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... place of dated note to the seller Opening bank gets the document Opening bank credits correspondent bank Settlement by Negotiation
- Seller transfers documents to correspondent bank with a note made out to the buyer (the buyer is the beneficiary of the note) The correspondent bank pays seller against documents and note Correspondent bank transfers documents and note to opening bank Opening bank credits correspondent bank
- Commercial invoice, including a list of the goods, details of buyer and seller and signatures Packing list signed by seller Insurance policy including its type, the coverage it affords, amount covered. The policy's beneficiary must be the opening (importers) bank and it must be fully endorse able Detailed bill ways, receipts or bill of lading: who is entitled to receive delivery of the goods, who pays for the carriage, is carriage prepaid and where, etc. Other documents
The corresponding bank informs exporter about opening of L/C and checks and verifies the exporters documentation after goods have been loaded (such verification subject to opening banks consent). Sometimes the correspondent bank verifies the documents AND pays for them this is known as CONFIRMATION. With a confirmed L/C, the correspondent bank must pay the exporter upon verification of the documents. The exporter pays a confirmation fee. Transferable and Divisible An L/C that can be transferred to or be paid in parts to sub-contractors and suppliers of the Exporter. Only one transfer is allowed:
- The name and details (address, etc. ) of first beneficiary can be changed to name and details of second beneficiary The amount of transferred credit must be smaller than original amount of credit The period of validity of the L/C or its parts can be altered The percentage of insurance can be increased The details of the new L/Cs issued on basis of original L/C can be different to details of original L/C as long as new L/C are less (in amount) or shorter (in period) or partial and do not expand the original L/C or otherwise enhance it
If irrevocable, cannot be revoked even if revolving and even if the buyer went bankrupt. The bank is responsible to pay. Counter Credit (Back to Back) The L/C is pledged by the Exporter to his bank (the corresponding bank) or (more often) to another bank against receipt of credit from the bank. This credit is then used to pay suppliers.
The exporters obligation to pay the back to back credit it received from its bank is NOT dependent upon the payment of the L/C used as a collateral. V. Shipping Packing and transportation of goods to port or terminal Marine transport Air transport International forwarding and customs agency Cargo insurance Credit insurance Prevention of loss and damages Labeling Land export and import Packing Cardboard (two or three waves) Crate (wood with or without cardboard) Wooden boxes (heavy and expensive) Barrels (metal, plastic, wood; for the transportation of fluids; fluids must fit the material of the barrel) Sacks (jute, paper, plastic, cloth) The Goods can be transported Loose (each unit box, barrel, etc. separately) Unitizing (one unit composed of sub-units) shrink, containers, big bags or semi bulk, stretch, etc. Marine Transport The carriage fee or rate + charges, fees, levies, duties and commissions = carriage tariff Influenced by: Fixed and variable transport costs (such as the distance traveled, expenses and fees in various ports, balancing the cargo, frequency, size and type of vessel, properties of the goods, modes of loading and warehousing, volume / weight ratio, transport risks, possible damage to cargo, size of cargo and its composition, etc. ) But Likes are not treated as likes different prices are quoted for similar situations. This is because of additional costs related to the market in the goods and to the marine transport marketplace.
The carriage fee is determined also by what the traffic can bear how in demand are the goods, how valuable they are, etc. The conditions of the global marketplace in marine transport and the competition in it also determine the quoted price as well as fees, levies, charges, commissions and taxes in the various ports and in the various origin and destination countries. Changes of technology also influence prices. Tariffs are determined as CLASS RATE a class of transport, which includes many types of cargo with the same rate or A COMMODITY RATE specifically tailored to every type of cargo and multiplied by the weight or the mass (volume). Payment is according to the higher of the weight and the mass.
To this the exporter should add charges (such as the Heavy Lift Charge or the Extra Length Charge) and other levies such as the CAF (Currency Adjustment Factor a currency hedge in favor of the shipowner); the BAF (Bunker Adjustment Factor a percentage of the rate intended to offset certain expenses of the ship operator); a War Risk (or Political Risk to offset a high insurance premium); a Congestion Surcharge (to offset expenses which are the result of long periods of waiting at the port) or a THC (Terminal Handling Charges imposed by the port itself for the right to anchor). Containers Door to Door (House to House) An empty container is deposited with the exporter in a pre-determined date. The Exporter fills it and transports it to the harbor. In the destination country the container is deposited with the importer. He empties it, returns it to the port.
