Incoterms
The Incoterms rules or International
Commercial terms are a series of pre-defined
commercial terms published by the
International Chamber of Commerce (ICC)
widely used in international commercial
transactions. A series of three-letter trade terms
related to common sales practices, the
Incoterms rules are intended primarily to clearly
communicate the tasks, costs and risks
associated with the transportation and delivery
of goods.
INCOTERMS AND THE
EXPORTER:International Commercial Terms,
known as “Incoterms”, are internationally
accepted terms defining the responsibilities of
exporters and importers in the arrangement of
shipments and the transfer of liability involved
at various stages of the transaction. Incoterms
do not cover ownership or the transfer of title of
goods. tariffs.Rules for Sea and Inland
Waterway Transport:FAS - Free Alongside Ship:
Risk passes to buyer, including payment of all
transportation and insurance costs, once
delivered alongside the ship (realistically at
named port terminal) by the seller. The export
clearance obligation rests with the seller.FOB -
Free On Board: Risk passes to buyer, including
payment of all transportation and insurance
costs, once delivered on board the ship by the
seller. A step further than FAS.CFR - Cost and
Freight: Seller delivers goods and risk passes to
buyer when on board the vessel. Seller arranges
and pays cost and freight to the named
destination port. A step further than FOB.CIF -
Cost, Insurance and Freight: Risk passes to buyer
when delivered on board the ship. Seller
arranges and pays cost, freight and insurance to
destination port. Adds insurance costs to CFR.
ConsignmentConsignment in international
trade is a variation of open account in which
payment is sent to the exporter only after the
goods have been sold by the foreign distributor
to the end customer (payment method)
Rules for Any Mode or Modes of
Transportation:
EXW - Ex Works: Seller delivers (without loading)
the goods at disposal of buyer at seller's
premises. Long held as the most preferable term
for those new-to-export because it represents
the minimum liability to the seller
FCA - Free Carrier: Seller delivers the goods to
the carrier and may be responsible for clearing
the goods for export (filing the EEI).
CPT - Carriage Paid To: Seller delivers goods to
the carrier at an agreed place, shifting risk to the
buyer, but seller must pay cost of carriage to the
named place of destination.
CIP - Carriage and Insurance Paid To: Seller
delivers goods to the carrier at an agreed place,
shifting risk to the buyer, but seller pays carriage
and insurance to the named place of
destination.
DAT - Delivered at Terminal: Seller bears cost,
risk and responsibility until goods are unloaded
(delivered) at named quay, warehouse, yard, or
terminal at destination.
DAP - Delivered at Place: Seller bears cost, risk
and responsibility for goods until made available
to buyer at named place of destination. Seller
clears goods for export, not import. DAP
replaces DAF, DDU.
DDP - Delivered Duty Paid: Seller bears cost, risk
and responsibility for cleared goods at named
place of destination at buyers disposal.
Procedure to start an import export business in
India
Getting started.
Set up. – service tax regist.
Obtain a PAN card for the business.
Open a current account.
Get the Import Export Code (IEC) issued.
Documents Required for Import Export Code
(IEC):
Obtaining the Registration cum Membership
Certificate (RCMC)
Opportunities available with exporters.
Methods of Payment
Cash-in-Advance
With cash-in-advance payment terms, an
exporter can avoid credit risk because payment
is received before the ownership of the goods is
transferred. For international sales, wire
transfers and credit cards are the most
commonly used cash-in-advance options
available to exporters. With the advancement of
the Internet, escrow services are becoming
another cash-in-advance option for small export
transactions.
Letters of Credit
Letters of credit (LCs) are one of the most secure
instruments available to international traders.
An LC is a commitment by a bank on behalf of
the buyer that payment will be made to the
exporter, provided that the terms and
conditions stated in the LC have been met, as
verified through the presentation of all required
documents.
Documentary Collections
A documentary collection (D/C) is a transaction
whereby the exporter entrusts the collection of
the payment for a sale to its bank (remitting
bank), which sends the documents that its buyer
needs to the importer’s bank (collecting bank),
with instructions to release the documents to
the buyer for payment.
