Import & Export Practices Description of commodity Quantity
Transport Package Price Payment Insurance Inspection Claims &
dispute Body all the terms and conditions agreed upon
Slide 3
Import & Export Practices Unit price Amount
Slide 4
Slide 5
Import & Export Practices The price of the goods Unit price
and total amount of payment are extremely important in a contract.
After several rounds of offer and counter-offer, both parties reach
an agreement on the price.
Slide 6
Import & Export Practices The total amount should be
written in figure and capital, When writing the total amount in
capital, we always add say at the beginning of the sentence, and
only at the end. USD38500.00 (in figure) SAY: US DOLLARS THIRTY
EIGHT THOUSAND FIVE HUANDRED ONLY. (in capital) The price of the
goods
Slide 7
Import & Export Practices The price of the goods the price
of goods usually refers to the unit price.
Slide 8
Import & Export Practices Unit price Unit price has four
parts: The currency The figure The calculating unit The price
term
Slide 9
Import & Export Practices How to mark the price in
international trade Feather sofa USD200 per set FOB Dalian E.g.
HKD5.00 per dozen net CIF Hong Kong. E.g. USD21 per set FOB
Shanghai including your commission 5% on FOB basis.
Slide 10
Slide 11
Import & Export Practices One import and export company
exported his goods under the CIF term. The seller delivered the
goods on board the vessel on time and prepared all necessary
documents. But the vessel stranded( ) and sank in a few hours after
departure.
Slide 12
Import & Export Practices The next day, when the seller
asked for payment with full set of documents in conformity with the
contract, the buyer refused to accept the documents and rejected
payment because his goods have been lost. Is it reasonable for the
buyer to do so? Why?
Slide 13
Import & Export Practices One problem in international
trade is that different countries might have different
interpretation of the same contract wording. Thus there is a risk
of misunderstanding and subsequent disputes.
Slide 14
Import & Export Practices However, such a problem can be
best solved or reduced by creating a set of internationally
accepted terms defining the respective roles of the buyer and
seller in the arrangement of transportation and other
responsibilities and clarifying when the ownership of the
merchandise takes place.
Slide 15
Import & Export Practices The trade terms refer to using a
brief English concept or abbreviation to indicate the formation of
the unit price and determine the responsibilities, expenses and
risks borne by two parties as well as the time of the passing of
the property in the goods.
Slide 16
Import & Export Practices The formation of the unit price (
) The time and place of delivery/ risk transfer / Responsibilities
and expenses borne by two parties
Slide 17
Import & Export Practices The primary function of the trade
terms is to define the responsibilities to be carried out by either
the seller or the buyer. In relation to the responsibilities, there
are costs and expense. Problem in that regard would often mean loss
of good relation and loss of repeat orders.
Slide 18
Import & Export Practices titles to the goods will pass
over from the seller to the buyer at different time and places.
Seller and buyer need to know when and how they will lose or
acquire the title to the goods. Time and place of delivery are
crucial factors in defining the point where the responsibilities
and the risks pass from the seller to the buyer.
Slide 19
Import & Export Practices It is therefore of vital
importance to establish a clearly defined cut- off point to show
where the sellers responsibilities and risks ends and where the
buyers begin so that the seller can price his goods accurately and
the buyer can calculate the full cost of import.
Slide 20
Import & Export Practices In transaction, different trade
term used by the buyer an seller decides the price. The price of
same goods quoted on FOB basis is lower than that on CIF basis, as
the seller need to pay the freight and the insurance on CIF. So,
the trade terms can define the formation of the unit price.