Pier to House In the port of discharge, cargo and goods from different suppliers are concentrated in one container which is then sent to the importer / buyer. House to Pier Like House to House but because the container contains goods for various buyers, the container itself is not sent to any single buyer. Pier to Pier Cargoes reach the port, get containerized by the agent in the port of loading. In the port of discharge, it is emptied and each cargo is sent separately to each buyer. Consolidation Transporting the cargoes of a few sellers in one container. REMEMBER! ! !
Compare Prices you will always find a cheaper alternative! ! ! Types of Ships Liner operate in regular lines with regular vessels in pre-determined dates Charter (ed) Voyage Charter Cargo owner charters a vessel to transport the cargo from port of loading to port of unloading Time Charter Cargo owner or shipping company charters a vessel for a defined period of time (upto a few years) Bareboat Charter Long term (5 - 15 years) charter (common in the transport of fuel and grains). The lessee takes care of the cargo, of operating the vessel and its crew Container ships Built like a beehive with cells the size of containers RORO Cargo rolled on wheeled carriages under deck (for transporting vehicles, etc. ) Multi Purpose Boat Tankers (fluids, liquids, fuel) Bulk Transports grains or chemicals in bulk Lash Carry with them big platforms or rafts Conference All shipowners are organized in a cartel called Conference Marine Bill of Lading (MBL) Serves as a receipt for the cargo, proof of existence of a carriage contract and proof of ownership. It is negotiable and endorse able. Under the Hague principles, a bill of lading (BL) must include the following:
- Name and address of shipper / exporter Port of loading and port of discharge Date of loading and place of issuance of BL Name of vessel (ocean liner, etc. ) and voyage number Cargo identification marks Description of goods number of units, weight, volume (mass) Condition of goods (if not filled no external or visible damage) BL must be clean on board not foul
- The words bill of lading and the words lading or shipped (which prove that goods have been loaded on board vessel) Date of loading Confirmation of the shipping company Numbers of original bills of lading, if any The words Clean on Board Name of the shipper Name of the consignee or To Order (of the shipper) together with endorsement of the shipper Name of vessel Port of loading, final destination and is re-loading required Name of parties to be notified upon arrival to the port of discharge Marks and numbers stamped on the packages Abbreviated description of the goods (weight, number of units and volume / mass) How many original copies of the MBL are there and is the presentation of all original copies required to in order to release the goods
The first carrier must transport the goods from the port of loading to the port of discharge through an intermediate port and is responsible for damages. Combined Transport BL Covering all modes of transport (not only sea) Forwarder BL Issued by an agent, an international forwarder Freight Forwarder BL Issued by FIATA, the international organization of forwarders IMPORTANT The Hague Principles regulate the legal relationship between carrier and shipper from loading to discharge. It covers only exported goods, carried by vessels by sea It applies only when a transport contract has been incorporated in the BL It does not cover goods (such as animals) on deck Air Transport Types of Transport Tariffs Air transport tariffs are indicated by IATA but often these tariffs are ignored. SHOP AROUND. Minimum Rate not in accordance with actual weight (when under 45 kg. ) General cargo Rate (GCR) for all kinds of cargo Specific Commodity Rate (SCR) per a minimum weight of a specific type of cargo and valid for a limited period of time.
Cheaper than GCR. Unit Load Device (ULD) Special tariff for cargo transported as a unit on a surface or in a container. Only weight is limited (maximum and minimum) The tariff is derived from: Destination of cargo Type of goods Scr's can be negotiated with the local IATA representative Minimum Rate Weight / Mass (volume) ratio (every 6 cu. m. equal 1000 kg. ) if W/M exceeds this ratio payment will be according to weight REMEMBER Try to exceed the minimum rate and the minimum weight Negotiate an SCR or a ULD wherever possible Make sure that the W/M ration does not exceed the allowed ratio Airway Bill Issued by the air carrier. Mainly a confirmation of transport not of ownership or any right to goods.
Absence of airway bill does not effect validity of contract of air carriage or the applicability of the treaty but may prevent carrier from resorting to exemptions and other restrictions in the treaty. Airway bill is proof of weight, measurements, quantity and packing. It is also a carriage invoice, an insurance policy (if insurance taken out by carrier) and a customs declaration (if no other declaration is required by law). Not negotiable and ownership cannot be transferred by its endorsement or transfer. Only consignee can accept delivery at discharge. Buyer appears under also notify when bank is consignee and fiduciary on behalf of seller.