Open Account
An open account transaction is a sale where the
goods are shipped and delivered before
payment is due, which in international sales is
typically in 30, 60 or 90 days.
Export contract
The export contract is used for the international
sale of certain products (industrial supplies, raw
materials, manufactured goods), which are
projected for resale, where the buyer is a trader,
importer, distributor or wholesaler that will sell
the products to another company or merchant.
Though it is common practice to export products
based a proforma invoice or quotation received
from exporters, it is a safe practice to use
written and legal export contracts.
Elements
Products, standards and specifications.
Units of measure in both figures and words.
Total value. The total contract value in words
and figures, and in a specific currency.
Terms of delivery. Delivery terms, based on the
Incoterms.
Terms of payment. Amount, mode and currency.
Documentary requirements. Documents needed
for international trade transactions.
Delay in delivery. Damages due to the importer
from the exporter in the event of late delivery
owing to reasons other that force majeure.
Force majeure. Provisions in the contract
defining circumstances that would relieve
partners of their liability for non-performance of
the contract.
Applicable law. The law of the country that is to
govern the contract.
Bill of Landing
A document issued by a carrier, or its agent, to
the shipper as a contract of carriage of goods. It
is also a receipt for cargo accepted for
transportation, and must be presented for
taking delivery at the destination.
Among other items of information, a bill of
lading contains (1) consignor's and consignee's
name, (2) names of the ports of departure and
destination, (3) name of the vessel, (4) dates of
departure and arrival, (5) itemized list of goods
being transported with number of packages and
kind of packaging, (6) marks and numbers on the
packages, (7) weight and/or volume of the
cargo, (8) freight rate and amount.
It serves as a proof of ownership (title) of the
cargo, and may be issued either in a negotiable
or non-negotiable form. In negotiable form, it is
commonly used in letter of credit transactions,
and may be bought, sold, or traded; or used as
security for borrowing money. A bill of lading is
required in all claims for compensation for any
damage, delay, or loss; and for the resolution of
disputes regarding ownership of the cargo. The
rights, responsibilities, and liabilities of the
carrier and the shipper under a bill of lading
(often printed on its back) are governed
generally either by the older Hague rules, or by
the more recent Hague-Visby rules.
Pre Shipment credit (PSC)
Pre Shipment Finance is issued by a financial
institution when the seller want the payment of
the goods before shipment. The main objectives
behind preshipment finance or pre export
finance is to enable exporter to:
Procure raw materials., Carry out manufacturing
process.,Provide a secure warehouse for goods
and raw materials., Process and pack the goods.
Ship the goods to the buyers., Meet other
financial cost of the business. Types:
Packing Credit, Advance against Cheques/Draft
etc. representing Advance Payments.
Bill of Entry
An account of goods entered at a customhouse,
of imports and exports, detailing the merchant,
quantity of goods, their type, and place of origin
or destination. It is issued by the customs
presenting the total assigned value and the
corresponding duty charged on the cargo.
Marine Insurance
Marine insurance covers the loss or damage of
ships, cargo, terminals, and any transport or
cargo by which the property is transferred,
acquired, or held between the points of origin
and the final destination. Cargo insurance is the
sub-branch of marine insurance, though Marine
insurance also includes Onshore and Offshore
exposed property, (container terminals, ports,
oil platforms, pipelines), Hull, Marine Casualty,
and Marine Liability.
Covers
A marine policy typically covered only three-
quarter of the insured's liabilities towards third
parties. The typical liabilities arise in respect of
collision with another ship, known as "running
down" (collision with a fixed object is a
"allision"), and wreck removal (a wreck may
serve to block a harbour, for example).
Transit Cargo
Cargoes that have been off-loaded at a port for
transhipment are NOT allowed to exit the port
by land or rail across international borders to a
land locked country unless they are declared as
Cargo in Transit.. *** Cargo in Transit is the
movement of cargo that is. discharged at a
gateway seaport