Slide 21
Import & Export Practices International customary practices
1)Warsaw--Oxford Rules 1932 2)Revised American Foreign Trade
Definitions 1990 3)International Rules For the Interpretation of
Trade Terms NameIssued bytime trade terms Revised American Foreign
Trade Definitions 1990 In 1919 EXW,FOB, FAS,C&F, CIF, DEQ
Warsaw-Oxford Rules Internation al Law Institute In 1928 CIF
International Rules for the Interpretation of Trade Terms
Internation al Chamber of Commerce In 1936 E F C D 11 Trade
terms
Import & Export Practices Revised American Foreign Trade
Definitions 1941 1990 1919 ,1941 National Council of American
Importers, Inc. ,1990 FOB INCOTERMS
Slide 25
Import & Export Practices Revised American Foreign Trade
Definitions 1990 EX Point of Origin EX Point of Origin Free on
board Free on board Free Along Side Free Along Side (Cost and
Freight) (Cost and Freight) (Cost, Insurance and Freight) (Cost,
Insurance and Freight) (EX Dock) (EX Dock)
Slide 26
Import & Export Practices International Rules for the
Interpretation of Trade Terms, commonly referred to as Incoterms,
are such a set of commercial terms. It aims to provide such a set
of standardized terms which mean exactly the same to both parties
to a contract and which will be interpreted in exactly the same way
by courts in every country. This set of terms was first published
in 1936 and is now in its 7th revision, we call it 2010
INCOTERMS
Slide 27
Import & Export Practices However, Incoterms are not part
of national or international law though they can be binding on
sellers and buyers as their contractual obligations provided the
sales contract specifies that a particular Incoterms will apply. In
a word, Incoterms are not a panacea for a sales transaction.
Slide 28
Import & Export Practices E/ EXWEx Work F FCAFree Carrier
FASFree Alongside Ship FOBFree on Board C CFRCost and Freight
CIFCost Insurance Freight CPTCarriage Paid To CIPCarriage and
Insurance Paid To TRADE TERMS IN INCOTERMS 2010
Slide 29
Import & Export Practices D DATdelivered at terminal
DAPdelivered at place DDPDelivered Duty Paid TRADE TERMS IN
INCOTERMS 2010
Slide 30
Import & Export Practices The following terms can be used
only for sea or inland waterway transport: FAS, FOB, CFR, CIF The
following terms can be used for multimodal transport EXW, FCA, CIP,
CPT, DAT,DAP, DDP Six main international trade terms FOB, CFR, CIF,
FCA, CPT, CIP TRADE TERMS IN INCOTERMS 2010
Slide 31
Import & Export Practices FAS=Free alongside ship.named
port of shipment FAS means that the sellers fulfils his obligation
to deliver when the goods have been placed alongside the vessel at
the named port of shipment. This means that the buyer has to bear
all cost and risks of loss of or damage to the goods from that
moment.
Slide 32
Import & Export Practices THE SELLERS RESPONSIBILITIES 1.
provide appropriate packing and marking 2. deliver the goods at the
disposal of the buyer alongside the ship. 3. carry out the export
procedures 4. provide the buyer with the document received for the
delivery of the goods
Slide 33
Import & Export Practices THE BUYERS RESPONSIBILITIES 1.
take delivery of the goods alongside the ship 2. carry out the
import procedures and the carriage to the final destination
Slide 34
Import & Export Practices FAS FAS Free Along Side VESSEL
FAS FAS
Slide 35
Import & Export Practices FOB=Free on Board (Named port of
Shipment) It means that the seller fulfils his obligation to
deliver the goods when they have shipped on board at the named port
of shipment. This means that the buyer has to bear all expenses and
risks of or damage to the goods from that point.
Slide 36
Import & Export Practices
Slide 37
Import & Export Practices THE SELLERS RESPONSIBILITIES 1
deliver the goods at the time stipulated in the contract provides
sufficient notice 2 obtains the export licenses and authorizations
and carry out all export formalities and procedures 3 assume all
risks of loss or damage to the goods until they have shipped on
board.
Slide 38
Import & Export Practices THE SELLERS RESPONSIBILITIES 4
provides the buyer with a proof of delivery or a transport document
(such as B/L,inspection documents) The most important is deliver
the goods on time and notice the buyer. Generally speaking, the
seller dispatches the shipping advice within 24hours after
shipment.