Buyer receives power of attorney from bank to release and clear the goods. Issued in three original duplicates to shipper, consignee and carrier. International Forwarding and Customs Agency The international organization of forwarders FIATA created a document system called FBL (Forwarders Bill of Lading - equivalent to MBL). The forwarder responsible for goods door to door (house to house). FCR (Forwarders Certificate of Receipt) A receipt issued by forwarder confirming receipt of goods at the factory to be carried to destination. FWR (Forwarders Warehouse Receipt) Receipt issued by forwarder that it received goods in a warehouse to be carried to destination.
Airfreight Forwarder As opposed to marine forwarders, airfreight forwarders have to comply with certain professional and financial conditions. Some of them are IATA forwarders with minimal volume of activity, proven acquaintance with airfreight rules, skilled staff and so on. IATA forwarders get 5 % of carriers rate and are allowed to issue airway bills to shippers on behalf of air carriers. An airfreight forwarder: Arranges a number of shipments, unites them and passes them to the aircraft, handles commercial export / import operations for exporter / importer, prepares all paperwork, takes care of transit from one aircraft to another and of air insurance (if client demands it), consolidates cargoes, issues airway bills and selects routes. Customs Agent deals with goods only within the port while an international forwarder handles the goods from door to door. Customs Agent deals with the following: Reserving space in a vessel, coordination of acceptance of containers, provision of information regarding prices, routes, schedules, preparation of documents for exporter including BL, CO and all other documents demanded by the customs.
The agent appraises and classifies the goods for customs purposes, obtains a gate pass and arranges the transportation of the goods to the buyers location. The buyer is responsible for the activities of the agent. Cargo Insurance About 0. 15 % of value of cargo, except if dangerous or fragile cargo. One Time Policy expires with completion of transport.
Open Policy or Current Policy see above. REMEMBER Insurance is cheap use it abundantly. Insure the cost, the profit, the carriage rates, the marine insurance premium, port expenses and land transport, customs agency, import taxes and so on. Double marine insurance is allowed.
Marine insurance is subject to the London Clauses. Institute Cargo Clauses deal with general cargo. A Clauses Coverage All risks insurance against loss or damage caused by random event which happens outside the cargo and effects it. Does not cover loss or damage which is the result of intentional behaviour of the insured, general leakage, loss or vaporization of mass or weight, normal wear and tear, inappropriate packing or preparation of insured goods, breach of contractual schedules and obligations by insured or owners, charterers or operators of vessel, inherent defects, war, nuclear fusion or fission, radioactive material, incapacitation of vessel known to insured at time of loading.
B Clauses Coverage loss or damage due to fire, explosion, shipwreck, capsizing, derailment of a land vehicle, collision or contact with another body except water, unloading in distress, earthquake, volcanic eruption or thunder, general average, penetration of sea, lake, or river water into the ships warehouses, lift, etc. , total loss of cargo which fell in the sea during unloading of loading. C Clauses Coverage covers only catastrophic marine disasters such as fire, explosion, shipwreck, drowning, capsizing, derailment, collision, unloading in distress, general average or dumping in the sea. Credit Insurance Both private and state companies (such as ECGD in the United Kingdom, COFACE in France and OPIC in the USA) provide insurance: Against the credit risks of the buyer Against political risks (war, terror, acts of state) Against financial risks (non convertibility, non repatriation) Credit risks insurance policy serves as collateral. It is pledged against credit, which goes towards financing the production of the goods and working capital. Credit insurance firms check and rate clients (or rely on credit rating agencies such as Moody's, Fitch-IBCA for banks or Dun and Bradstreet). They issue policies guaranteeing payment to the supplier / exporter in case of the buyers bankruptcy, refusal to pay, default, nationalization and expropriation, etc.
Insurance is provided mainly or only to firms registered in the domicile of the insurance company or in another member of the same customs union or trade block (EU, EFTA, etc. ) so, it is recommended to establish subsidiaries in these territories to be eligible. Premiums range between 0. 5 - 0. 7 % per insurance unit for a period of 90 days. Prevention of Loss and Damage Use only new packings suitable to the goods Fit crates and cardboard boxes with metal corners Use shrink wherever possible, tie and strengthen everything massively Do not paste labels with descriptions, pictures, brandname's, trademarks or labels on the packages these attract thieves. Mark the packing with letters and numbers on at least two of its sides.
