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Seminar Import/ Export Trade/ Transportation Speaker: Richard Tang of Universal Bridge Cargo.

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Presentation on theme: "Seminar Import/ Export Trade/ Transportation Speaker: Richard Tang of Universal Bridge Cargo."— Presentation transcript:

1 Seminar Import/ Export Trade/ Transportation Speaker: Richard Tang of Universal Bridge Cargo

2 Introduction Import/ Export in Canada Sales Process/ Documentation requirements Incoterms 1990 Payment Methods Payment: Documentary Collections and Letter of Credit Insurance and Claim The role of the Carrier/ Freight Forwarder/ Customs Broker& Sufferance Warehouse including logistic

3 Player in the field Depending on the size of the organization, there may be several departments within the exporters own shop to handle various processes Marketing (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 obligations B1 Payment of the price B2 Licenses, authorizations, and formalities B3 Contracts of carriage B4 Taking delivery B5 Transfer of risks B6 Division of costs B7 Notice to the seller B8 Proof of delivery, transport document or equivalent electronic message B9 Inspection of goods B10 Other obligations To 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 DocumentReason - Contracts - Purchase order - Pro-forms Invoice - Sales Contract - Shipping and Insurance Documents - Bills of lading - Inspection Certificate - Marine Insurance Certificate - Health/ Analysis Certificate - Weight & Packing List - Certificate of Origin - Letters of Credits - Documentary Collections -Export Declaration Form B13 - Canada Customs Invoice CCI - Canada Customs Coding Form B3 -Many forms are necessary depending on the product and the country of destination To avoid misunderstandings To ensure trust between buyer and seller To obtain payment and finance To fulfill Canadian government requirements Statistics (Balance of trade) Assessment/ Collection of duty taxes and fees Import/ Export Control

6 1.Purchase order

7 2. Pro-forma Invoices

8 3. Sales Contracts

9 INCOTERMS 1990 Ocean FAS FOB CFR CIF DES DEQ EXW FCA CPT CIP DAF DDU DDP Multimodal Groups E, F, and C terms details the terms of shipment while group D sets out the terms of arrival

10 INCOTERMS 1990 EXW FCA FCA FAS FOB CUSTOMS DES DEQ DEQ DDP (DP) DDU CPT/CIP (RISK) DAF CPT/CIP (HOST) CIF/CFR (RISK) CIF/CFR (COST) FCA 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, ships 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 ships rail, FCA, CPT, and CIP should be used when the goods are delivered to the carrier at any point other than the ships side.

11 Grouping of the Terms Group E Departure EXW Ex Works Group F Main carriage unpaid FCA Free carrier FAS Free Alongside Ship FOB Free on Board Group C Main carriage paid CFR Cost and Freight CIF Cost, Insurance and Freight CPT Carriage Paid to CIP Carriage and Insurance paid to Group D Arrival DAF Delivered At Frontier DES Delivered Ex Ship DEQ Delivered Ex Quay DDU Delivered Duty Unpaid DDP Delivered Duty Paid c = cost, r = risk, s = seller, b = buyer S S S SB B B B c/r contracts &pays delivers delivers &contracts pays transportation r c c/r delivers

12 Shipment Contracts INCOTERMS Shipment Contracts Multimodal Land Air Ocean Named Port RISK COST CFR CIF FOB FCA CPT CIP The shipment contracts sets out sellers 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 INCOTERMS 1990 Arrival Contracts U.S.AMEXICO RISK COST The arrival contract commits the seller to be responsible for the goods in transit until they reach the named point of destination. DAF DES DEQ DDU DDP

14 Ocean vs. Multimodal terms INCOTERMS 1990 Ocean vs. Multimodal terms Ocean RISK COST FOB RISK COST CFR CIF Multimodal RISK COST FCA RISK COST FCA The 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 FOB Liner Buyer Buyer Loading Unloading FIO Seller Buyer FIO Seller Negotiable Liner Buyer Buyer CIF Liner FIO Stevedoring charges alwaysCost of loading/ unloading FIO: Free in-out The 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 CUSTOMS Sellers cost > Buyers cost Sellers risk > Buyers risk INCOTERMS – EX Works (… named place) EXW Sellers primary duties 1- To make the goods available at his or her premises Buyers primary duties 1- To take delivery of the goods as soon as they have been placed at his disposal 2- To bear all costs and risks required to bring the goods to final destination

