the back of the draft itself and consists of a signature,or plus the name of the endorsee and related comments by the owner of the draft.
**Discount : If the holder of a usance draft wants to get money before payment,the draft can be discounted through a discounting back at the prevailing discount rate.
**Dishonor:When a draft is duly presented for acceptance or payment,but teh acceptance or payment is refused,the draft is said to be dishonored.Upon dishonor, the holder of a draft can exercise the right of resources asking the drawer or the endorser to pay the draft amount.However,the holder has to obtain a "Certificate of Protest" from a notary public,a law court,a bank or other institutions with authority of issuing it to certify the dishonor of the draft.Sometimes,to avoid the possibility of recourse,the drawer or the endorser may mark the draft with "without recourse" when issuing or endorsing the draft.But a draft with " without recourse" can hardly be discounted in the money market.
1.2>Promissory Note
The simplest kind of negotiable money paper is the promissory note. It is an unconditional promise in writing,made by one person to another,engaging to pay on demand or at a fixed or determinable time a certain amount of money to or to the order of a specifed person or to bearer. A promissory note is ,therefore, two party paper where the issurer (maker) promises to pay a second person.A promissory note can be issued by a person,a firm, or a bank.Compared with commercial promissory note issued by an individual or a firm,promissory note issued by a bank is more widely used in trade.
1.3>Check
A check is a special type of draft.The drawer is the person signing the check,the drawee is the bank where the drawer has an account,and the payee is the beneficiary,that is ,the person in whose favor the check is made out.Thus,a check is an unconditional order by the drawer or maker,asking his back to pay a certain amout of money to a third party,the payee.If a check is issued by a bank,it is called a bank's demand draft.When the drawer signs the check,he should see to it that his deposit in the bank is not lower than the amount of the check. If the drawer has not enough deposit in the bank (drawee) for the check amount, the check will be dishonored, and this kind of check is called a "bounced check",which is not allowed.
Saturday, July 21, 2007
International Transportation Insurance-Insurance Procedures
Usually insurance is arranged by the exporter (under CIF terms,etc.) or the importer (under FOB,CFR terms,etc.)approaching an insurance company which has a department specializing in cargo insurance.They may start by inquiring and choosing the right coverage and then negotiate insurance premium rates.Sometimes,brokers may be utilized whose assistance can be of enormous benefit as they are highly sklled specialists and can obtain sound and reliable coverage,together with competitive premium rates.In export trade,who will effect insurance depends on the particular trade term adopted.Under CIF terms,it is the seller who arrange insurance with an insurance company.Under the terms as FOB,CRF,etc., the buyer effects insurance,but he may ask the seller to arrange insurance on behalf of the buyer.An insurance policy is issued when goods are insured,but it is also usual for a certificate of insurance to be issued for documentary purpose.An insurance policy is actually a contract,sering as evidence of the agreement between the insurer and the insured (the people who take out insurance.It forms part of the shipping documents.
The amount insured must be at least the invoiced value of the goods.Under a CIF contract,it is common practice for exporter to insure the goods for 10% above the invoice value.In return for payment of a premium paid by the insured,the insurer agrees to pay the insured a sum should the event insured occur.In the sales contract,insurance clause should be expressly stipulated,including insurer,insured,the criterion for the insurance clause,insured value, and so on.
*Fundamental Principles of Cargo Insurance
The three fundamental principles of insurance are insurable interest,good faith and indemnity.
1.Insurable Interest
It means the person insuring must have the absolute ownership of the goods insured and must be the one who suffers some financial loss if the risk materializes.If he does not have the ownership or does not suffer any financial loss,he will have no insurable interest and will not be given the coverage.
2.Good Faith
In the formation of a contract of cargo insurance,the utmost good faith must be observed by both the assured and insurer.If either party fails to observe good faith,the other may avoid the contract.Breach of good faith may consist of either material misrepresentation,or of non- disclosure of a material fact.Hence,It is the duty ot the assured to disclose to the insurer all material circumstances that are known to the assured before the contract is concluded.The material circumstance will influence the decision of the insurer as to whether or not to accept the risk and under what terms.
3.Indemnity
A cargo insurance policy is basically a contract of indemnity,an agreement to compensate teh assured in the event of loss. According to this principle,the assured cannot recover more than his actual loss because the objective of insurance to provide compensation for the loss suffered by the assured but not to profit from insurance.
*Factors Determining Premium Rates
1.The Carrying Vessel
The age,classification,flag,ownership and management of the ship are imprtant consideration.
2.Nature of the packing used
This has to be related to the mode of the transportation and its adequacy as a form of protection to the cargo.Air freight and maritime container shipment tend to require less packing.
3.Type of Merchandise involved
Some commodities are more vulnerable to damage than others.Additionally,one must relate this to the cover provided and the experience of conveying such cargo.
4.Nature of Transit and Related Warehouse Accommodition
Generally,the shorter the transit time,the less vulnerable the cargo to damge/pilferage.Again the mode(s) of transport invloved influence(s) premium determination.
5.Previous Experience
If the cargo involved have been subject to significant damage/pilferage,the premium are likely to be high.
6.The Extent of Cover Needed
Obviously the more extensive cover is required,the higher the premium rate is.For example,glassware may be at a high rate against all risks including breakage,or at a much lower rate excluding breakage,cracking or chipping.
7.The Volume of Cargo Involved
A substantial quantity shipment of cargo may obtain a more favorable premium, but much consideration depends on other circumstances,particularly transport mode and type of packing,if any.
*Cargo Insurance Claims
Most insurance company policies require that immediate notice be given to nearest branch or agency in the event of damage giving rise to a claim under a policy on goods.When notified of damage,the company's agent appoints a suitable surveyor to inspect the goods and to report on the nature and extent of damage.A common practice is for a report or certificate of loss incorporate the surveyor's findings to be issured to the consignees,the latter paying fee.This certificate of loss is included with the claim papers and,if the loss is recoverable under the insurance cover,the fee is refunded to the claimants.
In some circumstances,the claim papers are returned to the place where the insurance was effected and subsequently presented to the underwriter.However especially where goods are sold on CIF terms,and the policy is assigned to the consignees,arrangement are made for any claims to be paid at destination. In such cases,the consignees approach the agents named in the policy for payment of their claims. Of course,the claims procedure will vay by circumstances,but undountedly a quicker settlement should be secured in the event of loss or damage.
The following documents are required when making an insurance claim and should be produced by the buyer:
7.1 The commercial invoice issued to the buyer
7.2 The original bill of lading
7.3The original policy or certificate of insurance
7.4The survey report or other documentary evident detailing the loss or dame incurred
7.5Extended protest for salvage loss,particular average in goods or the total loss of goods
7.6Any exchange of correspondence with carrier or other parties regading their liability for the loss or damage
7.7Any landing account af final destination
The amount insured must be at least the invoiced value of the goods.Under a CIF contract,it is common practice for exporter to insure the goods for 10% above the invoice value.In return for payment of a premium paid by the insured,the insurer agrees to pay the insured a sum should the event insured occur.In the sales contract,insurance clause should be expressly stipulated,including insurer,insured,the criterion for the insurance clause,insured value, and so on.
*Fundamental Principles of Cargo Insurance
The three fundamental principles of insurance are insurable interest,good faith and indemnity.
1.Insurable Interest
It means the person insuring must have the absolute ownership of the goods insured and must be the one who suffers some financial loss if the risk materializes.If he does not have the ownership or does not suffer any financial loss,he will have no insurable interest and will not be given the coverage.
2.Good Faith
In the formation of a contract of cargo insurance,the utmost good faith must be observed by both the assured and insurer.If either party fails to observe good faith,the other may avoid the contract.Breach of good faith may consist of either material misrepresentation,or of non- disclosure of a material fact.Hence,It is the duty ot the assured to disclose to the insurer all material circumstances that are known to the assured before the contract is concluded.The material circumstance will influence the decision of the insurer as to whether or not to accept the risk and under what terms.
3.Indemnity
A cargo insurance policy is basically a contract of indemnity,an agreement to compensate teh assured in the event of loss. According to this principle,the assured cannot recover more than his actual loss because the objective of insurance to provide compensation for the loss suffered by the assured but not to profit from insurance.
*Factors Determining Premium Rates
1.The Carrying Vessel
The age,classification,flag,ownership and management of the ship are imprtant consideration.
2.Nature of the packing used
This has to be related to the mode of the transportation and its adequacy as a form of protection to the cargo.Air freight and maritime container shipment tend to require less packing.
3.Type of Merchandise involved
Some commodities are more vulnerable to damage than others.Additionally,one must relate this to the cover provided and the experience of conveying such cargo.
4.Nature of Transit and Related Warehouse Accommodition
Generally,the shorter the transit time,the less vulnerable the cargo to damge/pilferage.Again the mode(s) of transport invloved influence(s) premium determination.
5.Previous Experience
If the cargo involved have been subject to significant damage/pilferage,the premium are likely to be high.
6.The Extent of Cover Needed
Obviously the more extensive cover is required,the higher the premium rate is.For example,glassware may be at a high rate against all risks including breakage,or at a much lower rate excluding breakage,cracking or chipping.
7.The Volume of Cargo Involved
A substantial quantity shipment of cargo may obtain a more favorable premium, but much consideration depends on other circumstances,particularly transport mode and type of packing,if any.
*Cargo Insurance Claims
Most insurance company policies require that immediate notice be given to nearest branch or agency in the event of damage giving rise to a claim under a policy on goods.When notified of damage,the company's agent appoints a suitable surveyor to inspect the goods and to report on the nature and extent of damage.A common practice is for a report or certificate of loss incorporate the surveyor's findings to be issured to the consignees,the latter paying fee.This certificate of loss is included with the claim papers and,if the loss is recoverable under the insurance cover,the fee is refunded to the claimants.
In some circumstances,the claim papers are returned to the place where the insurance was effected and subsequently presented to the underwriter.However especially where goods are sold on CIF terms,and the policy is assigned to the consignees,arrangement are made for any claims to be paid at destination. In such cases,the consignees approach the agents named in the policy for payment of their claims. Of course,the claims procedure will vay by circumstances,but undountedly a quicker settlement should be secured in the event of loss or damage.
The following documents are required when making an insurance claim and should be produced by the buyer:
7.1 The commercial invoice issued to the buyer
7.2 The original bill of lading
7.3The original policy or certificate of insurance
7.4The survey report or other documentary evident detailing the loss or dame incurred
7.5Extended protest for salvage loss,particular average in goods or the total loss of goods
7.6Any exchange of correspondence with carrier or other parties regading their liability for the loss or damage
7.7Any landing account af final destination
International Cargo Transportation Insurance-Insuance of Land,Air and Postal Transportation
A high volume of business is now conveyed by rail and road.It is essential that adequate cover be obtained for the land carriage.Again,the insurance broker or a trade association can give valuable advice.Insurance coverage for land transportation can be divided into two categories:Land Transportation,almost equivalent to WPA,and All Risks for land transportation,almost equivalent to Marine All Risks.
By the nature of air movements,short transit times,lighter packing requied,quick clearance at destination points and,in most places,stricker theft-pilferage control, a significant number of dispatches are sent by air these days.While an air disaster is spectacular and concerntrates the public attention exceptionally,it is true that air traffice is one of the safest methods of moving goods.Obviously,the speed and ease of handling air freight makes an insurance risk attractive to the insurer and premium rates attractive to the insured.There are also two types of coverage: Air transportation risk and Air transportation All Risk.Air transportation risk is similar to WPA,while air transportation All Risk is similar to Marine All Risk.
Parcel post insuance covers the lossed of or damge to the parcels caused by nature calamities,fortuitous accidents or external risks.It includes Parcel Risk and Parcel Post All Risks.On the basis of these two basic coverage,some additional risks may also be added if circumstances require.
By the nature of air movements,short transit times,lighter packing requied,quick clearance at destination points and,in most places,stricker theft-pilferage control, a significant number of dispatches are sent by air these days.While an air disaster is spectacular and concerntrates the public attention exceptionally,it is true that air traffice is one of the safest methods of moving goods.Obviously,the speed and ease of handling air freight makes an insurance risk attractive to the insurer and premium rates attractive to the insured.There are also two types of coverage: Air transportation risk and Air transportation All Risk.Air transportation risk is similar to WPA,while air transportation All Risk is similar to Marine All Risk.
Parcel post insuance covers the lossed of or damge to the parcels caused by nature calamities,fortuitous accidents or external risks.It includes Parcel Risk and Parcel Post All Risks.On the basis of these two basic coverage,some additional risks may also be added if circumstances require.
Tuesday, July 17, 2007
International Cargo Transportation Insurance-Marine Cargo Insurance
In internatonal trade, good traveling long distances to another courtry,outof the physical control of bothe the buyer and the seller,may face all kinds of damages or losses and therefore must be insured again loss or damage at each stage of the journey.In this way, whatever mode of transport is being used, neither the exporter nor the importer suffers any loss.Obviously,cargo insurance is a contract whereby the insurer(insurance company) ,on the base of a premium paid,unertake to indemnify the insured against loss from certain risks or perils to which the cargo insured may be exposed.It is an indispensable adjunct of international trade. Without adequate insurance and protection of the interests of those with goods in transit,international trade can not be guaranteed.
*Marine Cargo Insurance
1.1.Types of Risks,Losses and Expenses Covered.