Slide 39
Import & Export Practices THE BUYERS RESPONSIBILITIES 1
take delivery of the goods on board the ship at the port of
shipment 2 carry out the import procedures and the carriage to the
final destination 3 assume all risks of loss or damage to the goods
after they have shipped on board.
Slide 40
Import & Export Practices THE VARIATION OF FOB In order to
indicate who shall bear the loading charges expenses, the most used
variation of FOB are: 1 FOB liner terms 2 FOB under tackle 3 FOB
stowed 4 FOB trimmed
Slide 41
Import & Export Practices On FOB term basis, Seller A
prepared the goods at the stipulated time, meanwhile, Buyer B
informed A of the name of vessel and the date of shipment, when the
goods is lifted to the ship, it fell down on the deck, so now who
shall take responsibility? Seller or Buyer? CASE
Slide 42
Import & Export Practices ANSWER Under FOB terms, the risk
separation was the rail of the ship, during the shipment of goods,
if they didnt across the ship's rail, and fell to the sea, the
seller should bear the risk. When the goods across the ship's rail,
fall in the deck, the buyer should bear the corresponding
risks.
Slide 43
Import & Export Practices 300 FOB
Slide 44
Import & Export Practices ANSWER In this case, falling into
the cargo deck, the buyer can assume the risk is no doubt.
Import & Export Practices FOB FOB 1 FOB NEW YORK FOB VESSEL
NEW YORK 2
Slide 49
Import & Export Practices 242 FOB Vessel New York 200 48400
50000 242 FOB Vessel New York 200 48400 50000
Slide 50
Import & Export Practices 1990 FOB FOB (named inland
carrier at named inland point of departure) FOB (named inland
carrier at named inland point of exportation) Freight Paid to
(named point of exportation) FOB (named inland carrier at named
inland point of departure) Freight Allowed to (named point)
Slide 51
Import & Export Practices 1990 FOB FOB (named inland
carrier at named point of exportation) FOB Vessel (named port of
shipment) FOB (named inland point in country of importation)
Slide 52
Import & Export Practices CFR (Cost and Freight named port
of destination) It means that the seller shall undertake the cost
and freight necessary to carry the goods to the named port of
destination, C&F
Slide 53
Import & Export Practices but the risks of, losses of, or
damage to the goods, as well as any additional costs due to events
occurring after the time the goods have been delivered on board the
vessel, are transferred from the seller to the buyer when the goods
is shipped on board at the port of shipment
Slide 54
Import & Export Practices
Slide 55
Import & Export Practices 1 deliver the goods at the time
stipulated in the contract and bear freight from port of loading
and discharge, provides sufficient notice 2 obtains the export
licenses and authorizations and carry out all export formalities
and procedures THE SELLERS RESPONSIBILITIES
Slide 56
Import & Export Practices 3 assume all risks of loss or
damage to the goods until they have shipped on board. 4 provides
the buyer with a proof of delivery or a transport document (such as
B/L, inspection documents) 5 The most important is deliver the
goods on time and notice the buyer. THE SELLERS
RESPONSIBILITIES
Slide 57
Import & Export Practices 1 Accept delivery of goods at the
port of shipment and receive them from the carrier at the port of
destination 2 Carry out the import procedures and the carriage to
the final destination THE BUYERS RESPONSIBILITIES
Slide 58
Import & Export Practices THE VARIATION OF CFR In order to
indicate who shall bear the unloading charges expenses, the most
used variation of CFR are: CFR Ex Ships Hold CFR Ex Tackle CFR
Landed CFR Liner Terms
Slide 59
Import & Export Practices CFR A 9 1 2 9 1 2 3 2 4
Slide 60
Import & Export Practices A merchant in South America
placed an order with a Chinese export company for a certain
commodity on CFR Asuncion ( )terms.With a view to develop new
markets, the export company immediately made an offer abroad on the
basis of CFR Asuncion, and the transaction was soon concluded.