17 FCA - Free Carrier Sellers cost > Negotiable * > Buyers cost Sellers risk > Negotiable* > Buyers risk CUSTOMS INCOTERMS – Free Carrier.. (named point) FCA Sellers primary duties 1- Deliver the goods into the custody of the carrier named by the buyer 2- Provide export license, pay export taxes/fees if required 3- Provide evidence of delivery of the goods to the carrier Buyers primary duties 1- Nominate carrier 2- Contract for the carriage and pay the freight (*) Transfer of cost & risk will depend on the named point

18 FAS - Free alongside ship Export customs Sellers cost > Buyers cost Sellers risk > Buyers risk CUSTOMS INCOTERMS – FAS (Free alongside ship, named port of shipment) FAS Sellers primary duties 1- Deliver the goods alongside ship 2- Provide an alongside receipt Buyers primary duties 1- Nominate carrier 2- Contract for the carriage and pay the freight 3- Obtain export license, pay export taxes if required

19 FOB - Free on board Sellers cost > Buyers cost INCOTERMS – FOB (Free on board) FOB CUSTOMS Sellers primary duties 1- Deliver the goods on board 2- provide export license, pay taxes/fees if required 3- Provide a clean non board receipt 4- Pay loading, if not included in the freight Buyers primary duties 1- Nominate carrier 2- Contract for the carriage and pay the freight

20 Sellers cost > Buyers cost INCOTERMS - CIF (Cost, Insurance & Freight) CUSTOMS CIF CIF - Cost, Insurance & Freight Sellers risk > Buyers risk Sellers primary duties 1- Contract for carriage, pay for loading, freight, export taxes/fees and unloading if included in freight 2- Provide buyer with invoice and B/L 3- Insure goods and pay premium Buyers primary duties 1- Accept goods, invoice and B/L 2- Pay unloading costs if not included in the freight 3- Accept insurance when tendered

21 CUSTOMS Incoterms- CFR (Cost & Freight) CFR- Cost & Freight Sellers cost > Buyers cost Sellers risk > Buyers risk Sellers primary duties 1 - Contract for carriage, pay for loading, freight, export taxes/fees and unloading if included in freight 2 - Provide buyer with invoice and B/L Buyers Primary duties 1- Accept goods, invoice and B/L 2- Pay unloading costs, if not included in the freight CFR

22 INCOTERMS - Carriage paid to (…names place of destination) Sellers cost > Buyers cost Sellers risk > Negotiable > Buyers risk CPT CPT - Carriage paid to CUSTOMS Sellers primary duties 1- Contract for carriage and pay freight to destination 2- Deliver goods into custody of first carrier 3- Obtain export license, pay export taxes/fees if required 4- Give buyer invoice and the usual transport documents Buyers primary duties 1- 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) Sellers cost > Buyers cost Sellers risk > Negotiable > Buyers risk CUSTOMS INCOTERMS – Carriage/insurance paid to CIP CUSTOMS Sellers primary duties 1- Contract for carriage, pay freight to destination 2- Deliver goods to first carrier 3- Obtain insurance and may premiums 4- Obtain export license, pay export tax/fee if required 5- Give buyer invoice and transport documents Buyers primary duties 1- Accept delivery of goods when delivered to first carrier 2- Accept invoices, insurance and transport documents

24 DAF - Delivered at frontier (…named place) Sellers cost > Buyers cost Sellers risk > Buyers risk U.S.A MEXICO Laredo INCOTERMS – Delivered at frontier DAF Sellers primary duties 1- Deliver goods cleared for export to named frontier 2- Provide document to enable the buyer to take delivery Buyers primary duties 1- Takes delivery of goods at frontier 2- Pay for on- carriage and import duties/taxes if required