(1).Two types of risks are coverd by ocean marine insurance: one is the perils of the sea,including both natural calamities and unexpected accidents.Natural calamities include heavy weather,lightering,Tsunami,earthquake,volcanic eruption and so on.Accidents refer to fire,explosion,vessel being stranded,grounded,sunk or capsized,collision or contact of vessel with any external object other than water,etc.
The other type of risks is external (extraneous)risks including general external risks and special external risks.General external risks include theft and pilferage,contamination,leakage,breakage,sweating and/or heating,taint of odor,rusting,hook damage,fresh and/or rain water damage,short-delivery and noe-delivery,shortage in weight,clashing and so on.Special risks include war,strike,failure to delivery due to some special laws or regulations.
(2).Two types of losses are covered by marine cargo insurance,one is total loss and the orther partial loss.
Total loss is divided into actual total loss and constructive total loss.Actual loss means the complete loss of the insured cargo in value.A constructive total loss accurs when the cost of salvaging the shipment would be more than the salvaged value of the merchandise.The shipment insured is reasonably abandoned as any further efforts at salvage would be fruitless.Most insurance policies provide for the payment of a total loss up to the insured amount.
Partial loss means the total loss of part of the insured cargo.It can be divided into general average and particular average.
General average is based upon the relationship between the shipowner and the shippers who have cargo aboard the same vessel on a particular voyage.All these parties are bound together in the "adventure".Sometims,when the whole ship was threatened by a peril of the sea or some other hazard,in order to save the ship and some of the cargo,part of the cargo or vessel have to be sacrificed,then an act of general average would be declared.According to marine law,those interests whose property was saved must contribute proportional1y to cover the lossed of the one whose property was voluntarily sacrificed.
Particular average means a partial loss suffered by part of the cargo.It occurs when a storm or fire damages part of the shipper's and no one else's cargo has toe sacrificed to save the voyage.The cargo owner whose goods were damaged or lost should refer to his insurance company,provided his policy covers the specific type of loss suffered.
(3).Ocean cargo insurance also covers the expense incurred to avoid or reduce the damage or loss of the subject mattery insured.There are two main types of expenses. One is sue and labor expense paid by he assured or his agent.The other is salvage charge paid by the party other than the insuer and/or the insured.
*Main Types of Insurance
Thear are mainly two types of insurance coverage,basic coverage and additianal coverage.Basic coverage mainly includes FPA,WPA and All Risks.Additional coverage includes general additional coverage and special additional coverage.
(1). FPA(Free from Particular Average) is a limited form of cargo insurance coverage under which no partial loss or damage is recoverable.It only provides coverage for total losses and general average emerging from the actual "marine perils" like vessel being stranded,grounded or sunk.
(2).WPA(With Particular Average) is a wide cover than FPA.It provides extensive cover against all loss or damage due to marine perils throughout the duration of the policy,including partial loss or damage which may be attributed (ascribed) to natural calamities like heavy weather.
(3).All Risks is the most comprehensive of the thress basic coverage under which the insurer is responsible for all total or partial loss of ,or damge to the goods insured either arising from sea perils or general external causes.However,it does not cover loss,damage or expense caused by delay,inherent vice or nature of the goods insured,or special external risks of war,strike,etc.
(4).General additional risks include TPND (Theft,Pilferage and Non-delivery),Fresh Water Rain Damage,Risk of storage,Risk of Intermixture and Contamination ,Risk of Leakage,Risk of Clash and Breakage,Risk of Odor,Damage caused by Heating and Sweating,Hook Damage,Risk of Rust,etc.These additional risks can not be covered independently and should go with FPA or WPA and are included in All Risks coverage.
(5)Special additional risks include War Risk,Strike Risks,Failure to delivery Risk,Import Duty risk,Rejection Risk,etc.,among which War Risk and Strike risk are more common.These additional coverages are usually taken out with FPA,WPA and All risks.
Too choose an insurance coverage that is both economical and effective,the exporter or the importer should be aware of the possible losses to be expected of a particular consignment.Different items have different natures and may apply to different insurance types.For example,cargo like iron ore faces little risk of partial loss,so FPA will be sufficient.Most manufactured goods are covered against All Risks as they are prone to damage caused by sea perils or external risks.
*Marine Cargo Insurance
1.1.Types of Risks,Losses and Expenses Covered.
(1).Two types of risks are coverd by ocean marine insurance: one is the perils of the sea,including both natural calamities and unexpected accidents.Natural calamities include heavy weather,lightering,Tsunami,earthquake,volcanic eruption and so on.Accidents refer to fire,explosion,vessel being stranded,grounded,sunk or capsized,collision or contact of vessel with any external object other than water,etc.
The other type of risks is external (extraneous)risks including general external risks and special external risks.General external risks include theft and pilferage,contamination,leakage,breakage,sweating and/or heating,taint of odor,rusting,hook damage,fresh and/or rain water damage,short-delivery and noe-delivery,shortage in weight,clashing and so on.Special risks include war,strike,failure to delivery due to some special laws or regulations.
(2).Two types of losses are covered by marine cargo insurance,one is total loss and the orther partial loss.
Total loss is divided into actual total loss and constructive total loss.Actual loss means the complete loss of the insured cargo in value.A constructive total loss accurs when the cost of salvaging the shipment would be more than the salvaged value of the merchandise.The shipment insured is reasonably abandoned as any further efforts at salvage would be fruitless.Most insurance policies provide for the payment of a total loss up to the insured amount.
Partial loss means the total loss of part of the insured cargo.It can be divided into general average and particular average.
General average is based upon the relationship between the shipowner and the shippers who have cargo aboard the same vessel on a particular voyage.All these parties are bound together in the "adventure".Sometims,when the whole ship was threatened by a peril of the sea or some other hazard,in order to save the ship and some of the cargo,part of the cargo or vessel have to be sacrificed,then an act of general average would be declared.According to marine law,those interests whose property was saved must contribute proportional1y to cover the lossed of the one whose property was voluntarily sacrificed.
Particular average means a partial loss suffered by part of the cargo.It occurs when a storm or fire damages part of the shipper's and no one else's cargo has toe sacrificed to save the voyage.The cargo owner whose goods were damaged or lost should refer to his insurance company,provided his policy covers the specific type of loss suffered.
(3).Ocean cargo insurance also covers the expense incurred to avoid or reduce the damage or loss of the subject mattery insured.There are two main types of expenses. One is sue and labor expense paid by he assured or his agent.The other is salvage charge paid by the party other than the insuer and/or the insured.
*Main Types of Insurance
Thear are mainly two types of insurance coverage,basic coverage and additianal coverage.Basic coverage mainly includes FPA,WPA and All Risks.Additional coverage includes general additional coverage and special additional coverage.
(1). FPA(Free from Particular Average) is a limited form of cargo insurance coverage under which no partial loss or damage is recoverable.It only provides coverage for total losses and general average emerging from the actual "marine perils" like vessel being stranded,grounded or sunk.
(2).WPA(With Particular Average) is a wide cover than FPA.It provides extensive cover against all loss or damage due to marine perils throughout the duration of the policy,including partial loss or damage which may be attributed (ascribed) to natural calamities like heavy weather.
(3).All Risks is the most comprehensive of the thress basic coverage under which the insurer is responsible for all total or partial loss of ,or damge to the goods insured either arising from sea perils or general external causes.However,it does not cover loss,damage or expense caused by delay,inherent vice or nature of the goods insured,or special external risks of war,strike,etc.
(4).General additional risks include TPND (Theft,Pilferage and Non-delivery),Fresh Water Rain Damage,Risk of storage,Risk of Intermixture and Contamination ,Risk of Leakage,Risk of Clash and Breakage,Risk of Odor,Damage caused by Heating and Sweating,Hook Damage,Risk of Rust,etc.These additional risks can not be covered independently and should go with FPA or WPA and are included in All Risks coverage.
(5)Special additional risks include War Risk,Strike Risks,Failure to delivery Risk,Import Duty risk,Rejection Risk,etc.,among which War Risk and Strike risk are more common.These additional coverages are usually taken out with FPA,WPA and All risks.
Too choose an insurance coverage that is both economical and effective,the exporter or the importer should be aware of the possible losses to be expected of a particular consignment.Different items have different natures and may apply to different insurance types.For example,cargo like iron ore faces little risk of partial loss,so FPA will be sufficient.Most manufactured goods are covered against All Risks as they are prone to damage caused by sea perils or external risks.
Thursday, July 12, 2007
Internaiton Cargo Transport-Major Shipping Documents
*Bill of Lading
A bill of lading is a receipt for goods shipped on board of the nominated vessel,signed by the person (or his agent) who contracts to carry them, and stating the conditions in which the goods were delivered to (received by) the ship.It is not the actual contract,but forms excellent evidenct of the terms of the contract.It is a document of title to the goods,enabling the shipper or owner of the goods to endorse title to the others,sell goods in transmit,present to banks with other documents in seeking payment under documentary credits (跟单信用证).Abbreviated generally as B/L,it is the most important document for sea transport.
There are different types of bill of lading.
1.shipped (on board) B/L and received for Payment B/L
1.1.Shipped B/L is issued by the shipping company after the goods are actually shipped on the board of the designated vessel.Sine shipped Bill of Lading provide better guarantee for consignee to receive the cargoes at the destination,the importer will normally require the exporter to produce shipped B/L and most bill of lading forms are preprinted as "Shipped Bill".
1.2.Received for payment bill of lading ariese where the word "shipped" does not appear on the bill of lading.It merely confirm that the goods have been handed over to, and are in the custody of the shipowner.The buyer under a CIF contract will not accept such a B/L because,in the obsence of the date of shipment, her is in no position to anticipate the arrival of the consignment.
2.Clean B/L and Unclean B/L
2.1. A clean bill of lading is tha one that states that the goods have been "shipped in apparent good order and condition".It is issued when the goods do not show any defects on their exteriors at the time of loading at the port of shipment.This type is favored by the buyer and the banks for financial settlement purpose.
2.2.If defects are sound on the exteriors of the goods, or the shipping company does not agree to any of the statement in the bill of lading,the bill will be marked with (as) "unclean","foul" or"...package in damaged condition".Unclean B/L is usually unacceptable to the buyer and banks.
3.Straight,blank and order B/L
*Straight billof lading has a designated consignee.Under this bill,only the named consignee at the destination is entitled to take delivery of the cargo.As it is not transferable,it is not commonly used in international trade and normally applies to high-value shipment or goods for special purchases.
*Blank B/L aslo called Open B/L or Bearer B/L,means that there is no definite consignee of the goods.There usually appear in the box of consignee words like " To bearer".Anyone who holds the bill is entitled to the goods the bill presents.No endorsement is needed for the transfer of the bank bill. Due to the exceedingly high risk involved,this bill is rarely used.
*Order B/L is widely used in international trade.It means that the goods are consigned or destined to the order of a named person.In the box of consignee,"To order","To order of the shipper",or "To order of the consignee" is marked.It can be transferred only after endorsement is made.If the B/L is made out " To order of the shipper",the shipper will endorse the bill. If is made out " To order of the consignee",the consignee will endorse the bill to transfer it.A blank endorsement is usually required for a "To order" bill.
4.Direct,transshipment,through bill of lading
*Direct B/L means that the goods are shipped from the port of loading directly to the port of destination without involving transshipment.
*Transshipment B/L means the goods need to be transshipped at an intermediate port as there is no direct service between the shipment port and the destination port.
*It is sometimes necessary to employ two or more carriers to get the goods to their final destination.In this case,usually the first carrier will sign and issue a through bill of lading. The on-carriage may be either by a second vessel or by a different form of transport.
5.Liner B/L,container B/L and combined transport B/L
*Liner bill of lading is issued by a liner company for shipment on scheduled port calls through scheduled routes.
*Container B/L is becoming more common in use with the development of containerization. It covers the goods from pot to port or from inland point to of departure to inland point of destination.
*Combined transport B/L is issued by combined transport operator that covers the multi-modal transport on a door to door basis in one contract of carriage. It is ideal for container movements. It differs from "through B/L" in that combined transport is operated by only one carrier.
6.Long form B/L and shor form B/L
*Long form B/L is more detailed with shipping contract clause printed on the back of the page.
*Short form B/L, as the same implies,is an abbreviated type of document,smaller and not containing the long list of detailed clauses that generally appear on bills of lading.In certain circumstance it may not,therefore,be considered a suitable form of evidence of contract or affreightment.
7.On Deck B/L,stale B/L,ante-dated B/L and advanced B/L
*On Deck B/L is issued only when the cargo is loading on ship's deck. It applies to goods like livestock,plants,dangerous cargo, or awkwardly-shaped goods that can not fit into the ship's holds. In this case,the goods are exposed to greater risks and therefore usually specific insurance must be taken out against addtional risks.
*It is important that the bill of lading is available at the port of destination before the goods arrive or,failing this,at the same time.Bills presented to the consignee or buyer or his bank after the goods are due at the port of destination is called (described as )"Stale B/L". As a cargo cannot be collected by the buyer without the bill of lading,the late arrival of this all-important document may have undesirable consequence such as warehouse rent,etc. and therefore should be avoided.Sometimes especially in the case of short sea voyages,it is necessary to add a clause of "Stale B/L is acceptable".
*Ante-dated B/L means when the actual shipment date is later than that stipulated in the L/C,the carrier sometimes,at the shipper's request,issues a B/L with a date of signature that suits the requirement so as to avoid non-acceptance by the bank.Due to the risk of the goods being rejected by the buyer arising from the issuance of such a bill,it is advisable to avoid this malpractice even when it seems necessary in certain circumstances.