CASE
Slide 61
Import & Export Practices When shipping the goods, however,
this company came to realize that Asuncion is an inland city. As
was the case, if the company had the goods transported to Asuncion,
it had to, first of all, have the goods transported by sea to a
seaport in Argentina or some other South American neighboring
country. CASE
Slide 62
Import & Export Practices After that, the goods might be
transport to Asuncion through river transportation or inland
transportation. As a result, this company had to pay a considerable
sum of freight charges. What can we learn from this case? CASE
Slide 63
Import & Export Practices In this case the loss was caused
simply because of the ignorance on the part of the export
businessman. What we can learn from this case is that, when
offering abroad, we must make exact calculations of the total
freight and other relevant charges. Most importantly, it is very
beneficial for every export businessman to learn geography.
ANSWER
Slide 64
Import & Export Practices CIF (Cost Insurance and Freight
named port of destination) It means that the seller has the
obligation to procure marine insurance against the risks of, losses
of, or damage to the goods during the carriage. Under CIF term, the
seller has the same obligations as under CFR, but with the addition
that he has to procure marine insurance against the buyers risk of
loss of or damage to the goods during the carriage. The seller
contracts for insurance and pays the insurance premium.
Slide 65
Import & Export Practices The buyer should note that under
the CIF term the seller is only required to obtain insurance on the
minimum cover. Should the buyer wish to have the protection of
greater cover, he would either need to agree as such expressly with
the seller or to make his own extra insurance arrangements. CIF
10%. .
Slide 66
Import & Export Practices
Slide 67
Import & Export Practices THE SELLERS RESPONSIBILITIES 1
deliver the goods at the time stipulated in the contract and bear
seafreight and insurance premium from port of loading to discharge.
2 obtains the export licenses and authorizations and carry out all
export formalities and procedures
Slide 68
Import & Export Practices THE SELLERS RESPONSIBILITIES 3
assume all risks of loss or damage to the goods until they have
been shipped on board. 4 provides the buyer with a proof of
delivery or a transport document (such as B/L,inspection documents)
and insurance policy
Slide 69
Import & Export Practices In order to indicate who shall
bear the unloading charges, the most used variation of CIF are: 1.
CIF Liner Terms 2. CIF Ex Ships Hold 3. CIF Ex Tackle 4. CIF Landed
THE VARIATION OF CIF
Slide 70
Import & Export Practices A Chinese import and export
company concluded a Sale Contract with a Holland firm on August 5,
2000, selling a batch of certain commodity. The contract was based
on CIF Rotterdam at USD 2500 per metric ton. CASE
Slide 71
Import & Export Practices The Chinese company delivered the
goods in compliance with the contract and obtained a clean on board
Bill of Lading. During transportation, however, 100 metric tons of
goods got lost because of rough sea. CASE
Slide 72
Import & Export Practices Upon arrival of the good, the
price of the contracted goods went down quickly. The buyer refused
to take delivery of the goods and effect payment and claimed
damages from the seller. How would you deal with the case?