25 Sellers cost > Buyers cost Sellers risk > Buyers risk DES - Delivered Ex Ship INCOTERMS – Delivered Ex Quay (Duty Paid) DEQ CUSTOMS Sellers primary duties 1- Deliver goods on the quay at the port of destination 2- Pay unloading costs, duties if required and provide B/L 3- Provide import clearance Buyers primary duties 1- Take delivery of the goods from the quay at the port of destination

26 DEQ - Delivered Ex Quay Sellers cost > Buyers cost Sellers risk > Buyers risk CUSTOMS INCOTERMS – Delivered Ex Quay (Duty Paid) DEQ Sellers primary duties 1- Deliver goods on quay at the port of destination 2- Pay unloading costs, duties if required and provide B/L 3- Provide import clearance Buyers primary duties 1- Take delivery of the goods from the quay at the port of destination

27 DDU - Delivered Duty Paid Sellers cost > Buyers cost Sellers risk > Buyers risk INCOTERMS – Delivered Duty Unpaid DDU CUSTOMS Sellers primary duties 1- Delivered the goods to the named place of destination 2- Provide buyer with all shipping documents Buyers primary duties 1- Take delivery of the goods at the named place of destination 2- Pay import duties/taxes if required

28 DDP - Delivered Duty Paid CUSTOMS Sellers cost > Buyers cost Sellers risk > Buyers risk INCOTERMS- Delivered Ex Ship DDP CUSTOMS Sellers primary duties 1- Deliver the goods to the named place of destination 2- Pay import duties/taxes if required 3- Provide buyer with all shipping documents Buyers primary duties 1- Take delivery of the goods at the named place of destination

29 Methods of Payment Open Account – Flow chart ExporterImporter 1- Sales contract 2- Shipment 3- Documents 4- Payment

30 Methods of Payment Pre-payment – Flowchart ExporterImporter 1- Sales Contract 2- Payment 3- Shipment 4- Documents

31 Methods of Payment E E E E Open Account Prepayment Documentary CollectionsDocumentary Credit II II BBBB E – Exporter I – Importer B - Bank Contract of TRUST Contract for DOCUMENTS 1- Shipment 3- Payment 2- Docs 1- Shipment1- Payment 2- Payment 2- Shipment Methods of Payment Influencing factors A- Degree of confidence between seller and buyer B- Respective bargaining powers and financial standing of the parties C- Magnitude and duration of the transaction itself D- Political, economical and financial standing of both the sellers and buyers countries E- Foreign exchange control in buyers country

32 Parties to a collection Exporter Drawer Principal Remitter Seller Importer Drawee Accepter Buyer Remitting bank (usually sellers bank Presenting bank (usually buyers bank Foreign Documentary Collections Routing of Documents/Payments Exporter Bank Branch Banks head office Intl Service Center Documentary Collections Documentary Credits Bank Branch Banks head office Intl Service Center Documentary Collections Documentary Credits Importer Imp Exp DocumentsPayments

33 Documentary Collections Flow chart Exporter Importer Canadian Export Inc. 8- Payment 1- Contract 2- Shipment of goods Scrimson Sales 3- Collection order 5- Collection 6- Payment Barclays Bank 7- Payment 4- Remittance of collection order Bank of Montreal Documentary Credit Flow chart Canadian Export Inc. Scrimson Sales 7- Payment 2- Documents Bank of Montreal Barclays Bank 4- Documents 5- Payment 3- Documents 1- Goods

34 Accelerated Documentary Collection System (direct Collection System) Exporter Canadian Export Inc. Scrimson Sales Importer 1- Contract 2- Shipment 3- Collection order 4- Collection 5- Payment/ acceptance 6- Payment or acceptance 7- Payment or advice of acceptance Bank of Montreal Barclays bank

