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 exporter’s 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 Document Reason
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 B 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. 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
FCA
CUSTOMS
CUSTOMS
EXW FCA FCA FAS
DES DEQ DEQ DDP
FOB
(DP) DDU
CIF/CFR (RISK) CIF/CFR (COST)
CPT/CIP (RISK)
DAF
CPT/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 Works
c/r
contracts &pays
Group F Main carriage unpaid
FCA Free carrier FAS Free Alongside Ship FOB Free on Board S B
delivers
c/r
CFR Cost and Freight CIF Cost, Insurance and Freight CPT Carriage Paid to CIP Carriage and Insurance paid to
Group C Main carriage paid S B
delivers &contracts r
pays transportation c
DAF Delivered At Frontier DES Delivered Ex Ship DEQ Delivered Ex Quay DDU Delivered Duty Unpaid DDP Delivered Duty Paid
Group D Arrival S B
delivers
c/r
c = cost, r = risk, s = seller, b = buyer

12. Shipment Contracts INCOTERMS Shipment Contracts
Multimodal Land Air Ocean Named Port
FCA
RISK COST
FCA
RISK COST
FCA
RISK COST
FOB
RISK COST
CFR CIF
RISK COST
CPT CIP
RISK COST
The 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.A
MEXICO
DAF
RISK COST
DES
RISK COST
DEQ
RISK COST
DDU DDP
RISK COST
The 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
INCOTERMS
Ocean vs. Multimodal terms
Ocean
RISK COST
FOB
CFR CIF
RISK COST
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 Loading Unloading
Liner Buyer Buyer
FOB
FIO Seller Buyer
Liner Buyer Buyer
CIF
FIO Seller Negotiable
Liner
FIO
Stevedoring charges always
Cost 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 Seller’s primary duties Buyer’s primary duties
INCOTERMS – EX Works (… named place)
EXW
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s primary duties
1- To make the goods available at his or her premises
Buyer’s 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 Seller’s primary duties Buyer’s primary duties
INCOTERMS – Free Carrier .. (named point) FCA
CUSTOMS
CUSTOMS
Seller’s cost > Negotiable * > Buyer’s cost
Seller’s risk > Negotiable* > Buyer’s risk
Seller’s 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
Buyer’s 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
INCOTERMS – FAS (Free alongside ship, named port of shipment) FAS
Export customs
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s primary duties
1- Deliver the goods alongside ship
2- Provide an ‘alongside’ receipt
Buyer’s 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 Seller’s primary duties Buyer’s primary duties
INCOTERMS – FOB (Free on board) FOB
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s cost > Buyer’s cost
Seller’s 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
Buyer’s primary duties
1- Nominate carrier
2- Contract for the carriage and pay the freight

20. CIF - Cost, Insurance & Freight
INCOTERMS - CIF (Cost, Insurance & Freight)
CIF
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s 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
Buyer’s 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. CFR- Cost & Freight Seller’s primary duties Buyer’s Primary duties CFR
Incoterms- CFR (Cost & Freight)
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s 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
Buyer’s Primary duties
1- Accept goods, invoice and B/L
2- 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)
CPT
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Negotiable > Buyer’s risk
Seller’s 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
Buyer’s 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)
INCOTERMS – Carriage/insurance paid to CIP
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Negotiable > Buyer’s risk
Seller’s 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
Buyer’s 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)
INCOTERMS – Delivered at frontier DAF
U.S.A
MEXICO
Laredo
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s primary duties
1- Deliver goods cleared for export to named frontier
2- Provide document to enable the buyer to take delivery
Buyer’s primary duties
1- Takes delivery of goods at frontier
2- 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) DEQ
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s 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
Buyer’s primary duties
1- 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) DEQ
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s 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
Buyer’s primary duties
1- Take delivery of the goods from the quay at the port of destination

27. DDU - Delivered Duty Paid
INCOTERMS – Delivered Duty Unpaid DDU
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s primary duties
1- Delivered the goods to the named place of destination
2- Provide buyer with all shipping documents
Buyer’s 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
INCOTERMS- Delivered Ex Ship DDP
CUSTOMS
CUSTOMS
Seller’s cost > Buyer’s cost
Seller’s risk > Buyer’s risk
Seller’s 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
Buyer’s primary duties
1- Take delivery of the goods at the named place of destination

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

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

31. Methods of Payment Methods of Payment E I E I E I E I B B B B
Open Account
Prepayment
1- Shipment
1- Payment
Contract of TRUST E I E I
2- Payment
2- Shipment
Documentary Collections
Documentary Credit E
1- Shipment I E
1- Shipment I
Contract for DOCUMENTS
2- Docs
2- Docs B B B B
3- Payment
3- Payment
E – Exporter I – Importer B - Bank
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 seller’s and buyer’s countries
E- Foreign exchange control in buyer’s country

32. Parties to a collection
Importer Drawee Accepter Buyer
Exporter Drawer Principal Remitter Seller
Remitting bank (usually seller’s bank
Presenting bank (usually buyer’s bank
Foreign Documentary Collections
Routing of Documents/Payments
Exporter
Importer
Bank Branch
Bank Branch
Bank’s head office Int’l Service Center
Bank’s head office Int’l Service Center
Documentary Collections
Documentary Credits
Documentary Collections
Documentary Credits
Imp
Exp
Imp
Exp
Imp
Exp
Imp
Exp
Documents
Payments

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

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

35. Bank’s liabilities and responsibilities
Documentary Collection – Points to observe
Seller
1- Credit standing and trustworthiness of the buyer
2- Previous business experience with the buyer’s 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
Bank’s 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 Barclay’s Bank
Terms of Sale : CIF Liverpool
BANK
OWNERSHIP
COST
RISK
Transfer of risk, Cost and Ownership
Terms of Payment: Irrevocable L/C 30 Days Date
Terms of Sale : FCA Toronto Airport
Toronto Airport
Cost and Risk
Issuing Bank
Exporter
Ownership

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

38. Parties to a Letter of Credit
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
Importer APPLICANT
Exporter BENEFICIARY
1- Contract
4- Advice
2- Application
Correspondent Bank ADVISING BANK
Buyer’s Bank Issuing Bank
3- Credit

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

40. Arrangements between bank
International Center
Local Bank Issuing Bank
authorized signature
Test key
SWIFT (Society for worldwide Interbank Financial Telecommunication)
Local Bank Branch
Correspondent *
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 bank
to set down detailed instructions that must be followed
Purpose of application (buyer to issuing bank)
Types of Documentary Credits
Revocable
unconfirmed
Irrevocable
confirmed

42. Items an L/C must contain
Full name & address of the beneficiary
Amount and currency
Type of Credit: revocable, irrevocable, irrevocable confirm
Credit 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 drafts
Complete description of goods
Freight prepaid or collect
Details of the documents required (i.e. if legalized, if certificate of origin certified by the C. of C. etc.)
Transshipment allowed or not
Partial shipments allowed or not
Latest shipment date
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.)
Date and place of the expiry of the credit
Whether the credit is ‘transferable’
How the credit is to be advised (mail, cable, etc.)

43. Letter of Credit Format
Beneficiary/Toronto Exporters Inc.
Applicant
Nippon Importers Ltd. OR
Advice of Credit
Issuing Bank ABC Bank
Advising Bank XYZ Bank OR
Documentary Credit
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 beneficiary’s 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 *1st/2nd of exchange Draft endorsements *Blank *Qualified with recourse *Qualified w/o recourse - Case of need Clean draft

53. Truck Bill of Lading