CASE
Slide 73
Import & Export Practices It was not right for the buyer
not to take delivery of the goods. In this case, the contract
concluded between the seller and the buyer was on CIF terms,
according to which, the sellers responsibilities ended when he
loaded the goods on board the ship and paid the freight and
insurance premium; ANSWER
Slide 74
Import & Export Practices the risks were transferred to the
buyer or the other parties concerned after the seller put the goods
on board the ship. Since the documents presented by the seller were
right and proper, the seller could directly get paid form the
Issuing Bank of the L/C. ANSWER
Slide 75
Import & Export Practices However, part of the goods got
lost because of rough sea. Does this mean that the buyer suffered
loss? It is definitely not the case because there are other two
sub-contracts existing on CIF terms-I/P (insurance policy) and Bill
of Lading. ANSWER
Slide 76
Import & Export Practices In this case the buyer could
claim damages with the insurance company, but he had to take
delivery of the goods. Obviously, the actual reason for the buyers
refusal to accept the goods in this case was that the prices of the
goods were going down. This is, certainly, unjustified. ANSWER
Slide 77
Import & Export Practices 80 CIF 80 CIF
Slide 78
Import & Export Practices 1.The expenses and risks are
separated 2.CIF term is document transaction (Symbolic delivery)
The seller fulfills his duty of delivering goods against the
documents The buyer shall pay the price against the documents
(Physical Delivery)
Import & Export Practices The seller The buyer FOB Deliver
the goods on board the vessel Contract for the carriage of the
goods Obtain export license Obtain import license Cover cargo
insurance Provide documents for the buyer and ask for payment Pay
the price and take delivery of the goods Clearance for export
Slide 83
Import & Export Practices CFR Contract for the carriage of
the goods at his own expenses On usual term By the usual route In
the proper vessel Usual freight Additional Freight The seller The
buyer
Slide 84
Import & Export Practices CIF Contract for the carriage of
the goods Cover cargo insurance on behalf of the buyer Minimum
insurance (F.P.A) additional insurance premium The seller The
buyer
Slide 85
Import & Export Practices Suitable for sea or inland
waterway transport. The formation of the unit price FOB: Cost CFR:
Cost and Freight CIF: Cost, Insurance and Freight Summary:
Slide 86
Import & Export Practices FOB CFR CIF FOB BUYE R CFR SELLE
R BUYE R SELLE R BUYE R CIF SELLE R
Import & Export Practices TRADE TERMS IN INCOTERMS 2010 The
following terms can be used for multimodal The following terms can
be used for multimodal transport EXW, FCA, CIP, CPT, DAT,DAP,
DDP
Slide 89
Import & Export Practices EXW=EX Works named place This
term means that seller fulfils his obligation to deliver when he
has made the goods available at his premises (i.e., work, factory,
warehouse, etc) to the buyer.
Slide 90
Import & Export Practices In particular, he is not
responsible for clearing the goods for export and/or loading the
goods on the vehicle provided by the buyer or for clearing the
goods for export, unless otherwise agreed.
Slide 91
Import & Export Practices The buyer bears all costs and
risks involved in taking the goods from the sellers premises to the
desired destination. This term thus represents the minimum
obligation for the seller This term should not be used when the
buyer cannot carry out directly or indirectly the export
formalities.
Slide 92
Import & Export Practices FCA=Free Carrier,named place The
term means that The seller delivers the goods, cleared for exports,
to the carrier nominated by the buyer at the named place It should
be noted that the chosen place of delivery has an impact on the
obligations of loading the goods at that place. If delivery occurs
at the sellers premises, the seller is responsible for loading. If
delivery occurs at any other places, the seller is not responsible
for unloading.
Slide 93
Import & Export Practices Carrier means any person who, in
a contract of carriage, undertakes to perform (performing carrier)
or to procure (contracting carrier) the performance of carriage by
rail road, sea, air, inland waterway, or by a combination of such
modes. If the buyer nominates a person other than a carrier to
receive the goods, the seller is deemed to have fulfilled his
obligation to deliver the goods when they are delivered to that
person.
Slide 94
Import & Export Practices 1. provide appropriate packing
and marking 2. load the goods on the means of transport 3.
Nominated by the buyer (delivery at sellers premises) or place the
goods at the disposal of The carrier nominated by the buyer, not
unloaded In the sellers means of transport (delivery at the Depot
or elsewhere) THE SELLERS RESPONSIBILITIES
Slide 95
Import & Export Practices 4. carry out the export
procedures and provide the Buyer with the document received for the
delivery Of the goods. THE SELLERS RESPONSIBILITIES
Slide 96
Import & Export Practices CPT=Carriage Paid Tonamed place
of destination CPT means that seller delivers the goods to the
carrier nominated by him, but he must in addition pay the freight
for the carriage of the goods to the named destination.