*Advanced B/L is issued when the expiry date of the L/C is due but the exporter hasn't ye got the goods ready for shipment. The purpose of issuing such a bill is to negotiate payment with the bank in time whthin the validity of the L/C. It is also regarded as unlawful and risky and should be avoided.
Still there are some other types of B/L such as Groupage B/L which covers a number of consignments from different shippers,and House B/L issued by a freight forwarder to each individual shipper,and so on.House B/L is issued by the freight forwarder before he gets on groupage B/L from the shipowner.
All the above mentioned bills are not independent of each other.Sever types may be combined into one like "Clean on board,to order,blank endorsed B/L".A received form of shipment bill may also be a straight and clean bill.Bills of lading are made out in sets,consisting of a number of originals (usually three) and a number of copies and marked "original" and "copy" respectively.Only the originals signed by the carrier enable the consignee to take delivery of the goods.The copies are just for reference.
A bill of lading is a receipt for goods shipped on board of the nominated vessel,signed by the person (or his agent) who contracts to carry them, and stating the conditions in which the goods were delivered to (received by) the ship.It is not the actual contract,but forms excellent evidenct of the terms of the contract.It is a document of title to the goods,enabling the shipper or owner of the goods to endorse title to the others,sell goods in transmit,present to banks with other documents in seeking payment under documentary credits (跟单信用证).Abbreviated generally as B/L,it is the most important document for sea transport.
There are different types of bill of lading.
1.shipped (on board) B/L and received for Payment B/L
1.1.Shipped B/L is issued by the shipping company after the goods are actually shipped on the board of the designated vessel.Sine shipped Bill of Lading provide better guarantee for consignee to receive the cargoes at the destination,the importer will normally require the exporter to produce shipped B/L and most bill of lading forms are preprinted as "Shipped Bill".
1.2.Received for payment bill of lading ariese where the word "shipped" does not appear on the bill of lading.It merely confirm that the goods have been handed over to, and are in the custody of the shipowner.The buyer under a CIF contract will not accept such a B/L because,in the obsence of the date of shipment, her is in no position to anticipate the arrival of the consignment.
2.Clean B/L and Unclean B/L
2.1. A clean bill of lading is tha one that states that the goods have been "shipped in apparent good order and condition".It is issued when the goods do not show any defects on their exteriors at the time of loading at the port of shipment.This type is favored by the buyer and the banks for financial settlement purpose.
2.2.If defects are sound on the exteriors of the goods, or the shipping company does not agree to any of the statement in the bill of lading,the bill will be marked with (as) "unclean","foul" or"...package in damaged condition".Unclean B/L is usually unacceptable to the buyer and banks.
3.Straight,blank and order B/L
*Straight billof lading has a designated consignee.Under this bill,only the named consignee at the destination is entitled to take delivery of the cargo.As it is not transferable,it is not commonly used in international trade and normally applies to high-value shipment or goods for special purchases.
*Blank B/L aslo called Open B/L or Bearer B/L,means that there is no definite consignee of the goods.There usually appear in the box of consignee words like " To bearer".Anyone who holds the bill is entitled to the goods the bill presents.No endorsement is needed for the transfer of the bank bill. Due to the exceedingly high risk involved,this bill is rarely used.
*Order B/L is widely used in international trade.It means that the goods are consigned or destined to the order of a named person.In the box of consignee,"To order","To order of the shipper",or "To order of the consignee" is marked.It can be transferred only after endorsement is made.If the B/L is made out " To order of the shipper",the shipper will endorse the bill. If is made out " To order of the consignee",the consignee will endorse the bill to transfer it.A blank endorsement is usually required for a "To order" bill.
4.Direct,transshipment,through bill of lading
*Direct B/L means that the goods are shipped from the port of loading directly to the port of destination without involving transshipment.
*Transshipment B/L means the goods need to be transshipped at an intermediate port as there is no direct service between the shipment port and the destination port.
*It is sometimes necessary to employ two or more carriers to get the goods to their final destination.In this case,usually the first carrier will sign and issue a through bill of lading. The on-carriage may be either by a second vessel or by a different form of transport.
5.Liner B/L,container B/L and combined transport B/L
*Liner bill of lading is issued by a liner company for shipment on scheduled port calls through scheduled routes.
*Container B/L is becoming more common in use with the development of containerization. It covers the goods from pot to port or from inland point to of departure to inland point of destination.
*Combined transport B/L is issued by combined transport operator that covers the multi-modal transport on a door to door basis in one contract of carriage. It is ideal for container movements. It differs from "through B/L" in that combined transport is operated by only one carrier.
6.Long form B/L and shor form B/L
*Long form B/L is more detailed with shipping contract clause printed on the back of the page.
*Short form B/L, as the same implies,is an abbreviated type of document,smaller and not containing the long list of detailed clauses that generally appear on bills of lading.In certain circumstance it may not,therefore,be considered a suitable form of evidence of contract or affreightment.
7.On Deck B/L,stale B/L,ante-dated B/L and advanced B/L
*On Deck B/L is issued only when the cargo is loading on ship's deck. It applies to goods like livestock,plants,dangerous cargo, or awkwardly-shaped goods that can not fit into the ship's holds. In this case,the goods are exposed to greater risks and therefore usually specific insurance must be taken out against addtional risks.
*It is important that the bill of lading is available at the port of destination before the goods arrive or,failing this,at the same time.Bills presented to the consignee or buyer or his bank after the goods are due at the port of destination is called (described as )"Stale B/L". As a cargo cannot be collected by the buyer without the bill of lading,the late arrival of this all-important document may have undesirable consequence such as warehouse rent,etc. and therefore should be avoided.Sometimes especially in the case of short sea voyages,it is necessary to add a clause of "Stale B/L is acceptable".
*Ante-dated B/L means when the actual shipment date is later than that stipulated in the L/C,the carrier sometimes,at the shipper's request,issues a B/L with a date of signature that suits the requirement so as to avoid non-acceptance by the bank.Due to the risk of the goods being rejected by the buyer arising from the issuance of such a bill,it is advisable to avoid this malpractice even when it seems necessary in certain circumstances.
*Advanced B/L is issued when the expiry date of the L/C is due but the exporter hasn't ye got the goods ready for shipment. The purpose of issuing such a bill is to negotiate payment with the bank in time whthin the validity of the L/C. It is also regarded as unlawful and risky and should be avoided.
Still there are some other types of B/L such as Groupage B/L which covers a number of consignments from different shippers,and House B/L issued by a freight forwarder to each individual shipper,and so on.House B/L is issued by the freight forwarder before he gets on groupage B/L from the shipowner.
All the above mentioned bills are not independent of each other.Sever types may be combined into one like "Clean on board,to order,blank endorsed B/L".A received form of shipment bill may also be a straight and clean bill.Bills of lading are made out in sets,consisting of a number of originals (usually three) and a number of copies and marked "original" and "copy" respectively.Only the originals signed by the carrier enable the consignee to take delivery of the goods.The copies are just for reference.
Tuesday, July 10, 2007
International Cargo Transport-Clause of Shipment
When negotiating a transaction,the buyer and the seller should reach an agreement on time of shipment,port of shipment and port of destination,shipping advice ,partial shipment and transshipment ,dispatch and demurrage,etc.and specify them in the contract of sale.Clear stipulation of shipment clause is an important condition for the smooth execution of the contract.
*Time of Shipment
Time of shipment is the deadline by which the seller makes shipment of the contracted goods.There are two ways of setting the time of shipment.One is specifying clearly a period of time. The other is setting a time period between the shipment and the deadline by which the relevan L/C must reach the seller.For example,shipment is to be made *** days after the seller recevie the L/C.When stipulating the time of shipment,both parties should consider the availability of the goods,ships and shipping space,the opening date of L/C and the nature of the cargo.Avoid ambiguous phrase as "Immediate shipment","Prompt Shipment","Shipment as soon as possible".Normally,the L/C should arrive at least 15 days before the time of shipment to permit the sufficient time to check the L/C and make necessary shipping arrangements.
*Port of Shipment and Port of destination
Port of shipment is the port where the goods are shipped and depart,while port of destination is the port at which the goods are ultimately discharged.Both of them should be specified int the contract.Normally, a specific port of shipment and a specific port of destination are stipulated,but sometimes two or more of each are stated to meet special requirements.In case a decision cann't be made,several alternatives should be listed,such as "One port out of London/Hamburger/Rotterdam as the port of destination at the buyer's location" or perhaps a general scope is stated such as "EMP(European Main Port","China Port", and so on.As "EMP" and "China Port" are too vague (ambiguous),we'd better try to avoid using them.In choosing port of shipment and port of destination, try to made them as clear as possible;provide some flexibility by allowing optional ports specially when it's hard to make a clear decision;take into account port regulations,facilities,charges and possible sanctions;and be alert to the possibility of different port having the same name.
*Shipping Advice
When the goods are shipped on board of the vessel,the seller needs to give the buyer prompt notice of the port of shipment,the date of sailing,the name of the carring vessel,the estimated time of arrival of the vessel and send the buyer the copies of the necessary documents to enable the buyer to get ready to take delivery of the goods.In the event of the seller failing to send the buyer shippment advice within the prescribed time period,the seller would bear the consequential costs incured.Under FOB terms, the seller should also sent notificatin of cargo readiness to the buyer 30 days or 45 days before the time of shipment so that the buyer can charter ships and send them to the port of shipment to take cargoes in time.On the orther hand,after receipt of the notification of cargo readiness for the seller,the buyer should inform the seller within the agreed time the name of the nominated vessel and the date of the vessel taking cargoes so as to enable the seller to arrange shipment.
*Partial Shipment and Transshipment
Partial shipment means shipping the commodity under on contract in more than on lot.It should be defined in the clause of shipment whether "Partial shipment is ( or is not) allowed".Meanwhile, the time and quantity of each shipment should be specified,such as "shipment during March~June in four equal mothly lots".The seller should strictly follow the regulations,or otherwise,the buyer has the rights to reject the goods.Transshipment means when there is no direct ship between the port of shipment and the port of destination,or no suitable ships available at that particular period,the goods have to be transferred form one ships to another at an intermediate port.The clause must also specify "whether transshipment is (or is not) allowed".In addition,it should be indicated who pays the cost of transshipment,
*Lay Time,Demurrage and dispatch
Lay time is the time allowed for the completion of loading and unloading, and is usually expressed by days or hours.
There are some ways of stipulating the lay time.
1.Days or Running Days:including bad weather days,sundays or any other holidays,unfavorable to the shipper
2.Weather working days of 24 hours:excluding sundays,holidays and rainy days,favorable to shipper but unfavorable for shipowner
3.Weather working days of 24 consecutive hours:excluding the bad weather time period,suitable for ports that operate day and night]
As lay time concernes the interests of shipowner,consignee or consignor,it is important to make it clear in the contract.Vague phrases as "to load/discharge in customary quick dispatch" should be avoided.If loading and unloading is not completed within the agreed lay time,demurrage should be paid at agreed rate by the part that charters ships to the shipowner to compensate for the cost sustained.On the other hand,if loading and unloading are completed in advance,the shipowner will pay dispatch money as a reward to the part who charters ships. Demurrage and dispatch are considered as a way of encouraging timely shipment,and are somtimes specified in the shipment clause.
*Time of Shipment
Time of shipment is the deadline by which the seller makes shipment of the contracted goods.There are two ways of setting the time of shipment.One is specifying clearly a period of time. The other is setting a time period between the shipment and the deadline by which the relevan L/C must reach the seller.For example,shipment is to be made *** days after the seller recevie the L/C.When stipulating the time of shipment,both parties should consider the availability of the goods,ships and shipping space,the opening date of L/C and the nature of the cargo.Avoid ambiguous phrase as "Immediate shipment","Prompt Shipment","Shipment as soon as possible".Normally,the L/C should arrive at least 15 days before the time of shipment to permit the sufficient time to check the L/C and make necessary shipping arrangements.
*Port of Shipment and Port of destination
Port of shipment is the port where the goods are shipped and depart,while port of destination is the port at which the goods are ultimately discharged.Both of them should be specified int the contract.Normally, a specific port of shipment and a specific port of destination are stipulated,but sometimes two or more of each are stated to meet special requirements.In case a decision cann't be made,several alternatives should be listed,such as "One port out of London/Hamburger/Rotterdam as the port of destination at the buyer's location" or perhaps a general scope is stated such as "EMP(European Main Port","China Port", and so on.As "EMP" and "China Port" are too vague (ambiguous),we'd better try to avoid using them.In choosing port of shipment and port of destination, try to made them as clear as possible;provide some flexibility by allowing optional ports specially when it's hard to make a clear decision;take into account port regulations,facilities,charges and possible sanctions;and be alert to the possibility of different port having the same name.
*Shipping Advice
When the goods are shipped on board of the vessel,the seller needs to give the buyer prompt notice of the port of shipment,the date of sailing,the name of the carring vessel,the estimated time of arrival of the vessel and send the buyer the copies of the necessary documents to enable the buyer to get ready to take delivery of the goods.In the event of the seller failing to send the buyer shippment advice within the prescribed time period,the seller would bear the consequential costs incured.Under FOB terms, the seller should also sent notificatin of cargo readiness to the buyer 30 days or 45 days before the time of shipment so that the buyer can charter ships and send them to the port of shipment to take cargoes in time.On the orther hand,after receipt of the notification of cargo readiness for the seller,the buyer should inform the seller within the agreed time the name of the nominated vessel and the date of the vessel taking cargoes so as to enable the seller to arrange shipment.
