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

Seminar

Import/ Export Trade/ Transportation

Speaker: Richard Tang of Universal Bridge Cargo

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

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)

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.

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 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

1. Purchase order

2. Pro-forma Invoices

3. Sales Contracts

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

INCOTERMS 1990

EXW FCA FCA FAS FOB

CUSTOMS 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”, “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.

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

S B

B

B

B

c/r

c/r

contracts &pays

delivers

delivers &contracts

pays transportationr

c

c/rdelivers

Shipment ContractsINCOTERMS

Shipment Contracts

Multimodal Land Air Ocean Named Port

RISK COST

RISK COST

RISK COST

RISK COST

RISK COST

RISK COST

CFR CIF

FOB

FCA

FCA

FCA

CPT CIP

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

Arrival ContractINCOTERMS 1990

Arrival ContractsU.S.A MEXICO

RISK COST

RISK COST

RISK COST

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

Ocean vs. Multimodal terms

INCOTERMS 1990

Ocean vs. Multimodal terms

Ocean

RISK COSTFOB

RISK COST

CFR CIF

Multimodal

RISK COSTFCA

RISK COSTFCA

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.

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 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.

EXW - Ex Works

CUSTOMS CUSTOMS

Seller’s cost > Buyer’s costSeller’s risk > Buyer’s risk

INCOTERMS – EX Works (… named place) EXW

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

FCA - Free Carrier

Seller’s cost > Negotiable * > Buyer’s cost

Seller’s risk > Negotiable* > Buyer’s risk

CUSTOMS CUSTOMS

INCOTERMS – Free Carrier .. (named point) FCA


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


1- Nominate carrier

2- Contract for the carriage and pay the freight

(*) Transfer of cost & risk will depend on the named point

FAS - Free alongside ship

Export customs

Seller’s cost > Buyer’s cost

Seller’s risk > Buyer’s risk

CUSTOMS

INCOTERMS – FAS (Free alongside ship, named port of shipment) FAS


1- Deliver the goods alongside ship

2- Provide an ‘alongside’ receipt


1- Nominate carrier


3- Obtain export license, pay export taxes if required

FOB - Free on board



INCOTERMS – FOB (Free on board) FOB

CUSTOMSCUSTOMS


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


1- Nominate carrier



INCOTERMS - CIF (Cost, Insurance & Freight)

CUSTOMS CUSTOMS

CIF

CIF - Cost, Insurance & Freight



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


1- Accept goods, invoice and B/L

2- Pay unloading costs if not included in the freight

3- Accept insurance when tendered

CUSTOMS CUSTOMS

Incoterms- CFR (Cost & Freight)

CFR- Cost & Freight

Seller’s cost > Buyer’s costSeller’s risk > Buyer’s risk


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

CFR

INCOTERMS - Carriage paid to (…names place of destination)


Seller’s risk > Negotiable > Buyer’s risk

CPT

CPT - Carriage paid to

CUSTOMSCUSTOMS


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


1- Accept deliver of goods when they are delivered to first carrier and when the invoice and transport documents are tendered to him

CIP - Carriage Insurance Paid to (Port)


Seller’s risk > Negotiable > Buyer’s risk

CUSTOMS

INCOTERMS – Carriage/insurance paid to CIP

CUSTOMS


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


1- Accept delivery of goods when delivered to first carrier

2- Accept invoices, insurance and transport documents

DAF - Delivered at frontier (…named place)