Proper packing is an implied warranty in the carriage contract and an expressed warranty in a marine/ air insurance policy. Mark the packages with instructions: Fragile, Printed, Handle with Care, Avoid X-rays and so on. The standard marking of cargo should include:
- Initials or abbreviated name of consignee (full name and address required in case of road or rail transport) Reference number (order number or similar). Avoid indicating the date Name of port and final destination and via in case of transit Package number out of total (example: 2 / 20) Mark the packages Big, Clear and Brief (BCB) Use metal, plastic or strong cloth tags do not use cardboard or wood tags Marks bags and sacks with sealing liquid Mark dangerous and radioactive materials with warnings, the chemical composition and the shippers name Use Latin letters as well as local alphabets a maximum of 10 lines of 17 characters each It is advisable but not required to mark gross weight in case of air transport.
Net weight and measurements are not required at all unless chemicals or dangerous materials are involved. Some countries demand to mark the name of country of origin, number of import license, etc. pay attention to local regulations
Leave no empty space inside the package fill empty spaces with paper, Styrofoam, pad the goods and tie them tightly. Do not overfill the crates, sacks, or boxes. Do not concentrate the goods in one part of the package (internally) spread them evenly. Place light cargo on heavy cargo. Separate types of packings (cardboard boxes from crates, etc. ) Do not leave any space between the wall of the container and the packaged goods. VI.
More on Documents Invoice Must include:
- Country of Origin Place and date of preparation, number of invoice, reference to order number Names, addresses and other details of buyer and seller (and consignee if not the buyer), address for delivery of documents Type of carriage (sea, land, air, multimodal) Port of loading Port of discharge Final destination Commercial conditions and schedules (delivery and payment) Number of packages, their description and markings (numbers, etc. ), statistical classification Description of goods according to type, quality, special properties, composition in percentages of each material Amount of goods in units / weight / volume Gross, net and net net and measurements of each package The price agreed between the parties, costs of freight and insurance Conditions of shipment, dispatch and payment, including all discounts, fees, commissions and charges Exporter number if any Stamp and signature of seller plus declaration that all the above is true
Must include the following details to be valid: Name of insurer Policy number Details of carrier Route from exit to entry Total value insured and type of currency Conditions of the policy Details of agent in destination country Jurisdiction in case of disputes Description of goods and their packing Date of issuance of insurance Method of calculation of the premium (marine insurance, war surcharge, registration, policy, credit if payment of premium is post dated) Bill of Lading Contains description of goods, their quantity and quality (clean on board or foul). Airway bills include an invoice to be paid by buyer or seller. If seller pays, the bill will say prepaid if buyer is to pay, it will say collect. In case of marine bill of lading, a detailed invoice is issued to seller. Certificate of Origin EUR 1 Issued at the request of the buyer. Confirmed by the chamber of commerce, the customs, or the exporter or his agent / forwarder or any other body authorized by them.
Must be printed without corrections. Must conform to commercial invoice. Must include: Name and full address of exporter Name and full address of consignee Description of goods and their packing Weight of goods in kg. Or volume in liters Numbers of relevant invoices Declaration of exporter that goods conform to rules of origin stipulated in the agreement under which the certificate of origin is issued FORM A Like EUR 1 but: Authorities do not need to confirm it The percentage / amount of value added of the goods must be declared (or P in case the goods are also produced in the destination country) Consular Confirmation or Consular Invoice Demanded mainly by developing countries. Includes full description of goods in language of destination country including quantities, monetary values and a sworn affidavit of the exporter attesting to the veracity of the data. APPENDIX I: The World of the Internet FIRST STEPS Buy a computer including modem, graphic card with 2 Mb buffer and multimedia (sound card, speakers) Open an account with one of the internet service providers ISPs (PTT, Use, MOL, or others) You will get: An installation software on a diskette (usually someone will come to install it for you) A username (which is also the name of your account and part of your email address) A password keep this secret and change it often Certain ISPs will give you a separate password for communication purposes LETs GO SURFING Click on the phone (connection) icon a window will open Type in your password and click with the left button of the mouse OK Once connected to the network (you will be informed by a separate window which will show you the status of your modem and how much time you are connected) you have opened the door to the world of the internet The internet is like a huge city with many addresses of sites.
To visit these sites, you need to have their addresses (which usually start with http: // - example: web) You also need a car to take you to the sites a special software called browser. The two best known are Microsoft Internet Explorer 5. 0 and Netscape Communicator 4. 61. In this demonstration we will use the Explorer because it is user friendly. Click on the browser icon and study the browser. You can always click on the Help button to get detailed help.
