Presentation on theme: "Seminar Import/ Export Trade/ Transportation"— Presentation transcript:
1 Seminar Import/ Export Trade/ Transportation Speaker: Richard Tang of Universal Bridge Cargo
2 Introduction Import/ Export in Canada Sales Process/ Documentation requirementsIncoterms 1990Payment MethodsPayment: Documentary Collections and Letter of CreditInsurance and ClaimThe role of the Carrier/ Freight Forwarder/ Customs Broker& Sufferance Warehouse including logistic
3 Player in the fieldDepending on the size of the organization, there may be several departments within the exporter’s own shop to handle various processesMarketing (Selling Process) Traffic (Shipping/ Documentation) Finance (Payment Process)
4 The Seller Must The Buyer Must A1 Provision of goods in conformity within the contract A2 Licenses, authorizations and formalities A3 Contract of carriage & insurance A4 Delivery A5 Transfer of risks A6 Division of costs A7 Notice to the buyer A8 Proof of delivery, transport document or equivalent electronic message A9 Checking /packaging/ marking A10 Other obligationsB1 Payment of the priceB2 Licenses, authorizations, and formalitiesB3 Contracts of carriageB4 Taking delivery B5 Transfer of risks B6 Division of costs B7 Notice to the seller B8 Proof of delivery, transport document or equivalent electronic messageB9 Inspection of goodsB10 Other obligationsTo facilitate the interpretation of the 13 trade terms, the ICC has grouped them into 4 distinctive categories. The first letter of each indicates the group to which the term belongs.
5 Role of Documents Document Reason Contracts Purchase order Pro-forms Invoice Sales ContractShipping and Insurance Documents Bills of lading Inspection Certificate Marine Insurance Certificate Health/ Analysis Certificate Weight & Packing List Certificate of OriginLetters of Credits Documentary CollectionsExport Declaration Form B Canada Customs Invoice CCICanada Customs Coding Form B3Many forms are necessary depending on the product and the country of destinationTo avoid misunderstandingsTo ensure trust between buyer and sellerTo obtain payment and finance To fulfill Canadian government requirementsStatistics (Balance of trade)Assessment/ Collection of duty taxes and feesImport/ Export Control
9 INCOTERMS 1990 Ocean FAS FOB CFR CIF DES DEQ EXW FCA CPT CIP DAF DDU DDPMultimodalGroups E, F, and C terms details the terms of shipment while group D sets out the terms of arrival
10 INCOTERMS 1990FCACUSTOMSCUSTOMSEXW FCA FCA FASDES DEQ DEQ DDPFOB(DP) DDUCIF/CFR (RISK) CIF/CFR (COST)CPT/CIP (RISK)DAFCPT/CIP (HOST)In the past, some of the ocean terms, specially FOB, CFR, and CIF were used incorrectly to denote a certain mode of transportation. In contrast, Incoterms 1990 clearly indicates which terms should be used exclusively for sea and inland waterway and which terms should be used for Multimodal transport.All ocean terms make specific reference to “ship”, “ship’s rail”, “port of departure”, “port of destination” or even a “quay”. Since the transfer of risks and/or costs are based on those critical ports, it is understood why these should be used only when sending shipment by ocean (sea or inland waterway).Multimodal terms can be used by and mode of transportation including ocean. While the ocean terms FAS, FOB, CFR, and CIF are appropriate when the goods must cross the ship’s rail, FCA, CPT, and CIP should be used when the goods are delivered to the carrier at any point other than the ship’s side.
11 S B S B S B S B Grouping of the Terms Group E Departure EXW Ex Worksc/rcontracts &paysGroup F Main carriage unpaidFCA Free carrier FAS Free Alongside Ship FOB Free on BoardSBdeliversc/rCFR Cost and Freight CIF Cost, Insurance and Freight CPT Carriage Paid to CIP Carriage and Insurance paid toGroup C Main carriage paidSBdelivers &contractsrpays transportationcDAF Delivered At Frontier DES Delivered Ex Ship DEQ Delivered Ex Quay DDU Delivered Duty Unpaid DDP Delivered Duty PaidGroup D ArrivalSBdeliversc/rc = cost, r = risk, s = seller, b = buyer
12 Shipment Contracts INCOTERMS Shipment Contracts Multimodal Land Air Ocean Named PortFCARISK COSTFCARISK COSTFCARISK COSTFOBRISK COSTCFR CIFRISK COSTCPT CIPRISK COSTThe shipment contracts sets out seller’s responsibility to deliver the cargo in good condition into the custody of the named carrier.Under the F terms (FCA, FAS and FOB) the transfer of costs and risks takes place simultaneously when the seller delivers the shipment to the carrier and obtains in exchange a clean receipt.Under the C terms (CFR, CIF, CPT, and CIP), the risks of loss or damage to the goods will pass from the seller to the buyer at the point of delivery
13 Arrival Contract DAF DES DEQ DDU DDP INCOTERMS 1990 Arrival Contracts U.S.AMEXICODAFRISK COSTDESRISK COSTDEQRISK COSTDDU DDPRISK COSTThe arrival contract commits the seller to be responsible for the goods in transit until they reach the named point of destination.