*Partial Shipment and Transshipment
Partial shipment means shipping the commodity under on contract in more than on lot.It should be defined in the clause of shipment whether "Partial shipment is ( or is not) allowed".Meanwhile, the time and quantity of each shipment should be specified,such as "shipment during March~June in four equal mothly lots".The seller should strictly follow the regulations,or otherwise,the buyer has the rights to reject the goods.Transshipment means when there is no direct ship between the port of shipment and the port of destination,or no suitable ships available at that particular period,the goods have to be transferred form one ships to another at an intermediate port.The clause must also specify "whether transshipment is (or is not) allowed".In addition,it should be indicated who pays the cost of transshipment,
*Lay Time,Demurrage and dispatch
Lay time is the time allowed for the completion of loading and unloading, and is usually expressed by days or hours.
There are some ways of stipulating the lay time.
1.Days or Running Days:including bad weather days,sundays or any other holidays,unfavorable to the shipper
2.Weather working days of 24 hours:excluding sundays,holidays and rainy days,favorable to shipper but unfavorable for shipowner
3.Weather working days of 24 consecutive hours:excluding the bad weather time period,suitable for ports that operate day and night]
As lay time concernes the interests of shipowner,consignee or consignor,it is important to make it clear in the contract.Vague phrases as "to load/discharge in customary quick dispatch" should be avoided.If loading and unloading is not completed within the agreed lay time,demurrage should be paid at agreed rate by the part that charters ships to the shipowner to compensate for the cost sustained.On the other hand,if loading and unloading are completed in advance,the shipowner will pay dispatch money as a reward to the part who charters ships. Demurrage and dispatch are considered as a way of encouraging timely shipment,and are somtimes specified in the shipment clause.
International Cargo Transport-Modes of Transport
Modes of Transport
Transport allows goods to be conveyed from one place to another.Without transport, international trade would not be possible. Carriage of goods can take place by sea,rail,air,road,inland waterway,parcel post,container and multimodal transport.
*Sea Transport (Ocean Transport)
Ocean freight is the most widely used mode of transportation in international trade,with advantage of easy passage,large capacity and low cost.However,it is slow,vulnerable to bad weather and less punctual if compared with road or air transport.
1.Kinds of vessels
There are different types of cargo vessels designed to suit the needs of shipping different cargoes.
1.1General cargo vessels:to carry various types of cargoes
1.2.Oil tankers:resposible for the transport(movement) of the world's oil
1.3.container vessels:designed to carry from 200 to over 4000 standard containers of 20 feet in length
1.4.Oil/Bulk/Ore(OBO) vessels:multi-purpose ship designed for switching between bulk shipment of oil and bulk grain,fertilizer and ore.
1.5.Ro/Ro vessels:designed for loaded trailers or any vehicles to be driven onto the vessel to facilitate faster loading and unloading
1.6.LASH(Lighter Aboard ship):designed to carry lighters on which cargoes are loaded,idealfor shallow waterways
1.7.Refrigerated ship:for carrying perishable cargoes
1.8.Timber ship:with spacious holds and heavy lifts for carrying timber or wood logs
According to the ways of operation, merchant vessels can be divided into liners（班轮） and tramps(不定期轮).Comparatively speaking,liners prove to be a more economical means of inernational cargo distribution
A liner is a vessel that operates over a regular route,stops at fixed ports according to an adventised schedule.Its freight is relatively fixed with loading and unloading charges included.It is suitable for the cargo of small quantity.
A tramp does not follow regular routes or fixed schedule,but travels when cargoes are available,ideal for cargoes of a complete shipload.Its freight is determined by market.Tramps can be divided into voyage charter and time time charter.A voyage charter is the hire of a ship for a particular voyage that can be further divided into single voyage charter ,consecutive voyage charter and so on.A time charter is the charter of a ship for a definite period of time.
2.Role of shipping and forwarding agents
To many companies,particularly the small organizations or those new to exporting,shipping and forwarding agents will be of tremendous value.They are experts in their field with an up-to-date and specialized knowledge of all the various methods of transport and relative freight and carriage rates.Their business keeps them in close touch with the constantly changing conditions at ports and the requirements of customs authorities. Another advantage is that the consolidation or groupage of a number of cargoes from different exports into one consignment makes transportaton more economical.Many such agents also operate road transpor and can often include in their services the collection of the goods from the exporter's warehouse.Apart from charging their customer any direct costs encountered,such as transport,bills of lading,customs entry,etc.,they will usually levy a service fee based on a percentage of the freight charge.
3.Whether the exporter is arranging the shipment directly with ship owners or utilizing the service of an agent ,the following procedures will be encountered:
*The selection of a vessel and shipping line (route)of the required port of destination
*The procuring of space on board of a specific vessel
*The consideraton and calculation of the particular freight rates involved
*Payment of freight
*Preparation of the bills of lading
*Dispatch of the consignment to the docks
*Utilization of appropriate standard shipping order form.
4.Freight rate
In practice,most shipping companies calculate freight rates on a weight or measurement basis.The following rules are applicable in relation to the calculation of freight.
*For items marked with "W",the freight thereon is to be calculated per metric ton on weight.
*For items marked with "M",the freight is to be calculated per cubic meter on measurement of the cargo (measurement ton).
*For items marked with "Ad Val.",the freight is to be calculated on the basis of the price or value of the cargo concerned.
*For items marked with "W/M",the freight is to be calculate on the basis of either weight ton or measurement tom,subject to the higher rate.
*For items marked with "W/M or Ad val",the highest rate is applicable.
*where different articles are contained in one package,the higher rate of freight is applicable,while the same kind of commodity in different packing is subject to different rates.
In addition to the basic freights rates,there are all kinds of surcharges that can not be ignored,such as Extra Charges on Heavy Lifts,Extra Charges on over lengths,Additional on Optional Discharging Port,Direct Additional,Transshipment Additional,Port Additional and so on.
*Container Transport
Containerization is a method of distributing merchandises in a unitized form,suitable for ocean,rail and multimodal transport.It is the most modern form of physical international distribution and overall is highly efficient in terms of reliability, cost,quality of service,advanced technology and so on.
1.Features of container transport can be summarized as follows:
1.1. It offers a door to door service under FCL/FCL (Full Container Load/Full Container Load),door to container freight station (cfs) service under FCL/LCL (Full Container Load/Less than Container Load),cfs to cfs service under LCL/LCL,or cfs to door service under LCL/FCL conditions.
Note:
FCL: Full container Load 整装 (at exporter's place or shipment port） or 整交 （at carrier's place or destination port）
LCL: Less than Container Load 散装 （at exporter's place or shipment port）or 散交 (at carrier's place or destination port)
DOOR:门
CFS：container freight station 站
1.2. It can be handled quickly and easily by standardized equipment and can thus save labors and loading and unloading charges
1.3. The low risk of cargo damage and pilferage enables more favorable cargo premiums to be obtained,compared with break-bulk cargo shiment.
1.4. Less packing is required for containerized consignment. In some cases, particularly with specialized ISO ( International Standars Orginization) containers such as refrigerated one or tanks,no packing is required.This procuces substantial cost savings in the internaitonal transit and raise the service quality.
1.5.Faster transits,coupled with more reliable maritime schedules, and ultimately increased service frequency,produce savings in warehouse accommodation need, lessen risks of obsolescent stock and speed up capital turnover.
A substantial volume of world trad is moved in maritime ISO container. The range of container types continues to increase and this is aid the expansionof of business. Furthermore,as port modernization proceeds,the size of container vessels capable of being handled at container berths is on the increase.New ports are also being developed by some countries to facilitate the development of their trade.These on-going developments have lowered transportation costs and permit more competitive rates.
2. There are several options for container freight calculation:
*Rates can be generally formulated based on container capacity and the origin and destination of the merchandise.This is irrespective of commodities inside the container.
*Another kind of rate will embrace the inland transportation cost,applying to full container load (FCL).
*A further kind of container rate is based on the commodities inside the container.Hence the rate will vary by the commoditiy in the container.
*A very substantial volume of goods that is conveyed in container is less than container load ( LCL).A consignment comprising various LCL cargo is assenbled and loaded into a contaner,with each individual LCL attracting a separate rate.
When calculating the W/M shipping option rate,the volumetric rate will apply when the goods are of a low weight but high volume.Conversely,the actual weight rate will prevail when the goods is of a high weight but small volume. Usually,the freight rate is higher than FCL.The small importers or exporters are urged to use the LCL container service when possible as it offers regularity of service coupled with competitive rates and reliable transits.
*Rail Tansport
Rail tansport is a major mode of transport in terms of capacity,only second to ocean transport. It is capable of achieving relatively high speed and is most economical especially if it provides the complete trainload for a shipper on a regular basis.Besides, it is less prone to interruption by poor weather .But it is confined to railroad and therefore less flexible.
Rail transport can be divided into international combined rail transport and domestic rail transport. The most important document for rail transport is consignment note.Once the forwarding railway staton has accepted the goods for carriage along with the consignment note,the contract of carriage comes into existence.
*Air Transport
Air transport is one of the youngest forms of distribution.The most obvious advantage of air freight is quick ransit.Quick,reliable tansit eliminate need for extensive warehouse accommodation and reduce risk of stockpiling,obsolescence,deterioration and capital tied up in warehouse and stock provision.Low risk of damage and pilferage with consequent very competitive insurance premium is another advantage. Air freight is ideal for consumer-type cargoes such as fresh flowers and fruits which deteriorate easily,fashionable articles that have a short selling life,seasonal goods or merchandises of high value to low weight ratio.However, air tansport is subject to a high operating cost and initial cost of aircraft when compared with overall capacity.Average aircraft capacity is only 2000~2500kg.
Air transport services are divided into three categories:scheduled airlines, charter carries,and consolidated consignments by freight forwarders
*Scheduled Airlines operate on a scheduled service ,over a fixed airline and between two airports.They are suitable for conveying fresh,emergent and seasonal goods.
*Chartered carriers are the hire of an aircraft by a shipper or several shippers to deliver cargoes. They are ideal for carrying cargoes of large quantities or carrying cargoes of different shippers to the same destination.
*Consolidated consignments mean that the air freight forwarder usually assembles a number of individual shipments into one consignment and dispatches them on one air waybill.A consolidated shipment made up by several shipments can be dispatched to one common destination.Many shippers prefer this kind of shipment as the freight rate is 7-10% lower than that of a scheduled airline pulished by IATA.
Airline rates are normally based on actual weight for heavy cargo or measurement weight for large volume carego.The shipper of air freight will encounter several different types of freight classification,such as General Cargo,Classified Rates,Specified Commondity rate and so on.The characteristics of air freight are:the freight is charged for airport to airport (single trip) only,and it is the freight only, excluding other charges such as customs fees and storage fees.
Transport allows goods to be conveyed from one place to another.Without transport, international trade would not be possible. Carriage of goods can take place by sea,rail,air,road,inland waterway,parcel post,container and multimodal transport.
*Sea Transport (Ocean Transport)
Ocean freight is the most widely used mode of transportation in international trade,with advantage of easy passage,large capacity and low cost.However,it is slow,vulnerable to bad weather and less punctual if compared with road or air transport.
1.Kinds of vessels
There are different types of cargo vessels designed to suit the needs of shipping different cargoes.
1.1General cargo vessels:to carry various types of cargoes
1.2.Oil tankers:resposible for the transport(movement) of the world's oil
1.3.container vessels:designed to carry from 200 to over 4000 standard containers of 20 feet in length
1.4.Oil/Bulk/Ore(OBO) vessels:multi-purpose ship designed for switching between bulk shipment of oil and bulk grain,fertilizer and ore.
1.5.Ro/Ro vessels:designed for loaded trailers or any vehicles to be driven onto the vessel to facilitate faster loading and unloading
1.6.LASH(Lighter Aboard ship):designed to carry lighters on which cargoes are loaded,idealfor shallow waterways
1.7.Refrigerated ship:for carrying perishable cargoes
1.8.Timber ship:with spacious holds and heavy lifts for carrying timber or wood logs
According to the ways of operation, merchant vessels can be divided into liners（班轮） and tramps(不定期轮).Comparatively speaking,liners prove to be a more economical means of inernational cargo distribution
A liner is a vessel that operates over a regular route,stops at fixed ports according to an adventised schedule.Its freight is relatively fixed with loading and unloading charges included.It is suitable for the cargo of small quantity.
A tramp does not follow regular routes or fixed schedule,but travels when cargoes are available,ideal for cargoes of a complete shipload.Its freight is determined by market.Tramps can be divided into voyage charter and time time charter.A voyage charter is the hire of a ship for a particular voyage that can be further divided into single voyage charter ,consecutive voyage charter and so on.A time charter is the charter of a ship for a definite period of time.