To visit a site you can either: Click on the address if it is active (in blue color in a computer file) OR copy the address (mark it, click the right button of the mouse and click copy in the menu) Click file in the browser toolbar, then click open (or click the open button of the browser directly) Paste the address that you copied (click the right button of the mouse and click paste in the menu) Click open The browser will find the site whose address you asked for and bring you there. Once in a site, you can click on any COLOURED (hyperlinked) text to visit other sites. SEARCH ENGINES BUT WHAT IF YOU DO NOT HAVE THE ADDRESS? In other words, how do you find an address of a site? Or, even more difficult, how do you find sites which deal with subjects you are interested in? To do that, you need to use Search Engines.
These are special software applications. Look at the list of addresses you received under the heading search engines. You have there the addresses of the 6 most important search engines. Let us exercise. You are interested to find the addresses of tobacco organizations in the United States.
You have no idea which sites deal with this subject, let alone what are their addresses. Open the Alta Vista search engine (or any other the biggest are Alta Vista and Northern Light, the best organized are LookSmart and Yahoo) using the address you have. Type your search term: tobacco organizations in USA (use the marks). You will get a list of sites. Click on the colored text (the hyperlinked text).
Each title you click on will lead you to another site. We will learn more advanced modes of searching in this seminar. The internet is the biggest library in the world. It has everything you need about any subject in the world.
BUT, it is very chaotic. OTHER WAYS OF KNOWING THINGS A more orderly way of obtaining information is by: Subscribing to specialized providers of information through subscription databases such as DIALOG and NEXIS-LEXIS (lets find their addresses through the internet) OR Subscribing to specialty magazines and CD-ROMs (lets find a few of these through the internet) the biggest such providers are US agencies (the USDA and even the CIA! ! ! ). ELECTRONIC MAIL (E-MAIL) When you open an account with an ISP you get an email address. This is YOUR address in cyberspace, in the world of the internet. It is NOT the address of a SITE it is your PERSONAL address and it looks like this: (all letters usually small).
You can: Send messages Receive messages Send and receive computer files (attached to the message as attachments) whole documents, pictures, diagrams, faxes, EVERYTHING and you can send it at the price of a local phone call to anywhere in the world. Design a special signature Good luck and welcome to the internet. Appendix II Incoterms In-Depth Documentary Credits and INCOTERMS - International Commercial Terms 1. Incoterms are part of international sales contracts.
They regulate: (A) Carriage of goods from seller to buyer (B) Export and import clearances (C) Division of costs and risks between the parties 2. Important acronyms: Electronic Data Interchange (EDI), Electronic Data Interchange for Administration Commerce and Transport (EDIFACT) and Uniform Rules of Conduct for Interchange of Trade Data by Tele transmission (UNCID). Internet: GE - TPN 3. Electronic Bills of Lading use the CMI Uniform Rules. 4.
As a result of the container revolution and cargo utilization, the incoterms FCA, CIP and CPT were developed. Emphasis shifted from means of conveyance to the place of carriage. FOR / FOT / FOBA were omitted. 5. Case Study: warehouse to warehouse insurance and the FOB point - where is delivery effected? . CIF - seller exposed to claims for failing to reach the ships rail on time. 6. The mirror method - the 10 headings see Appendix of Incoterms. 7.
INCOTERMS - part of larger picture (deal with delivery and with nothing after delivery - not with quantity, costs of loading / discharging, clearance, transport, risks of loss / damage and insurance against them, title, quality breach of contract or price). There are: Contract of sale, applicable law, custom of trade. Example: an FOB Buyer would insure the goods despite the fact that Incoterms do not oblige him to do so - difference between obligation and commonsense. 8. Specific reference required.
Example: trading with a US firm (UCC - AFDT). 9. CISG - Contracts for the International Sale of Goods: POD where breach is determined in conjunction with Incoterms (concerning delivery). 10. D-terms: seller's delivery obligation is extended to the country of destination (arrival contract) E-terms, F-terms, C-terms: seller fulfils delivery obligation in his country (shipment contract) 11. The common error: there is no connection between risks, costs and delivery. 12.
F-terms: Free of risks C-terms: Costs borne after critical risk point reached D-terms: Destination C-TERMS: 2 points of interest: delivery and risk / costs 13. FCA buyer to instruct seller how to hand over goods and wher FCL Full loads (railway wagon / container) vs. LCL break bulk 14. FOB additional service Seller contracts for carriage - though he has no obligation to do so 15. FOB The port decides how to distribute loading 16. FAS Seller does not have the obligation to clear goods for exports (unlike FOB! ) 17.
C-terms Do not stipulate arrival date! seller obliged to ship good so that they COULD ARRIVE! 18. CFR, CIF Only by sea! A 8 demands bill of lading / sea waybill If Buyer wants to sell in transit - he will be unable because
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