U.S.A MEXICOLaredo

INCOTERMS – Delivered at frontier DAF


1- Deliver goods cleared for export to named frontier

2- Provide document to enable the buyer to take delivery


1- Takes delivery of goods at frontier

2- Pay for on- carriage and import duties/taxes if required



DES - Delivered Ex Ship

INCOTERMS – Delivered Ex Quay (Duty Paid) DEQ

CUSTOMS CUSTOMS


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


1- Take delivery of the goods from the quay at the port of destination

DEQ - Delivered Ex Quay



CUSTOMS CUSTOMS

INCOTERMS – Delivered Ex Quay (Duty Paid) DEQ


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


1- Take delivery of the goods from the quay at the port of destination

DDU - Delivered Duty Paid



INCOTERMS – Delivered Duty Unpaid DDU

CUSTOMS CUSTOMS


1- Delivered the goods to the named place of destination

2- Provide buyer with all shipping documents


1- Take delivery of the goods at the named place of destination

2- Pay import duties/taxes if required

DDP - Delivered Duty Paid

CUSTOMS



INCOTERMS- Delivered Ex Ship DDP

CUSTOMS


1- Deliver the goods to the named place of destination

2- Pay import duties/taxes if required

3- Provide buyer with all shipping documents


1- Take delivery of the goods at the named place of destination

Methods of Payment

Open Account – Flow chart

Exporter Importer

1- Sales contract

2- Shipment

3- Documents

4- Payment

Methods of Payment

Pre-payment – Flowchart

Exporter Importer

1- Sales Contract

2- Payment

3- Shipment

4- Documents

Methods of Payment

E E

E E

Open Account Prepayment

Documentary Collections Documentary Credit

I I

I I

B B B B

E – Exporter I – Importer B - Bank

Contract of TRUST

Contract for DOCUMENTS

1- Shipment 1- Shipment

3- Payment 3- Payment

2- Docs 2- Docs

1- Shipment 1- Payment

2- Payment 2- Shipment

Methods of PaymentInfluencing 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

Parties to a collection

Exporter Drawer Principal Remitter Seller

Importer Drawee Accepter Buyer

Remitting bank (usually seller’s bank

Presenting bank (usually buyer’s bank

Foreign Documentary CollectionsRouting of Documents/Payments

Exporter

Bank Branch

Bank’s head office Int’l Service Center

Documentary Collections

Documentary Credits

Bank Branch

Bank’s head office Int’l Service Center


Documentary Credits

Importer

Imp Imp Imp ImpExp Exp Exp Exp

Documents Payments

Documentary CollectionsFlow chart

Exporter Importer

Canadian Export Inc.

8- Payment

1- Contract

2- Shipment of goods

Scrimson Sales

3- Collection order5- Collection

6- Payment

Barclays Bank7- Payment

4- Remittance of collection order

Bank of Montreal

Documentary CreditFlow chart

Canadian Export Inc.Scrimson Sales

7- Payment

2- Documents

Bank of Montreal Barclays Bank

4- Documents5- Payment

3- Documents

1- Goods

Accelerated Documentary Collection System(direct Collection System)

Exporter

Canadian Export Inc. Scrimson Sales

Importer

1- Contract

2- Shipment

3- Collection order4- Collection

5- Payment/ acceptance

6- Payment or acceptance

7- Payment or advice of acceptance

Bank of Montreal Barclays bank

Documentary Collection – Points to observeSeller

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 observeBuyer

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

Transfer of risk, Cost and Ownership

Payment Terms : collection at sight through Barclay’s Bank

Terms of Sale : CIF Liverpool

RISKCOST

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 BankOwnership

Cost and Risk

Transfer of Risk, Cost and Ownership

Payment Terms : confirmed irrevocable L/C at sight

Terms of Sale : CIF Liverpool

Transfer of Risk, Cost and OwnershipPayment Terms : Irrevocable L/C at sight

Terms of Sale : CIF New York

RISK

BANK

COSTOWNERSIHP

Exporter

Risk 1st Carrier

Issuing BankBuyer Cost

Ownership NEWYORK

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

Buyer’s Bank Issuing Bank

1- Contract

4- Advice 2- Application

3- Credit

Letter of CreditSummary of proceduresExporter 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 BankBank of Montreal

5- Shipment

3- Request to advise/confirm8- Documents mailed

9- Bank of Montreal paid

How to Issue a Letter of CreditExporter Importer

Ban’s head office Int’l Service Center

Ban’s head office Int’l Service Center





Imp Imp ImpExp Exp Exp

Bank Branch

Exp Imp

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 bank’s currency

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

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.)

Letter of Credit FormatBeneficiary/Toronto Exporters Inc.

Advice of Credit

Advising Bank XYZ Bank

Documentary Credit

Issuing Bank ABC Bank

ApplicantNippon Importers Ltd.

OR

OR

Expiry Date and Presentation of DocumentsBeneficiary 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…”

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

Export Documentary Credit in SWIFT Format

Section 17(1) Bills of Exchange Act

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

Truck Bill of Lading

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

Documents

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