2.Role of shipping and forwarding agents
To many companies,particularly the small organizations or those new to exporting,shipping and forwarding agents will be of tremendous value.They are experts in their field with an up-to-date and specialized knowledge of all the various methods of transport and relative freight and carriage rates.Their business keeps them in close touch with the constantly changing conditions at ports and the requirements of customs authorities. Another advantage is that the consolidation or groupage of a number of cargoes from different exports into one consignment makes transportaton more economical.Many such agents also operate road transpor and can often include in their services the collection of the goods from the exporter's warehouse.Apart from charging their customer any direct costs encountered,such as transport,bills of lading,customs entry,etc.,they will usually levy a service fee based on a percentage of the freight charge.
3.Whether the exporter is arranging the shipment directly with ship owners or utilizing the service of an agent ,the following procedures will be encountered:
*The selection of a vessel and shipping line (route)of the required port of destination
*The procuring of space on board of a specific vessel
*The consideraton and calculation of the particular freight rates involved
*Payment of freight
*Preparation of the bills of lading
*Dispatch of the consignment to the docks
*Utilization of appropriate standard shipping order form.
4.Freight rate
In practice,most shipping companies calculate freight rates on a weight or measurement basis.The following rules are applicable in relation to the calculation of freight.
*For items marked with "W",the freight thereon is to be calculated per metric ton on weight.
*For items marked with "M",the freight is to be calculated per cubic meter on measurement of the cargo (measurement ton).
*For items marked with "Ad Val.",the freight is to be calculated on the basis of the price or value of the cargo concerned.
*For items marked with "W/M",the freight is to be calculate on the basis of either weight ton or measurement tom,subject to the higher rate.
*For items marked with "W/M or Ad val",the highest rate is applicable.
*where different articles are contained in one package,the higher rate of freight is applicable,while the same kind of commodity in different packing is subject to different rates.
In addition to the basic freights rates,there are all kinds of surcharges that can not be ignored,such as Extra Charges on Heavy Lifts,Extra Charges on over lengths,Additional on Optional Discharging Port,Direct Additional,Transshipment Additional,Port Additional and so on.
*Container Transport
Containerization is a method of distributing merchandises in a unitized form,suitable for ocean,rail and multimodal transport.It is the most modern form of physical international distribution and overall is highly efficient in terms of reliability, cost,quality of service,advanced technology and so on.
1.Features of container transport can be summarized as follows:
1.1. It offers a door to door service under FCL/FCL (Full Container Load/Full Container Load),door to container freight station (cfs) service under FCL/LCL (Full Container Load/Less than Container Load),cfs to cfs service under LCL/LCL,or cfs to door service under LCL/FCL conditions.
Note:
FCL: Full container Load 整装 (at exporter's place or shipment port） or 整交 （at carrier's place or destination port）
LCL: Less than Container Load 散装 （at exporter's place or shipment port）or 散交 (at carrier's place or destination port)
DOOR:门
CFS：container freight station 站
1.2. It can be handled quickly and easily by standardized equipment and can thus save labors and loading and unloading charges
1.3. The low risk of cargo damage and pilferage enables more favorable cargo premiums to be obtained,compared with break-bulk cargo shiment.
1.4. Less packing is required for containerized consignment. In some cases, particularly with specialized ISO ( International Standars Orginization) containers such as refrigerated one or tanks,no packing is required.This procuces substantial cost savings in the internaitonal transit and raise the service quality.
1.5.Faster transits,coupled with more reliable maritime schedules, and ultimately increased service frequency,produce savings in warehouse accommodation need, lessen risks of obsolescent stock and speed up capital turnover.
A substantial volume of world trad is moved in maritime ISO container. The range of container types continues to increase and this is aid the expansionof of business. Furthermore,as port modernization proceeds,the size of container vessels capable of being handled at container berths is on the increase.New ports are also being developed by some countries to facilitate the development of their trade.These on-going developments have lowered transportation costs and permit more competitive rates.
2. There are several options for container freight calculation:
*Rates can be generally formulated based on container capacity and the origin and destination of the merchandise.This is irrespective of commodities inside the container.
*Another kind of rate will embrace the inland transportation cost,applying to full container load (FCL).
*A further kind of container rate is based on the commodities inside the container.Hence the rate will vary by the commoditiy in the container.
*A very substantial volume of goods that is conveyed in container is less than container load ( LCL).A consignment comprising various LCL cargo is assenbled and loaded into a contaner,with each individual LCL attracting a separate rate.
When calculating the W/M shipping option rate,the volumetric rate will apply when the goods are of a low weight but high volume.Conversely,the actual weight rate will prevail when the goods is of a high weight but small volume. Usually,the freight rate is higher than FCL.The small importers or exporters are urged to use the LCL container service when possible as it offers regularity of service coupled with competitive rates and reliable transits.
*Rail Tansport
Rail tansport is a major mode of transport in terms of capacity,only second to ocean transport. It is capable of achieving relatively high speed and is most economical especially if it provides the complete trainload for a shipper on a regular basis.Besides, it is less prone to interruption by poor weather .But it is confined to railroad and therefore less flexible.
Rail transport can be divided into international combined rail transport and domestic rail transport. The most important document for rail transport is consignment note.Once the forwarding railway staton has accepted the goods for carriage along with the consignment note,the contract of carriage comes into existence.
*Air Transport
Air transport is one of the youngest forms of distribution.The most obvious advantage of air freight is quick ransit.Quick,reliable tansit eliminate need for extensive warehouse accommodation and reduce risk of stockpiling,obsolescence,deterioration and capital tied up in warehouse and stock provision.Low risk of damage and pilferage with consequent very competitive insurance premium is another advantage. Air freight is ideal for consumer-type cargoes such as fresh flowers and fruits which deteriorate easily,fashionable articles that have a short selling life,seasonal goods or merchandises of high value to low weight ratio.However, air tansport is subject to a high operating cost and initial cost of aircraft when compared with overall capacity.Average aircraft capacity is only 2000~2500kg.
Air transport services are divided into three categories:scheduled airlines, charter carries,and consolidated consignments by freight forwarders
*Scheduled Airlines operate on a scheduled service ,over a fixed airline and between two airports.They are suitable for conveying fresh,emergent and seasonal goods.
*Chartered carriers are the hire of an aircraft by a shipper or several shippers to deliver cargoes. They are ideal for carrying cargoes of large quantities or carrying cargoes of different shippers to the same destination.
*Consolidated consignments mean that the air freight forwarder usually assembles a number of individual shipments into one consignment and dispatches them on one air waybill.A consolidated shipment made up by several shipments can be dispatched to one common destination.Many shippers prefer this kind of shipment as the freight rate is 7-10% lower than that of a scheduled airline pulished by IATA.
Airline rates are normally based on actual weight for heavy cargo or measurement weight for large volume carego.The shipper of air freight will encounter several different types of freight classification,such as General Cargo,Classified Rates,Specified Commondity rate and so on.The characteristics of air freight are:the freight is charged for airport to airport (single trip) only,and it is the freight only, excluding other charges such as customs fees and storage fees.
Sunday, July 08, 2007
Contract Terms-Description of Commodities
To avoid possible conflicts,every effort should be made to describe the goods in the sales contract exactly as the buyer and the seller intemd them to be.
*Name of Commodity
This clause is relatively simple. Usually, the parties to the contract just specify the name of the product under the subject " Name of Commodity".This clause is a main component of the Description of Goods.As the basis of a transaction,it concerns the rights and the obligations of the buyer and the seller.If the goods delivered by the seller are not in accordance with the agreed name of commodity,the buyer reserves the right to lodge a claim,reject the goods or even cancel the contract.Therefore, as a main conditin of sale, the name of commodity should be clearly stipulated.When giving the name,try to be specific and adopt the widely accepted name agreed by both parties.
*Quantity of Commodity
In international trade,as different products have different characteriestics and different countries may adopt different system of weights and measures,units and ways of quantity calculation are varied.Units of calculation include weight,number,length,area,volume and capacity.The quantities of many commodities are calculated by weight,Gross weight,net weight,conditional weight (公量）,Theoretical Weight (理论中量），Legal Weight and Net Net weight are the commonly adopted ways of calculation.Sometimes,"Gross for Net"(以毛作净）is used for weight caculation.
Since quantity terms may be ambiguous,careful definition in the same contract is very important. The Metric system,British System,U.S. System and the International System of Units are generally used in international trade nowadays.The implementation and porpularization of the International System of Units symbolizes the increasing international and standardization of measurement system.But,confusion and misunderstanding on quantity measures is still not uncommon.An American Pound,for instance,is different from a European pound;similarly,a ton has a dfferent real weight depending on whether it is a short ton,a metric tone,or a long ton.
*Quality of Commodity
Terms indicating qulities are frequently even harder to define than weights and quantities.A term for defining one particular degree of quality in one country may have quite a different meaning in another.Some quality standards that are in frequent use in one country or specific industry may not be known or may be interpreted differently in other countries or industries.Furthermore,different commodities have different qualities ,and even the same commodity has different qualities.Therefore, great care needs to be taken to specify quality terms to avoid any disputes.
Sometimes,It's important to add a clause like "Qulity to be considered and being about equal to the sample" or a "Quality Tolerance" clause. It is also useful to clarity the buyer's rights if quality of goods shipped is lower than intened in the sales contract,for example,can he reject the shipment and send it back at the seller's expense, or does he get a reduction in price?Quality is an important component of the description of the goods, serving as the basis of a deal,The goods delivered by the seller should have the agreed quality.
In internaitonal transactions, there are different ways of showing quality:
1.Sale by Actual Quality
2.Sale by Sample (Seller's sample, Buyer's sample or counter sample)
3.Sale by Specification
4.Sale by Grade
5.Sale by Standard
6.Sale by Deiscriptions and Illustrations
7.Sale by Trademark or Brand
8.Sale by Name of Origin
*Packing of Commodity
Proper packing is extremely importand depending on the type of the products and its destination.Ocean voyages may be most damaging to the goods that are not properly packed.Goods subject to breakage have to be crated,those subject to moisture wrapped in plastic.Others may require some special treatment or coating before shipment,still others have to be refrigerated while in transit. Actually,packing not only serves as a form of protection,but also facilitates loading,unloading and stowage,and prevents pilferage.Fruthermore it can promote sales.
There are different types of packing:
1:Bale:a heap of material pressed togther and tied with rope and metal wire,suitable for paper,wool,cotton, and carpets,etc.
2.Bag:made of cotton,plastic,paper or jute,ideal for cement,fertilizer,flour,chemicals,etc
3.Barrel/Drum: made of wood,plastic or metal ,used for liquid or greasy cargoes
4.Box/Case:wooden in structure and of various size,and some are airtight,providing strong protection for cargoes as equipment and car accessories.
5.Glass container:used for dangerous liquid cargoes such as acids but needs careful handling.
6.Carton:now a very common form of packing particularly for consumer-type of products.It also aids marketing as words can be printed on them.
7.Crate/Skeleton case:wooden stucture between a bale and a case used for light weight goods of large cubic capacity as machinery
Factors influencing types of cargo packing for international consignments:
1.Packing should be designed according to the need of the cargo.Bulk cargoes require little packing.General merchandise require packing of various types,such as fruits in cartons,chemicals in bags and electrical equipment in wooden cases.Besides,high value goods normally require more expensive packing.
2.Factors in relation to transports such as the nature of transit,loading and unloading facilities,and transport unit should be considered.When contaniners are usted,packing can be less extensive.If cargoes are shipped by air,the packing should be stronger.In ocean transport, cargoes should be packed with even stronger means.The packing should fit the facilities that are to be used at terminals.The dimenstion and the weight limit may also influence the shape,the size and weight of the cargo packing.
3.Packing should be in compliance with customs or statutory requirements.For example, in some countries,straw is an unacceptable form of packing due to the risk of insects.Wood should be suitably treated to kill any pests inside.
4.Packing should meet insurance acceptance conditions.Cargo that have a bad record in terms of damage or pilferage may be subject to the prescribed packing specifications or the insurance company may refused to cover them.
5.Packing should also be economical while being suffcient.
6.Packing should make the handling as easy as possible.
Of equal importance is the marking of the packages themselves.This is vital in order to make possible speedy identification of the consignment and also to comply with any regulations in force with regard to dangerous or hazardous cargoes. Overseas territories also sometimes enforce the regulations pertaining to marking of export cases.Equally,the marks should include wording or symbols that will enable the personnel handling the cargo to exercise any special care that may be required.
Basically,the golden rule is to keep shipping marks as simple as possible as shown below:
U.F.P
397
NO.1/6 UP
COPENHAGEN
Note:
U.F.P - initials of the importing/exporting company
397- customer's order/contract number
1/6 UP -case No.1 of a consignment of 6cases
COPENHAGEN-port of destination
Such markings would enable the ship owners and dockers etc. to sort out the consignment and to link up the cases with the bill of loading,thus enabling the customer or the agent to effect prompt collection.
Of caurse,it is not always possible to keep the marking simple.Somtimes,it is necessary to indicate the weight or measure of the packages,the name of the vessel or the origin of the goods. Where fragile goods are being transported,it is sound practice to indicate this by marking the cases "fragile" or for bags of raw material to bear the notice "Use No Hooks",or where appropriate for other materials,"Keep Dry".On occasions,the warning signs for any dangerous,explosive or corrosive products should be given in the shipping marks.
In international trade,packing is still an important compoent of the description of the goods, and a main condition of a sales contract.In most cases, the parties to a contract should know beforehand what packing is needed. When drafting the stipulation of packing,the specifications should be clear.Phrases as "Sea-Worthy Packing" or Customary Packing" should not be used as their meanings are ambiguous.Sometimes,the part who is to bear the packing charges should be specified. The quantity or weight for each package is sometimes also stipulated,for example,"cartons,24 tins per carton".