14 Ocean vs. Multimodal terms INCOTERMSOcean vs. Multimodal termsOceanRISK COSTFOBCFR CIFRISK COSTMultimodalRISK COSTFCARISK COSTFCAThe above chart compare the critical points (i.e. points at which the transfer of cost & risk takes place) under both ocean and multimodal terms.
15 Liner vs. FIO Terms INCOTERMS Liner vs. FIO Terms Loading Unloading Liner Buyer BuyerFOBFIO Seller BuyerLiner Buyer BuyerCIFFIO Seller NegotiableLinerFIOStevedoring charges alwaysCost of loading/ unloadingFIO: Free in-outThe ocean terms FOB, CFR and CIF Cam be modified by adding “liner terms” of “FIO clause”. Depending upon which one is used, either the buyer of the seller had to pay the cost of loading and/or unloading.
16 EXW - Ex Works Seller’s primary duties Buyer’s primary duties INCOTERMS – EX Works (… named place)EXWCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- To make the goods available at his or her premisesBuyer’s primary duties1- To take delivery of the goods as soon as they have been placed at his disposal2- To bear all costs and risks required to bring the goods to final destination
17 FCA - Free Carrier Seller’s primary duties Buyer’s primary duties INCOTERMS – Free Carrier .. (named point) FCACUSTOMSCUSTOMSSeller’s cost > Negotiable * > Buyer’s costSeller’s risk > Negotiable* > Buyer’s riskSeller’s primary duties1- Deliver the goods into the custody of the carrier named by the buyer2- Provide export license, pay export taxes/fees if required3- Provide evidence of delivery of the goods to the carrierBuyer’s primary duties1- Nominate carrier2- Contract for the carriage and pay the freight(*) Transfer of cost & risk will depend on the named point
18 FAS - Free alongside ship INCOTERMS – FAS (Free alongside ship, named port of shipment) FASExport customsCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Deliver the goods alongside ship2- Provide an ‘alongside’ receiptBuyer’s primary duties1- Nominate carrier2- Contract for the carriage and pay the freight3- Obtain export license, pay export taxes if required
19 FOB - Free on board Seller’s primary duties Buyer’s primary duties INCOTERMS – FOB (Free on board) FOBCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s cost > Buyer’s costSeller’s primary duties1- Deliver the goods on board2- provide export license, pay taxes/fees if required3- Provide a ‘clean non board’ receipt4- Pay loading, if not included in the freightBuyer’s primary duties1- Nominate carrier2- Contract for the carriage and pay the freight
20 CIF - Cost, Insurance & Freight INCOTERMS - CIF (Cost, Insurance & Freight)CIFCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Contract for carriage, pay for loading, freight, export taxes/fees and unloading if included in freight2- Provide buyer with invoice and B/L3- Insure goods and pay premiumBuyer’s primary duties1- Accept goods, invoice and B/L2- Pay unloading costs if not included in the freight3- Accept insurance when tendered
21 CFR- Cost & Freight Seller’s primary duties Buyer’s Primary duties CFR Incoterms- CFR (Cost & Freight)CUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1 - Contract for carriage, pay for loading, freight, export taxes/fees and unloading if included in freight2 - Provide buyer with invoice and B/LBuyer’s Primary duties1- Accept goods, invoice and B/L2- Pay unloading costs, if not included in the freight
22 CPT - Carriage paid to Seller’s primary duties Buyer’s primary duties INCOTERMS - Carriage paid to (…names place of destination)CPTCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Negotiable > Buyer’s riskSeller’s primary duties1- Contract for carriage and pay freight to destination2- Deliver goods into custody of first carrier3- Obtain export license, pay export taxes/fees if required4- Give buyer invoice and the usual transport documentsBuyer’s primary duties1- Accept deliver of goods when they are delivered to first carrier and when the invoice and transport documents are tendered to him
23 CIP - Carriage Insurance Paid to (Port) INCOTERMS – Carriage/insurance paid to CIPCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Negotiable > Buyer’s riskSeller’s primary duties1- Contract for carriage, pay freight to destination2- Deliver goods to first carrier3- Obtain insurance and may premiums4- Obtain export license, pay export tax/fee if required5- Give buyer invoice and transport documentsBuyer’s primary duties1- Accept delivery of goods when delivered to first carrier2- Accept invoices, insurance and transport documents