35 Documentary Collection – Points to observe Seller 1- Credit standing and trustworthiness of the buyer 2- Previous business experience with the buyers country 3- Political, economical and legal situation in the importing country 4- Exchange control and import restrictions in the importing country 5- 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 observe Buyer 1- The drawee is entitled to examine the document at the collecting bank prior to making payment 2- Prior inspection or examination of the goods is not permissible without special authorization from the principle Foreign Documentary Collection Banks liabilities and responsibilities -Act in good faith and exercise reasonable care - Control and ensure the safety of documents - Follow exactly the safety of documents - Act promptly in executing instructions - Verify 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 Barclays Bank Terms of Sale : CIF Liverpool RISK COST OWNERSHIP BANK Transfer of risk, Cost and Ownership Terms of Payment: Irrevocable L/C 30 Days Date Terms of Sale : FCA Toronto Airport Exporter Toronto Airport Issuing Bank Ownership Cost and Risk

37 Transfer of Risk, Cost and Ownership Payment Terms : confirmed irrevocable L/C at sight Terms of Sale : CIF Liverpool Transfer of Risk, Cost and Ownership Payment Terms : Irrevocable L/C at sight Terms of Sale : CIF New York RISK BANK COST OWNERSIHP Exporter Risk 1 st Carrier Issuing Bank Buyer Cost Ownership NEWYORK

38 Documentary Credit - A Documentary Credit is a letter of advice *Issued by a Bank at the request of his customer -The addressee of this letter can obtain a sum of money, provided he complies to the letter with the terms and conditions of the credit Parties to a Letter of Credit Exporter BENEFICIARY Importer APPLICANT Correspondent Bank ADVISING BANK Buyers Bank Issuing Bank 1- Contract 4- Advice 2- Application 3- Credit

39 Letter of Credit Summary of procedures Exporter Importer Canadian Export Inc. Scrimson Sales 1- Sales Contract 2- Credit application 6- Documents presented 7- Exporter paid 4- Credit advised/confirmed 10- Document released 11- Issuing Bank paid Barclays Bank Bank of Montreal 5- Shipment 3- Request to advise/confirm 8- Documents mailed 9- Bank of Montreal paid How to Issue a Letter of Credit Exporter Importer Bans head office Intl Service Center Documentary Collections Imp Exp Bank Branch ExpImp

40 Arrangements between bank International Center Local Bank Issuing Bank Local Bank Branch Correspondent * Foreign Bank Advising Bank -authorized signature - Test key - SWIFT (Society for worldwide Interbank Financial Telecommunication) * May or may not carry an account/line of credit in the other banks currency

41 Steps to follow when issuing an L/C Purpose of application (buyer to issuing bank) -to ensure that applicant promise to repay the issuing bank - to set down detailed instructions that must be followed Types of Documentary Credits Revocable Irrevocable unconfirmed confirmed

42 Items an L/C must contain A.Full name & address of the beneficiary B.Amount and currency C.Type of Credit: revocable, irrevocable, irrevocable confirm D.Credit available by: payment (sight draft), acceptance (term draft), negotiable (draft at sight or tenor) E.Party on whom drafts, if any, are to be drawn and the tenor of such drafts F.Complete description of goods G.Freight prepaid or collect H.Details of the documents required (i.e. if legalized, if certificate of origin certified by the C. of C. etc.) I.Transshipment allowed or not J.Partial shipments allowed or not K.Latest shipment date L.Period 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.) M.Date and place of the expiry of the credit N.Whether the credit is transferable O.How the credit is to be advised (mail, cable, etc.)

43 Letter of Credit Format Beneficiary/Toronto Exporters Inc. Advice of Credit Advising Bank XYZ Bank Documentary Credit Issuing Bank ABC Bank Applicant Nippon Importers Ltd. OR Expiry Date and Presentation of Documents Beneficiary Applicant 2 – 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 Bank 4 – Expiry date Expiry date in the beneficiarys country for negotiation… Issuing Bank 5 – 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

45 Export Documentary Credit in SWIFT Format

46 Section 17(1) Bills of Exchange Act

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 *1 st /2 nd of exchange - Draft endorsements *Blank *Qualified with recourse *Qualified w/o recourse - Case of need - Clean draft

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53 Truck Bill of Lading

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