*Name of Commodity
This clause is relatively simple. Usually, the parties to the contract just specify the name of the product under the subject " Name of Commodity".This clause is a main component of the Description of Goods.As the basis of a transaction,it concerns the rights and the obligations of the buyer and the seller.If the goods delivered by the seller are not in accordance with the agreed name of commodity,the buyer reserves the right to lodge a claim,reject the goods or even cancel the contract.Therefore, as a main conditin of sale, the name of commodity should be clearly stipulated.When giving the name,try to be specific and adopt the widely accepted name agreed by both parties.
*Quantity of Commodity
In international trade,as different products have different characteriestics and different countries may adopt different system of weights and measures,units and ways of quantity calculation are varied.Units of calculation include weight,number,length,area,volume and capacity.The quantities of many commodities are calculated by weight,Gross weight,net weight,conditional weight (公量）,Theoretical Weight (理论中量），Legal Weight and Net Net weight are the commonly adopted ways of calculation.Sometimes,"Gross for Net"(以毛作净）is used for weight caculation.
Since quantity terms may be ambiguous,careful definition in the same contract is very important. The Metric system,British System,U.S. System and the International System of Units are generally used in international trade nowadays.The implementation and porpularization of the International System of Units symbolizes the increasing international and standardization of measurement system.But,confusion and misunderstanding on quantity measures is still not uncommon.An American Pound,for instance,is different from a European pound;similarly,a ton has a dfferent real weight depending on whether it is a short ton,a metric tone,or a long ton.
*Quality of Commodity
Terms indicating qulities are frequently even harder to define than weights and quantities.A term for defining one particular degree of quality in one country may have quite a different meaning in another.Some quality standards that are in frequent use in one country or specific industry may not be known or may be interpreted differently in other countries or industries.Furthermore,different commodities have different qualities ,and even the same commodity has different qualities.Therefore, great care needs to be taken to specify quality terms to avoid any disputes.
Sometimes,It's important to add a clause like "Qulity to be considered and being about equal to the sample" or a "Quality Tolerance" clause. It is also useful to clarity the buyer's rights if quality of goods shipped is lower than intened in the sales contract,for example,can he reject the shipment and send it back at the seller's expense, or does he get a reduction in price?Quality is an important component of the description of the goods, serving as the basis of a deal,The goods delivered by the seller should have the agreed quality.
In internaitonal transactions, there are different ways of showing quality:
1.Sale by Actual Quality
2.Sale by Sample (Seller's sample, Buyer's sample or counter sample)
3.Sale by Specification
4.Sale by Grade
5.Sale by Standard
6.Sale by Deiscriptions and Illustrations
7.Sale by Trademark or Brand
8.Sale by Name of Origin
*Packing of Commodity
Proper packing is extremely importand depending on the type of the products and its destination.Ocean voyages may be most damaging to the goods that are not properly packed.Goods subject to breakage have to be crated,those subject to moisture wrapped in plastic.Others may require some special treatment or coating before shipment,still others have to be refrigerated while in transit. Actually,packing not only serves as a form of protection,but also facilitates loading,unloading and stowage,and prevents pilferage.Fruthermore it can promote sales.
There are different types of packing:
1:Bale:a heap of material pressed togther and tied with rope and metal wire,suitable for paper,wool,cotton, and carpets,etc.
2.Bag:made of cotton,plastic,paper or jute,ideal for cement,fertilizer,flour,chemicals,etc
3.Barrel/Drum: made of wood,plastic or metal ,used for liquid or greasy cargoes
4.Box/Case:wooden in structure and of various size,and some are airtight,providing strong protection for cargoes as equipment and car accessories.
5.Glass container:used for dangerous liquid cargoes such as acids but needs careful handling.
6.Carton:now a very common form of packing particularly for consumer-type of products.It also aids marketing as words can be printed on them.
7.Crate/Skeleton case:wooden stucture between a bale and a case used for light weight goods of large cubic capacity as machinery
Factors influencing types of cargo packing for international consignments:
1.Packing should be designed according to the need of the cargo.Bulk cargoes require little packing.General merchandise require packing of various types,such as fruits in cartons,chemicals in bags and electrical equipment in wooden cases.Besides,high value goods normally require more expensive packing.
2.Factors in relation to transports such as the nature of transit,loading and unloading facilities,and transport unit should be considered.When contaniners are usted,packing can be less extensive.If cargoes are shipped by air,the packing should be stronger.In ocean transport, cargoes should be packed with even stronger means.The packing should fit the facilities that are to be used at terminals.The dimenstion and the weight limit may also influence the shape,the size and weight of the cargo packing.
3.Packing should be in compliance with customs or statutory requirements.For example, in some countries,straw is an unacceptable form of packing due to the risk of insects.Wood should be suitably treated to kill any pests inside.
4.Packing should meet insurance acceptance conditions.Cargo that have a bad record in terms of damage or pilferage may be subject to the prescribed packing specifications or the insurance company may refused to cover them.
5.Packing should also be economical while being suffcient.
6.Packing should make the handling as easy as possible.
Of equal importance is the marking of the packages themselves.This is vital in order to make possible speedy identification of the consignment and also to comply with any regulations in force with regard to dangerous or hazardous cargoes. Overseas territories also sometimes enforce the regulations pertaining to marking of export cases.Equally,the marks should include wording or symbols that will enable the personnel handling the cargo to exercise any special care that may be required.
Basically,the golden rule is to keep shipping marks as simple as possible as shown below:
U.F.P
397
NO.1/6 UP
COPENHAGEN
Note:
U.F.P - initials of the importing/exporting company
397- customer's order/contract number
1/6 UP -case No.1 of a consignment of 6cases
COPENHAGEN-port of destination
Such markings would enable the ship owners and dockers etc. to sort out the consignment and to link up the cases with the bill of loading,thus enabling the customer or the agent to effect prompt collection.
Of caurse,it is not always possible to keep the marking simple.Somtimes,it is necessary to indicate the weight or measure of the packages,the name of the vessel or the origin of the goods. Where fragile goods are being transported,it is sound practice to indicate this by marking the cases "fragile" or for bags of raw material to bear the notice "Use No Hooks",or where appropriate for other materials,"Keep Dry".On occasions,the warning signs for any dangerous,explosive or corrosive products should be given in the shipping marks.
In international trade,packing is still an important compoent of the description of the goods, and a main condition of a sales contract.In most cases, the parties to a contract should know beforehand what packing is needed. When drafting the stipulation of packing,the specifications should be clear.Phrases as "Sea-Worthy Packing" or Customary Packing" should not be used as their meanings are ambiguous.Sometimes,the part who is to bear the packing charges should be specified. The quantity or weight for each package is sometimes also stipulated,for example,"cartons,24 tins per carton".
Saturday, July 07, 2007
Import and Export Operating Procesures-Export Procedures
Contracts for Export in our country are mostly signed under CIF term on Letter of Credit.A lot of work is involved in carrying out this kind of contracts.The whole export process generally includes about eight procedures,among which cargo readiness,Letter of Credit,booking space or ship and document and payment are the most important ones. The following is a detailed account of the possible steps that may be involved in an export transaction.
*Export License
Many countries have export controls (foreign policy controls,national security controls etc.) over certain or all merchandises.Therefore, before arranging a contract and the subsequent overseas transaction,an exporter should ensure whether he needs or could obtain the export lisence from the government.But with EXW and FAS,it is the importer who should be responisble for obtaining the export license.
*Trade Negotiation
This is an indispensable procedure in business transaction.It generally includes the four procedure discussed,i.e. inquiry,offer,counter-offer and acceptance.When an agreement is reached,the two sides sign a business contract.
*Cargo Readiness
As soon as the contract is signed,the exporter should start to ensure the readiness of the export goods.He must get the goods ready for shipment before the stipulated delivery time.The quantity,quality,packaging and marking of the goods,and the delivery date must strictly follow the stipulations in the sales contract.
If the goods need to be inspected before shipment, the inspection should be carried out at a proper time.Necessary documents like application form ,copy of contract and L/C etc. should be presented to the inspection bureau.As an inspection certificate usually has validity,shipment should be made within the validity.Otherwise,another inspection will be needed before the goods can be shipped.
*L/C
If the payment is to be made by L/C,the exporter should ask the importer to open the L/C in time,e.g. 30 days or more before the date of shipment,depending on the nature of individual contract.With large orders or orders produced according to the special requirement of the importer,the exporter may wait until the L/C is opened to arrange to cargo readiness.
After receiving the L/C,the exporter must check the L/C against the sales contract.Special attention should be paid to the total sum,description of the goods,validity,required documents etc. Only when all the terms in the L/C are consistent with the terms of the sales contract can the export proceed to ship the goods.
If anything in the L/C is not agreeing with the contract,the exporter should ask the importer to ament the L/C immediately, in order to guarantee the collection and avoid dispute.
*Customs Clearance
The exporter should now declare the export goods to the customs by filling in certain customs forms and submitting appropriate documents such as commercial invoice, export license,copy of sales contract,and inspection certificate etc. The customs will inspect the export goods and decide if the shipment can be cleared through.Once the goods is cleared, the shipment can be made anytime. But,with the terms of EXW and FAS, the buyer should undertake to clear the goods for export in the seller's country.
*Shipping
Transport in international trade will be done either by sea,or air,or combination of roal/rail,or perhaps post.Transport by sea is by far the chiefly used method in international trade in our country. Shipment should be made according to the contract terms.Usually,the exporter shall fill in the Shipping Note to book the shipping space or ship. After receiving the Shipping Order from the carrier,the exporter may start to ensure the loading of the goods. The exporter should supervise the loading process,and get the Bill of Lading from the carrier.
Upon completion of the shipment ,the exporter should sent the importer the necessary delivery documents to enable the latter to arrange insurance (under FOB term),payment and receipt of the goods.Failing to provide these documents in time would result in the exporter's obligations for compensating for the losses of the importer.
*Insurance
The exporter on CIF or CIP term should obtain at his own expense cargo insurance as agreed in the contract.
It the importer is responsible for the insurance, the exporter should in due time send the importer all the necessary information the latter needs to arrange the coverage.
*Document and Payment
After shipment is made ,if L/C is used, the exporter should present to the negotiating bank the documents within the time specified in the L/C.All the documents must be made out in accordance with the L/C terms, such as types of documents,number of original and copies,items of the documents,etc. Documentation should be completed with absolute accuracy and clarity.
Generally, the following documents should be presented to the bank:
*invoice
*Bill of lading
*Insurance Policy
*Certificate of Origin
*Inspection Certificate
*Packing List
If documentary collection is used, the documents should be sent through banks to the importer for payment
It should be noted that the procedures for implementing a contract might be different according to the use of different payment terms or INCOTERMs.For insance,if open account or documentary collection is used, no Letter of Credit will be involved.Under CFR,the exporter will not be responsible for buying the insurance.Therefore,the above mentioned procedures may not all used in a specific single transaction.
*Export License
Many countries have export controls (foreign policy controls,national security controls etc.) over certain or all merchandises.Therefore, before arranging a contract and the subsequent overseas transaction,an exporter should ensure whether he needs or could obtain the export lisence from the government.But with EXW and FAS,it is the importer who should be responisble for obtaining the export license.
*Trade Negotiation
This is an indispensable procedure in business transaction.It generally includes the four procedure discussed,i.e. inquiry,offer,counter-offer and acceptance.When an agreement is reached,the two sides sign a business contract.
*Cargo Readiness
As soon as the contract is signed,the exporter should start to ensure the readiness of the export goods.He must get the goods ready for shipment before the stipulated delivery time.The quantity,quality,packaging and marking of the goods,and the delivery date must strictly follow the stipulations in the sales contract.
If the goods need to be inspected before shipment, the inspection should be carried out at a proper time.Necessary documents like application form ,copy of contract and L/C etc. should be presented to the inspection bureau.As an inspection certificate usually has validity,shipment should be made within the validity.Otherwise,another inspection will be needed before the goods can be shipped.
*L/C
If the payment is to be made by L/C,the exporter should ask the importer to open the L/C in time,e.g. 30 days or more before the date of shipment,depending on the nature of individual contract.With large orders or orders produced according to the special requirement of the importer,the exporter may wait until the L/C is opened to arrange to cargo readiness.
After receiving the L/C,the exporter must check the L/C against the sales contract.Special attention should be paid to the total sum,description of the goods,validity,required documents etc. Only when all the terms in the L/C are consistent with the terms of the sales contract can the export proceed to ship the goods.
If anything in the L/C is not agreeing with the contract,the exporter should ask the importer to ament the L/C immediately, in order to guarantee the collection and avoid dispute.
*Customs Clearance
The exporter should now declare the export goods to the customs by filling in certain customs forms and submitting appropriate documents such as commercial invoice, export license,copy of sales contract,and inspection certificate etc. The customs will inspect the export goods and decide if the shipment can be cleared through.Once the goods is cleared, the shipment can be made anytime. But,with the terms of EXW and FAS, the buyer should undertake to clear the goods for export in the seller's country.
*Shipping
Transport in international trade will be done either by sea,or air,or combination of roal/rail,or perhaps post.Transport by sea is by far the chiefly used method in international trade in our country. Shipment should be made according to the contract terms.Usually,the exporter shall fill in the Shipping Note to book the shipping space or ship. After receiving the Shipping Order from the carrier,the exporter may start to ensure the loading of the goods. The exporter should supervise the loading process,and get the Bill of Lading from the carrier.