Slide 97
Import & Export Practices The risk of loss of or damage to
the goods, as well as any additional costs due to the events
occurring after the time the goods have been delivered to the
carrier, are transferred from the seller to the buyer when the
goods have been delivered into the custody of the carrier. If
subsequent carriers are used for the carriage to the agreed
destination, the risk passes when the goods have been delivered to
the first carrier.
Slide 98
Import & Export Practices THE SELLERS RESPONSIBILITIES 1.
provide appropriate packing and marking 2. contract for the
carriage and pay the freight to the place of destination. 3.
deliver the goods to the carriers
Slide 99
Import & Export Practices THE SELLERS RESPONSIBILITIES 4.
carry out the export procedures 5. provides the buyers with the
transport document without delay.
Slide 100
Import & Export Practices CIP=Carriage And Insurance Paid
To named place of destination CIP means that the seller has the
same obligation as under CPT but with the addition that the seller
has to procure cargo insurance against the buyers risk of loss of
or damage to the goods during the carriage. The seller contracts
for insurance and pays the insurance premium.
Slide 101
Import & Export Practices The buyer should note that under
CIP the seller is only required to obtain insurance on a minimum
coverage. Should the buyer wish to have the protection of greater
cover, he would either need to agree as such expressly with the
seller or to make his own extra insurance arrangements.
Slide 102
Import & Export Practices 1. provide appropriate packing
and marking 2. contract for the carriage and pay the freight to the
place of destination 3. deliver the goods to the carrier 4. carry
out the export procedures THE SELLERS RESPONSIBILITIES
Slide 103
Import & Export Practices 5. contract and pay for agreed
cargo insurance in favor of the buyer 6. provide the buyer with the
transport document and cargo insurance document without delay THE
SELLERS RESPONSIBILITIES
Slide 104
Import & Export Practices FOB CFR CIFFCA CPT CIP
Slide 105
Import & Export Practices FCA CPT CIP
Slide 106
Import & Export Practices DAF=Delivered At Frontiernamed
place DAF means that the seller fulfils his obligation to deliver
when the goods have been made available, cleared for export, at the
named point and place at the frontier, but before the Customs
border of the adjoining country. The term frontier may be used for
any frontier including that of the country of export. Therefore, it
is of vital importance that frontier in question be defined
precisely by always naming the point and place in the term.
Slide 107
Import & Export Practices The term is primarily intended to
be used when goods are to be carried by rail or road, but it may be
used for any mode of transport.
Slide 108
Import & Export Practices DAP=delivered at place ++named
place of destination It means that the sellers fulfill his
obligation to deliver the goods the buyer at the named place of
destination with the seller bearing all the costs (other than those
related to import clearance, where applicable) and risks involved
in.
Slide 109
Import & Export Practices 1. In DAP, delivery occurs at the
buyers disposal, but ready for unloading from arriving vehicle at a
named destination. 2. the arriving vehicle under DAP may well be a
ship and the named place of destination may well be a port.
Slide 110
Import & Export Practices DAT=delivered at terminal ++named
place of destination DAT means that the sellers fulfill his
obligation just same as DAP, the seller will bear all the costs
(other than those related to import clearance, where applicable)
and risks involved in delivering the goods.
Slide 111
Import & Export Practices But under DAP term, delivery
occurs at the buyers disposal unloaded from arriving vehicle at a
named destination. It is suit for multimodal transport
Slide 112
Import & Export Practices DDP=Delivered Duty Paid named
place of destination DDP means that the sellers fulfill his
obligation to deliver when the goods have been made available at
the named place in the country of importation.
Slide 113
Import & Export Practices the seller has to bear the risks
and costs, including duties, taxes, and other charges of delivering
the goods thereto, cleared for import. this term represents the
maximum obligation.
Slide 114
Import & Export Practices considerations for choosing terms
of delivery 1 Transport capacity 2) Customers location 3) Freight
rate 4) Loading / Unloading facilities and local port custom 5)
Risks in transit