24 DAF - Delivered at frontier (…named place) INCOTERMS – Delivered at frontier DAFU.S.AMEXICOLaredoSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Deliver goods cleared for export to named frontier2- Provide document to enable the buyer to take deliveryBuyer’s primary duties1- Takes delivery of goods at frontier2- Pay for on- carriage and import duties/taxes if required
25 DES - Delivered Ex Ship Seller’s primary duties Buyer’s primary duties INCOTERMS – Delivered Ex Quay (Duty Paid) DEQCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Deliver goods on the quay at the port of destination2- Pay unloading costs, duties if required and provide B/L3- Provide import clearanceBuyer’s primary duties1- Take delivery of the goods from the quay at the port of destination
26 DEQ - Delivered Ex Quay Seller’s primary duties Buyer’s primary duties INCOTERMS – Delivered Ex Quay (Duty Paid) DEQCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Deliver goods on quay at the port of destination2- Pay unloading costs, duties if required and provide B/L3- Provide import clearanceBuyer’s primary duties1- Take delivery of the goods from the quay at the port of destination
27 DDU - Delivered Duty Paid INCOTERMS – Delivered Duty Unpaid DDUCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Delivered the goods to the named place of destination2- Provide buyer with all shipping documentsBuyer’s primary duties1- Take delivery of the goods at the named place of destination2- Pay import duties/taxes if required
28 DDP - Delivered Duty Paid INCOTERMS- Delivered Ex Ship DDPCUSTOMSCUSTOMSSeller’s cost > Buyer’s costSeller’s risk > Buyer’s riskSeller’s primary duties1- Deliver the goods to the named place of destination2- Pay import duties/taxes if required3- Provide buyer with all shipping documentsBuyer’s primary duties1- Take delivery of the goods at the named place of destination
29 Methods of Payment Open Account – Flow chart Exporter Importer 1- Sales contract2- Shipment3- Documents4- Payment
31 Methods of Payment Methods of Payment E I E I E I E I B B B B Open AccountPrepayment1- Shipment1- PaymentContract of TRUSTEIEI2- Payment2- ShipmentDocumentary CollectionsDocumentary CreditE1- ShipmentIE1- ShipmentIContract for DOCUMENTS2- Docs2- DocsBBBB3- Payment3- PaymentE – Exporter I – Importer B - BankMethods of PaymentInfluencing factorsA- Degree of confidence between seller and buyerB- Respective bargaining powers and financial standing of the partiesC- Magnitude and duration of the transaction itselfD- Political, economical and financial standing of both the seller’s and buyer’s countriesE- Foreign exchange control in buyer’s country
32 Parties to a collection Importer Drawee Accepter BuyerExporter Drawer Principal Remitter SellerRemitting bank (usually seller’s bankPresenting bank (usually buyer’s bankForeign Documentary CollectionsRouting of Documents/PaymentsExporterImporterBank BranchBank BranchBank’s head office Int’l Service CenterBank’s head office Int’l Service CenterDocumentary CollectionsDocumentary CreditsDocumentary CollectionsDocumentary CreditsImpExpImpExpImpExpImpExpDocumentsPayments
33 Documentary Collections Flow chartExporterImporterScrimson SalesCanadian Export Inc.1- Contract2- Shipment of goods8- Payment3- Collection order6- Payment5- Collection4- Remittance of collection order7- PaymentBank of MontrealBarclays BankDocumentary CreditFlow chartScrimson SalesCanadian Export Inc.1- Goods4- Documents7- Payment5- Payment2- Documents3- DocumentsBank of MontrealBarclays Bank
34 Accelerated Documentary Collection System (direct Collection System)ExporterImporterCanadian Export Inc.Scrimson Sales1- Contract2- Shipment4- Collection7- Payment or advice of acceptance3- Collection order5- Payment/ acceptance6- Payment or acceptanceBank of MontrealBarclays bank
35 Bank’s liabilities and responsibilities Documentary Collection – Points to observeSeller1- Credit standing and trustworthiness of the buyer2- Previous business experience with the buyer’s country3- Political, economical and legal situation in the importing country4- Exchange control and import restrictions in the importing country5- The possibility of retrieving the goods or of finding a new customer in the event of the non-acceptance or non-payment. If so, at what cost?Documentary Collection – Points to observeBuyer1- The drawee is entitled to examine the document at the collecting bank prior to making payment2- Prior inspection or examination of the goods is not permissible without special authorization from the principleForeign Documentary CollectionBank’s liabilities and responsibilitiesAct in good faith and exercise reasonable careControl and ensure the safety of documentsFollow exactly the safety of documentsAct promptly in executing instructionsVerify that the documents received appear to be as listed- Banks have no further obligation to examine the documents