Upon completion of the shipment ,the exporter should sent the importer the necessary delivery documents to enable the latter to arrange insurance (under FOB term),payment and receipt of the goods.Failing to provide these documents in time would result in the exporter's obligations for compensating for the losses of the importer.
*Insurance
The exporter on CIF or CIP term should obtain at his own expense cargo insurance as agreed in the contract.
It the importer is responsible for the insurance, the exporter should in due time send the importer all the necessary information the latter needs to arrange the coverage.
*Document and Payment
After shipment is made ,if L/C is used, the exporter should present to the negotiating bank the documents within the time specified in the L/C.All the documents must be made out in accordance with the L/C terms, such as types of documents,number of original and copies,items of the documents,etc. Documentation should be completed with absolute accuracy and clarity.
Generally, the following documents should be presented to the bank:
*invoice
*Bill of lading
*Insurance Policy
*Certificate of Origin
*Inspection Certificate
*Packing List
If documentary collection is used, the documents should be sent through banks to the importer for payment
It should be noted that the procedures for implementing a contract might be different according to the use of different payment terms or INCOTERMs.For insance,if open account or documentary collection is used, no Letter of Credit will be involved.Under CFR,the exporter will not be responsible for buying the insurance.Therefore,the above mentioned procedures may not all used in a specific single transaction.
Import and Export Operating Procesures-Import Procedures
Import Procedures
Most of the import transactions in our country are Under FOB term,on Letter of Credit.Their general procedures are:
Most of the import transactions in our country are Under FOB term,on Letter of Credit.Their general procedures are:
Trade Document- Insurance Documents
Insuance cover against possible loss or damae to specified merchandise during shipment is of paramount importance.Whether the responsiblity for shipment insurance provision is the buyer's or the seller's is decided according to the details of the particular export sales contract.
*Insurance Policy
An Insurance Plicy is the evidence that insurance has been purchased.This document is normally issued to the party who buys the insurance.
A typical insurance plicy should include the following data:
1.Name,address and signature of the insurer
2.Name of the assured
3.The endorsement of the assured
4.A description of the risks covered and the insured time
5.A description of the consignment
6.the sum or sums insured
7.Premium
*Insurance Certificate
An Insurance Certificate is a simplified Insurance Policy. It usually contains similar data as an Insurance Policy,but it does not include the detailed rights and obligations of both sides at the back of the document.
*Insurance Policy
An Insurance Plicy is the evidence that insurance has been purchased.This document is normally issued to the party who buys the insurance.
A typical insurance plicy should include the following data:
1.Name,address and signature of the insurer
2.Name of the assured
3.The endorsement of the assured
4.A description of the risks covered and the insured time
5.A description of the consignment
6.the sum or sums insured
7.Premium
*Insurance Certificate
An Insurance Certificate is a simplified Insurance Policy. It usually contains similar data as an Insurance Policy,but it does not include the detailed rights and obligations of both sides at the back of the document.
Trade Document-Transportation Documents
A single export shipment can involve a lot of different documents to ensure that the goods reach the final consignee.A few commonly used transportation documents are listed below. Some of them have already been discussed in detail about their importance and function in the former chapter.Therefore,the subsequent discussion will be mainly about the ones that have no been covered and the details that should be contained in those already mentioned before.
*Shipping Note
A shipping note gives information about a particular export consignment when offered for shipment. It serves the shipping company as a delivery or receipt note for particular consignment.Some people also call it Mate's Receipt.Its role in various ports and trades may differ worldwide. Anyway , the cargo description in a shipping Note should comform to that found on the commercial invoice.
*Packing List
A Packing list provides a list of the contents of the consignment.It is completed by the shipper.Its prime purpose is to give an inventory of the shipped goods.It is often attached to the Bill of lading, the Air Waybill, or Consignment Note.A packing list is especially useful for the consignments which are composite (散箱拼装）。It accompanies the goods throughout the transit and placed in the container,trailer,etc.And it is ususally required by the costoms for clearing purpose.
*Bill of Lading
The Bill of Lading is the contract between the owner of the goods and the carrier.The customers ususally needs the original as proof of the ownership to take possession of the goods.Although there are many different kinds of B/L. the key elements contained in a B/L should in clude:
1. Name of the shipper
2.Name of the carring vessel
3.Full description of the cargo(provide it is not bulk cargo)including any shipping marks,individual package numbers in the consignment,contents,cubic measurement ,gross weight,etc.
4.Port of lading and port of discharge.
5.Full details of freight,including when and where it is paid-whether freight paid or payable at destinaiton
6.Name of the shipper
7.Name of the carring vessel
8.Terms of the contract of carriage
9.The dae the goods were received for shipemnt/or Loaded on the vessel.
10.The name and address of the notified part ( the person to be notified on arrival of the shipment, usually the buyer)
11.Number of Bills of Lading consigned on behalf to the master or his agent, acknowledging receipt of the goods.
12.Signature of the carrier or his agent and the date.
*Consignment Note (for Rail and Road)
A consignment Note is not a negotiable or transferable document or a document of title,but forms a receipt of the cargo. The consignment note must contain the following particulars:
1.The name and address of the sender and the consignee
2.The original rail station accepting consignment and the station or place designated for delivery
3.The ordinary description of the nature of the goods and method of packing and, in the case of dangerous goods,their generally recognized description
4.The gross weight of the goods and the quantity
5.The charges related to the carriage
6.The requisite instructions of customs and other information
It should be noted that the sender is responsible for the accuracy and adequacy of information contained in the Consignment Note.The sender should also provide the necessary information of the purpose of Customs or other formalities which have to be completed before delivery of the goods
*Air Waybill
In addition to the introduction about it before, details that should be comtained in An Air Waybill are listed in the following:
1.The place and date of its execution
2.Names of the departure and destination airports
3.The names and addresses of the consignor,consignees and the carrier
4.A description of the goods including method of packing,marks,weights,quantity and dimensions,etc.
5.the total freight amount prepaid and to pay and the rate
6.The declared value for customs purpose,likewise for carriage,and the currency
7.Date of the flight
8.Details of any special route to be taken
9.The signature of the shipper or his agent
10.The signature of the issuing carrrier (airline operator) or his agent
11.Details of the booked flight and the actual flight(s) incorporating the first,second and the third carrier if there are several carriers involved
At the detination airport(s),the Air Waybill serves as a basic document for verification to consignee,Customers clearance and delivery to consignee.Additionally, it is a source document for clearance and delivery-charges accounting.
*Arrival Notification
An Arrival Notification is a document advising the consignee of the arrival of consignments. It also requires the consignee to submit appropriate document,such as original Bill of Lading,for customs clearance.Thus,the carrier can subsequently dispatch the goods to the consignee.Details could be refered to the attached sample.
*Shipping Note
A shipping note gives information about a particular export consignment when offered for shipment. It serves the shipping company as a delivery or receipt note for particular consignment.Some people also call it Mate's Receipt.Its role in various ports and trades may differ worldwide. Anyway , the cargo description in a shipping Note should comform to that found on the commercial invoice.
*Packing List
A Packing list provides a list of the contents of the consignment.It is completed by the shipper.Its prime purpose is to give an inventory of the shipped goods.It is often attached to the Bill of lading, the Air Waybill, or Consignment Note.A packing list is especially useful for the consignments which are composite (散箱拼装）。It accompanies the goods throughout the transit and placed in the container,trailer,etc.And it is ususally required by the costoms for clearing purpose.
*Bill of Lading
The Bill of Lading is the contract between the owner of the goods and the carrier.The customers ususally needs the original as proof of the ownership to take possession of the goods.Although there are many different kinds of B/L. the key elements contained in a B/L should in clude:
1. Name of the shipper
2.Name of the carring vessel
3.Full description of the cargo(provide it is not bulk cargo)including any shipping marks,individual package numbers in the consignment,contents,cubic measurement ,gross weight,etc.
4.Port of lading and port of discharge.
5.Full details of freight,including when and where it is paid-whether freight paid or payable at destinaiton
6.Name of the shipper
7.Name of the carring vessel
8.Terms of the contract of carriage
9.The dae the goods were received for shipemnt/or Loaded on the vessel.
10.The name and address of the notified part ( the person to be notified on arrival of the shipment, usually the buyer)
11.Number of Bills of Lading consigned on behalf to the master or his agent, acknowledging receipt of the goods.
12.Signature of the carrier or his agent and the date.
*Consignment Note (for Rail and Road)
A consignment Note is not a negotiable or transferable document or a document of title,but forms a receipt of the cargo. The consignment note must contain the following particulars:
1.The name and address of the sender and the consignee
2.The original rail station accepting consignment and the station or place designated for delivery
3.The ordinary description of the nature of the goods and method of packing and, in the case of dangerous goods,their generally recognized description
4.The gross weight of the goods and the quantity
5.The charges related to the carriage
6.The requisite instructions of customs and other information
It should be noted that the sender is responsible for the accuracy and adequacy of information contained in the Consignment Note.The sender should also provide the necessary information of the purpose of Customs or other formalities which have to be completed before delivery of the goods
*Air Waybill
In addition to the introduction about it before, details that should be comtained in An Air Waybill are listed in the following:
1.The place and date of its execution
2.Names of the departure and destination airports
3.The names and addresses of the consignor,consignees and the carrier
4.A description of the goods including method of packing,marks,weights,quantity and dimensions,etc.
5.the total freight amount prepaid and to pay and the rate
6.The declared value for customs purpose,likewise for carriage,and the currency
7.Date of the flight
8.Details of any special route to be taken
9.The signature of the shipper or his agent
10.The signature of the issuing carrrier (airline operator) or his agent
11.Details of the booked flight and the actual flight(s) incorporating the first,second and the third carrier if there are several carriers involved
At the detination airport(s),the Air Waybill serves as a basic document for verification to consignee,Customers clearance and delivery to consignee.Additionally, it is a source document for clearance and delivery-charges accounting.
*Arrival Notification
An Arrival Notification is a document advising the consignee of the arrival of consignments. It also requires the consignee to submit appropriate document,such as original Bill of Lading,for customs clearance.Thus,the carrier can subsequently dispatch the goods to the consignee.Details could be refered to the attached sample.
Thursday, July 05, 2007
Trade Documents-Finance Documents
In international trade, quite a few finance documents are used to ensure that the exporter receives full and timely payment for the shipment.These documents are usually issued by Banks or exporters.As some of documents have already been discussed about their functions and varieties in the former chapters, the subsequent discussion will be mainly about the details that should be contained in these documents,followed by some sample:
*Application Form for International Money Transfer
When Cash in advance or Open Account is used, payment may be effected by Transferring money through banks.Thus, the overseas buyers need to complete the relevant Application Form of International Money Transfer.This kind of form is essentially a request to a bank to make an international money transfer on the remitter's behalf.In others words,an overseas buyer instructs a bank in the buyer's country to transfer an amount of money to an exporter's bank by M/T,T/T or D/T.A sample of an application form for M/T is included at the end of this occation.
*Drafts (including Banker's draft and Commercial Draft and Sight Draft and Time Draft)
In the collection method of payment for goods, the exporters use the banking system to send the buyer a draft to get paid.In other words, the exporter uses a draft to draw on the overseas buyer.,for the sum agreed as settlement in the export contract.By using a draft with other shipping documents through the banks system,an exporter can ensure greater control of the goods,because until the draft is paid or accepted by the overseas buyer, the goods cannot be released.
*Application for Documentary Letter of Credit(跟单信用证）
An Application for Documentary Letter of Credit is the form used by the buyer to request the back to open a Documentary Letter of Credit in favor of the seller.It is used to authorize a back to open a Letter of Credit.
The following information is always required in the form:
1.Method of advice : airmail/cable
2.Type of credit :whether the L/C is irrevocable or revocable.
3.Date of Expiry
4.Applicant's name and address
5.Beneficiary's name and address
6.Advising/Paying/confirming Bank
7.Amount
8.Drafts presented under the credit must be presented for payment/negotiation/acceptance
9.Allow partial shipment/transshipment or not
10.Port of shipment and port of discharge
11.Trade terms
12.Description of goods (quality,quantity,packing etc.)
13.Unit price
14.Documents required
15.Additional conditions
16,Bank charges
17.Signature
*Letter of Credit
As one of the most important finance documents used in international trade,accuracy in the contents of L/C is of vital importance.Usually,an exporter will be advised of the opening of L/C well before the shipment, so that he could have enough time to check the details contained in it.The details listed below are the ones that require special attention when an L/C is opened by the buyer or Checked by the seller.
1.Method of advice: airmail/cable
2.Type of credit: whether the L/C is irrevocable or revocable
3.Date of expiry
5.Documents required
6.Applicant's name and address
7.Beneficiary's name and address
8.Advising/paying/confirming bank
9.Amount
10.Drafts presented under the credit must be presented for Payment.negotiation/acceptance
11.Allow partial shipment/transshipment or not
12.Port of shipment and port of discharge
*Application Form for International Money Transfer
When Cash in advance or Open Account is used, payment may be effected by Transferring money through banks.Thus, the overseas buyers need to complete the relevant Application Form of International Money Transfer.This kind of form is essentially a request to a bank to make an international money transfer on the remitter's behalf.In others words,an overseas buyer instructs a bank in the buyer's country to transfer an amount of money to an exporter's bank by M/T,T/T or D/T.A sample of an application form for M/T is included at the end of this occation.