36 Transfer of risk, Cost and Ownership Payment Terms : collection at sight through Barclay’s BankTerms of Sale : CIF LiverpoolBANKOWNERSHIPCOSTRISKTransfer of risk, Cost and OwnershipTerms of Payment: Irrevocable L/C 30 Days DateTerms of Sale : FCA Toronto AirportToronto AirportCost and RiskIssuing BankExporterOwnership
37 Transfer of Risk, Cost and Ownership Payment Terms : confirmed irrevocable L/C at sightTerms of Sale : CIF LiverpoolBANKCOSTOWNERSIHPRISKTransfer of Risk, Cost and OwnershipPayment Terms : Irrevocable L/C at sightTerms of Sale : CIF New YorkBuyer CostIssuing BankExporterOwnership NEWYORKRisk 1st Carrier
38 Parties to a Letter of Credit Documentary CreditA Documentary Credit is a letter of advice *Issued by a Bank at the request of his customerThe addressee of this letter can obtain a sum of money, provided he complies to the letter with the terms and conditions of the creditParties to a Letter of CreditImporter APPLICANTExporter BENEFICIARY1- Contract4- Advice2- ApplicationCorrespondent Bank ADVISING BANKBuyer’s Bank Issuing Bank3- Credit
39 How to Issue a Letter of Credit Summary of proceduresExporterImporterCanadian Export Inc.Scrimson Sales1- Sales Contract5- Shipment2- Credit application7- Exporter paid4- Credit advised/confirmed10- Document released11- Issuing Bank paid6- Documents presented3- Request to advise/confirm8- Documents mailed9- Bank of Montreal paidBank of MontrealBarclays BankHow to Issue a Letter of CreditExporterImporterBank BranchBan’s head office Int’l Service CenterBan’s head office Int’l Service CenterDocumentary CollectionsDocumentary CollectionsDocumentary CollectionsDocumentary CollectionsImpExpImpExpImpExpImpExp
40 Arrangements between bank International CenterLocal Bank Issuing Bankauthorized signatureTest keySWIFT (Society for worldwide Interbank Financial Telecommunication)Local Bank BranchCorrespondent *Foreign Bank Advising Bank* May or may not carry an account/line of credit in the other bank’s currency
41 Steps to follow when issuing an L/C to ensure that applicant promise to repay the issuing bankto set down detailed instructions that must be followedPurpose of application (buyer to issuing bank)Types of Documentary CreditsRevocableunconfirmedIrrevocableconfirmed
42 Items an L/C must contain Full name & address of the beneficiaryAmount and currencyType of Credit: revocable, irrevocable, irrevocable confirmCredit available by: payment (sight draft), acceptance (term draft), negotiable (draft at sight or tenor)Party on whom drafts, if any, are to be drawn and the tenor of such draftsComplete description of goodsFreight prepaid or collectDetails of the documents required (i.e. if legalized, if certificate of origin certified by the C. of C. etc.)Transshipment allowed or notPartial shipments allowed or notLatest shipment datePeriod of the time after the date of issue of the transport document, during which presentation of documents must (if not stipulated, the beneficiary has 21 days after issuance of the transport document, but no later that the expiry date.)Date and place of the expiry of the creditWhether the credit is ‘transferable’How the credit is to be advised (mail, cable, etc.)
43 Letter of Credit Format Beneficiary/Toronto Exporters Inc.ApplicantNippon Importers Ltd.ORAdvice of CreditIssuing Bank ABC BankAdvising Bank XYZ BankORDocumentary CreditExpiry Date and Presentation of DocumentsBeneficiaryApplicant2 – Latest shipment date“Bills of lading dated not later than…”3 - Specific Number of days given for presentation of documents“Documents must be presented for negotiation not later than…days after Bill of Lading date.”Advising Bank4 – Expiry date“Expiry date in the beneficiary’s country for negotiation…”Issuing Bank5 – Date of issuance“All documents must show this L/C No. and date…”
44 Discrepancies most frequently found in the Commercial invoice merchandise description not exactly as indicated in the L/C terms of delivery quantity of goods total amount of money unit price / currency breakdown of charges signatures / legalization number of copies used / second hand / rebuilt other instructions
47 Selected Bank Terms- Bank acceptance -Trade acceptance - Acceptor Avail Bill discounted Days of grace Dishonour Past due bill Protest Stamp duty Presentation for *Acceptance *Payment- Bill of exchange *Demand *Sight *Term *1st/2nd of exchange Draft endorsements *Blank *Qualified with recourse *Qualified w/o recourse - Case of need Clean draft
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