*Drafts (including Banker's draft and Commercial Draft and Sight Draft and Time Draft)
In the collection method of payment for goods, the exporters use the banking system to send the buyer a draft to get paid.In other words, the exporter uses a draft to draw on the overseas buyer.,for the sum agreed as settlement in the export contract.By using a draft with other shipping documents through the banks system,an exporter can ensure greater control of the goods,because until the draft is paid or accepted by the overseas buyer, the goods cannot be released.
*Application for Documentary Letter of Credit(跟单信用证）
An Application for Documentary Letter of Credit is the form used by the buyer to request the back to open a Documentary Letter of Credit in favor of the seller.It is used to authorize a back to open a Letter of Credit.
The following information is always required in the form:
1.Method of advice : airmail/cable
2.Type of credit :whether the L/C is irrevocable or revocable.
3.Date of Expiry
4.Applicant's name and address
5.Beneficiary's name and address
6.Advising/Paying/confirming Bank
7.Amount
8.Drafts presented under the credit must be presented for payment/negotiation/acceptance
9.Allow partial shipment/transshipment or not
10.Port of shipment and port of discharge
11.Trade terms
12.Description of goods (quality,quantity,packing etc.)
13.Unit price
14.Documents required
15.Additional conditions
16,Bank charges
17.Signature
*Letter of Credit
As one of the most important finance documents used in international trade,accuracy in the contents of L/C is of vital importance.Usually,an exporter will be advised of the opening of L/C well before the shipment, so that he could have enough time to check the details contained in it.The details listed below are the ones that require special attention when an L/C is opened by the buyer or Checked by the seller.
1.Method of advice: airmail/cable
2.Type of credit: whether the L/C is irrevocable or revocable
3.Date of expiry
5.Documents required
6.Applicant's name and address
7.Beneficiary's name and address
8.Advising/paying/confirming bank
9.Amount
10.Drafts presented under the credit must be presented for Payment.negotiation/acceptance
11.Allow partial shipment/transshipment or not
12.Port of shipment and port of discharge
Wednesday, July 04, 2007
Trade Documents-Commercial Documents
Commecial documents are generally issued by the importer,export or some relevant not-governmental business organizations. They aim to ensure smoothe transactions.
*Pro forma Invoice
Usually, a pro forma invoice is a structure response to an inquiry. It is issued by the exporter in the following circumstances:
1.An irrevocable letter of credit is required by the exporter.The importer will use it to substantiate the need for a letter of credit to his banker.
2.The importer's country requires that an import license be issued for each import and must approve the pro forma invoice before making foreign exchange available for payment by the importer.
Therefore,a pro forma invoice has no legal status.It is only a means to facilitate the buyer to accomplish the above-mentioned tasks.
*Commercial Invoice
A commercial invoice is a bill for the goods from the seller to the buyer.It is one of the most important documents used in international trade.Even if the importer may have opened a letter of credit,the exporter will usually not be paid until he presents a commercial invoice along with other documents to the bank.The invoice serves as a record of the essential details of a transaction.
A commercial invoice must show the following basic information about the transaction:
1.Buyer's order number
2.Invoice number and date
3.Shipment terms
4.Names and address of the seller and buyer
5.Country from which the shipment is made
6.Description of the goods
7.Quantity,weight or measurements of the goods
8.Unit price
9.Total amount payable ,including price of the goods,freight,insurance and so on
10.Rebate or similar incentives
11.Signature of the exporter
*Quality Certificate
A Quality Certificate confirms that the quality/specification of a particular consignment of goods is in accordance with the sales contract at the time of shipment.It may be issued by the exporter or a relevant government department as required under Letter of Credit or Sales Contract terms.It is essential that cargo description in the quality Certificate conforms to its terms in other relevant documents,such as the Commercial Invoice,L/C,Insurance Policy,etc.
*Weight Certificate
The weight Certificate is usually requested by the importer to confirm that the weight of the goods is in accordance with the sales contract at the time of shipment.Similar to a Quality Certificate,it may be issued by the exporter or a relevant government department as required under Letter of Credit or Sales Contract terms.
*Pro forma Invoice
Usually, a pro forma invoice is a structure response to an inquiry. It is issued by the exporter in the following circumstances:
1.An irrevocable letter of credit is required by the exporter.The importer will use it to substantiate the need for a letter of credit to his banker.
2.The importer's country requires that an import license be issued for each import and must approve the pro forma invoice before making foreign exchange available for payment by the importer.
Therefore,a pro forma invoice has no legal status.It is only a means to facilitate the buyer to accomplish the above-mentioned tasks.
*Commercial Invoice
A commercial invoice is a bill for the goods from the seller to the buyer.It is one of the most important documents used in international trade.Even if the importer may have opened a letter of credit,the exporter will usually not be paid until he presents a commercial invoice along with other documents to the bank.The invoice serves as a record of the essential details of a transaction.
A commercial invoice must show the following basic information about the transaction:
1.Buyer's order number
2.Invoice number and date
3.Shipment terms
4.Names and address of the seller and buyer
5.Country from which the shipment is made
6.Description of the goods
7.Quantity,weight or measurements of the goods
8.Unit price
9.Total amount payable ,including price of the goods,freight,insurance and so on
10.Rebate or similar incentives
11.Signature of the exporter
*Quality Certificate
A Quality Certificate confirms that the quality/specification of a particular consignment of goods is in accordance with the sales contract at the time of shipment.It may be issued by the exporter or a relevant government department as required under Letter of Credit or Sales Contract terms.It is essential that cargo description in the quality Certificate conforms to its terms in other relevant documents,such as the Commercial Invoice,L/C,Insurance Policy,etc.
*Weight Certificate
The weight Certificate is usually requested by the importer to confirm that the weight of the goods is in accordance with the sales contract at the time of shipment.Similar to a Quality Certificate,it may be issued by the exporter or a relevant government department as required under Letter of Credit or Sales Contract terms.
Trade Documents-Government Control Documents
International trade involves complex flows of goods and services between many countries.Therefore, a set of documents are used by countries to monitor and control these flows.There usually include:
*Import Licenseand Foreign Exchange Authorization
Many countries use import license and foreign exchange authorization system to restrict imports.Importers have to present pro forma invoices to their licensing authorities or to their central banks,or sometimes to both to apply for the license. If the planned importation is legal and meets current requirement,the license will be issued. Therefore, exporters should not ship to importers who need licenses until the licenes are actually in hand.
*Certificate of Origin
It's a document stating the country of origin of the goods. It's usually required by countries who do not ust customs Invoice or Consular Invoice to set the appropriate duties for imports.It contains the nature,quantity,value of the goods and their place of the manufacture. No particular format exists internationally. It's a long established document and is required as one of the support documents at the time of importation. It enables the buyer not only to process their importation of the goods,but permits preferential import duties where appropriate.
In our country, this certificate is generally issued by the Import and Export commodity Inspection Bureau or China Council for Promotion of International Trade.Nowadays, China enjoys the Generalized System of Preferences(GSP普惠制）treatment granted by many countries like New Zealand,Canada,Japan,and EU members to get preferential import duties. Commonly used GSP documents include GSP Certificate of Origin Form A(表格A产地证）,Certificate of Origin of Textile Products,Export Licenses of Textile Products, Shipment Certificate of Textile Products,etc.
*Export License
At the present time,usually there are very few obstacles placed in the exporter's path by his own government.On the contrary,many governments are assisting and encouraging the export of the goods and extension of oversea market.Nevertheless,there are some occasions when a paricular restriction might be encountered due to the nature of the product,the market to which the goods are being exported or some other reasons.
*Inspection Certificate
Inspection Certificates are used by some countries to implement a control system imposed by government regulation.Its prime function is to ensure that goods are shipped in a quality condition and in accordance with ther terms of the sales contract.It may be issued by government organization or professional inspection companies. In our country, this is generally issued by Import and Export Commodity Inspection Bureau.
*Consular Invoice
Certain countries require a consular invoice to control and identify goods.The invoice must be purchased by the consular of the country to which the goods are shipped to and usually is prepared in the language of that country.
*Customs Invoice
Customs Invoice is required by the importing country in order to clear the customs,to verify country of Origin for import duty and tax purpose,to compare export price and domestic price,and to fix anti-dumping duty,etc. Usually, this invoice is required in exporting to US,Canada,New Zealand,Australia and some African countries.
*Import Licenseand Foreign Exchange Authorization
Many countries use import license and foreign exchange authorization system to restrict imports.Importers have to present pro forma invoices to their licensing authorities or to their central banks,or sometimes to both to apply for the license. If the planned importation is legal and meets current requirement,the license will be issued. Therefore, exporters should not ship to importers who need licenses until the licenes are actually in hand.
*Certificate of Origin
It's a document stating the country of origin of the goods. It's usually required by countries who do not ust customs Invoice or Consular Invoice to set the appropriate duties for imports.It contains the nature,quantity,value of the goods and their place of the manufacture. No particular format exists internationally. It's a long established document and is required as one of the support documents at the time of importation. It enables the buyer not only to process their importation of the goods,but permits preferential import duties where appropriate.
In our country, this certificate is generally issued by the Import and Export commodity Inspection Bureau or China Council for Promotion of International Trade.Nowadays, China enjoys the Generalized System of Preferences(GSP普惠制）treatment granted by many countries like New Zealand,Canada,Japan,and EU members to get preferential import duties. Commonly used GSP documents include GSP Certificate of Origin Form A(表格A产地证）,Certificate of Origin of Textile Products,Export Licenses of Textile Products, Shipment Certificate of Textile Products,etc.
*Export License
At the present time,usually there are very few obstacles placed in the exporter's path by his own government.On the contrary,many governments are assisting and encouraging the export of the goods and extension of oversea market.Nevertheless,there are some occasions when a paricular restriction might be encountered due to the nature of the product,the market to which the goods are being exported or some other reasons.
*Inspection Certificate
Inspection Certificates are used by some countries to implement a control system imposed by government regulation.Its prime function is to ensure that goods are shipped in a quality condition and in accordance with ther terms of the sales contract.It may be issued by government organization or professional inspection companies. In our country, this is generally issued by Import and Export Commodity Inspection Bureau.
*Consular Invoice
Certain countries require a consular invoice to control and identify goods.The invoice must be purchased by the consular of the country to which the goods are shipped to and usually is prepared in the language of that country.
*Customs Invoice
Customs Invoice is required by the importing country in order to clear the customs,to verify country of Origin for import duty and tax purpose,to compare export price and domestic price,and to fix anti-dumping duty,etc. Usually, this invoice is required in exporting to US,Canada,New Zealand,Australia and some African countries.
Import and Export Documentation(1)
Documentation is an area of great importance in international trade. It's a procedural matter that is required on every order and each individual document must be correctly completed.Successful international trade is only realized through complete professionalism in the use and execution of documentation without any mistake,Although no one may get praised just for having perfect documents, international traders can have serious problems because of imperfect documents.
Hundreds of documents are used in international trade nowadays, and a single order may have as many as 60-70 documents.Luckily, most transactions have far fewer than 60-70 documents, and many of those are never seen by the importer or the exporter.They are generally created and usded by service firms or governments.
The documents actually used in a transaction depend on the requirements imposed by both the importing and exporting countries.The characteristics of a transaction also determine the complexity of the documentation. A shipment of T-shirts from China to US by airfreight,open account,does not require much attention to documents.However, a shipment of automatic rifles form the US to Thailand by sea freight on a letter of creditm,may require so many documents that the traders may need to employ several specialists to deal with them.
Usually, documents should have the following characteristics:
*Accuracy The details in documents must be in strict conformity with those in the sales contract.No ambiguous words or expressions should be used.
*Completeness Every necessary detail should be included in each document.
*Conciseness No redundant words or expressions should be used, and no correction should be made on the document.
*Promptness Make sure the documents are ready when they are needed,so that unnecessary delay or confusing can be avoided.
Here, five kinds of commonly used international trade documents are discussed.They are categorized roughly according to the documents source.
1.Government Control Documents
2.Commercial Documents
3.Finace Documents
4.Transportation Documents
5.Insurance Documents
Hundreds of documents are used in international trade nowadays, and a single order may have as many as 60-70 documents.Luckily, most transactions have far fewer than 60-70 documents, and many of those are never seen by the importer or the exporter.They are generally created and usded by service firms or governments.
The documents actually used in a transaction depend on the requirements imposed by both the importing and exporting countries.The characteristics of a transaction also determine the complexity of the documentation. A shipment of T-shirts from China to US by airfreight,open account,does not require much attention to documents.However, a shipment of automatic rifles form the US to Thailand by sea freight on a letter of creditm,may require so many documents that the traders may need to employ several specialists to deal with them.
Usually, documents should have the following characteristics:
*Accuracy The details in documents must be in strict conformity with those in the sales contract.No ambiguous words or expressions should be used.
*Completeness Every necessary detail should be included in each document.
*Conciseness No redundant words or expressions should be used, and no correction should be made on the document.
*Promptness Make sure the documents are ready when they are needed,so that unnecessary delay or confusing can be avoided.
Here, five kinds of commonly used international trade documents are discussed.They are categorized roughly according to the documents source.
1.Government Control Documents
2.Commercial Documents
3.Finace Documents
4.Transportation Documents
5.Insurance Documents
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