Transcript MASTER - Texas Tech University

PE 425 – BASICS OF COMMERCIAL DIPLOMACY
Online/Distance Learning Course
SECTION 11
BASICS OF INTERNATIONAL TRADE:
EXPORTING AND IMPORTING
ALAN L. WHITEBREAD
FREIGHT FORWARDER
At the beginning of a sale, they can provide the exporter
with a quotation for regular or infrequent shipments for
• Freight costs
• Port charges
• Insurance costs
• Freight forwarder's fees
• And, if applicable
– Consular fees
– Cost of special documentation
CUSTOMS BROKER
http://www.itds.treas.gov/broker.html
“… a Customs Broker prepares and files the
necessary Customs entries, arranges for
the payment of duties found due, takes
steps to effect the release of the goods in
Customs custody, and represents their
clients in custody matters. ”
This is in addition to all the duties of a freight
forwarder.
INCOTERMS
• The 13 INCOTERMS fall into four different
groups. Each group represents a category of
shipment as shown below.
–
–
–
–
Departure [E]
Main Carriage Unpaid [F]
Main Carriage Paid [C], and
Arrival [D]
• SPECIAL WARNING – If someone is ever asked to use an
INCOTERM beginning with the letter “D” they should
immediately find expert assistance only from someone that
has successfully used a “D” term!
INCOTERMS
•
•
•
•
•
11 terms, 8 are common
For all modes of transportation
Part of the Buyer – Seller agreement
Recognized by most nations
Updated every 10 years by the
International Chamber of Commerce [ICC]
– The current version is INCOTERMS 2010
INCOTERMS 2010 – 4 Categories
http://www.i-b-t.net/incoterms.html
• Ex Works (EXW)
• Free Carrier, Named Place (FCA)
– Seller's Premises or Named Place of Origin (FCA)
•
•
•
•
•
•
•
•
•
Free Alongside Ship, Named Port (FAS)
Free on Board, Named Port (FOB)
Cost and Freight, Port of Destination (CFR)
Cost, Insurance and Freight, Port of Destination (CIF)
Carriage Paid To, Named Place of Destination (CPT)
Carriage and Insurance Paid To, Named Place of Destination (CIP)
Delivered at Terminal, Named Place of Destination (DAT)
Delivered at Place, Named Place of Destination (DAP)
Delivered Duty Paid, Named Place of Destination (DDP)
INCOTERMS: E and F Groups
E Group: Seller makes goods available at its dock.
F Group: Seller arranges and pays for transportation to a named place in
Seller’s country.
• EXW [ExWorks]
– Title transfers at the Seller’s dock.
• FCA [Free Carrier]
– Title transfers at the named place in the Seller’s country.
• FAS [Free Alongside Ship – water transport only]
– Seller clears the goods for export and title transfers when the cargo
passes at the side of the vessel at the named departure port in Seller’s
country.
• FOB [Free On Board – water transport only]
– Seller clears the goods for export and title transfers when the cargo
passes the ship’s rail at the named departure port in Seller’s country
and Seller pays the vessel loading fees.
INCOTERMS: C Group
Seller arranges primary transportation [and sometimes insurance] but
title transfers to the Buyer when the goods have passed the ship’s rail or
been delivered to the destination port or place.
• CFR [Cost and Freight]
– Title transfers at the ship’s rail while buyer incurs all costs and
inland freight from the destination port.
• CIF [Cost, Insurance, and Freight]
– Title transfers at the ship’s rail although Seller arranges
transportation and insurance to the destination port. Buyer
incurs all costs and inland freight from the destination port.
• CPT [Carriage Paid To]
– Seller pays all carriage to a named place of destination.
• CIP [Carriage and Insurance Paid to]
– Seller pays all carriage and insurance to a named place of
destination.
DOCUMENTATION
• The only acceptable way to complete international
documentation is to dot every “i” and cross every “t”.
• The exporter must pay attention to every detail for the
best results!
• Mistakes cost time, money, customer unhappiness, and
potentially legal disputes.
• Several of the typical international documents will be
examined.
DOCUMENTATION
• The Sarbanes-Oxley law requires publicly traded U.S.
companies and their vendors to keep import and export
documents for up to seven years.
• GUIDELINES FOR AMERICAN FIRMS:
– [1] Keep all transaction records and correspondence. This will
help you if there is ever an issue about an illegal or questionable
diversion, re-export, or transshipment of your product[s].
– [2] Having properly executed Export Reseller [EAR]
Questionnaires can be very useful. See Section 8C to review
this READING.
BILL OF LADING [B/L]
[Straight B/L; Shipper’s Order B/L; or Air Waybill]
• This form differs by mode of transportation and
provides
– [1] a receipt for the items,
– [2] detailed content of the shipment, and
– [3] title to the items under certain circumstances.
BILL OF LADING TYPES
• Signed
– If negotiable copies are signed [endorsed] by the
master of the vessel or its agent, the signed copies
carry title to the goods.
• Unsigned
– Signed non-negotiable copies are used as proof of
shipment. [Also called a Straight Bill of Lading.]
– These are used by the shipper, consignee, the
steamship company, insurance company, bank,
and potentially others involved in the transaction.
BILL OF LADING TYPES
• Straight Bill of Lading
– This is made out to a specific consignee at
the destination—the only entity authorized to
take delivery of the goods.
• Order Bill of Lading
– This is made out to the order of the shipper,
bank, agent, or “to order”. Whoever
possesses the document can take delivery of
the goods.
OCEAN [MARINE] BILL OF LADING
•
This negotiable document [unless
specifically marked “non-negotiable”]
serves as
1. a receipt for goods,
2. an evidence of the contract of carriage, and
3. a document of title to the goods.
•
“Full Set 3/3” means 3 out of 3 Bills of
Lading must be originals.
DOCK OR WAREHOUSE RECEIPTS
• May be required by the shipper or exporter
if the shipment lands at one port and then
goes on to a further destination.
• If that further destination is in another
country, it is a transshipment and the
American firm must be sure to comply with
U.S. law for that product / nation shipment.
PRO FORMA INVOICE
• The Pro Forma invoice states an offer to sell at
the prices, terms, and conditions listed on the
document. It looks like a Commercial Invoice
and acts as a quote for goods from Seller to
Buyer. The Buyer needs this invoice to prove
intent to purchase and arrange payment by
Letter of Credit or similar financial instrument.
• Be sure to include a statement about compliance
with U.S. laws and regulations on this document.
COMMERCIAL INVOICE
• The Commercial Invoice looks like the Pro Forma invoice but
acts as a Bill for Goods from Seller to Buyer. The Buyer needs
this invoice to prove ownership and arrange payment. Customs
examines the Commercial Invoice at the time of delivery and
may use it to assess import tariffs based on the transaction
value. It is signed and must provide the following.
•
•
•
•
•
•
Letter of Credit number [if applicable]
Waybill number
Voyage number
Bill of Lading number
Container number
Seal number
• Be sure to include a statement about compliance with U.S. laws
and regulations on this document.
COMMERCIAL INVOICE
• The American firm’s pro forma and commercial invoices
must have the following.
• An antidiversion clause [strongly recommended].
– “U.S. law prohibits disposition of these items to …”
choose either the Sanctions List or ECCN controls.
• Letter of Credit numbers and names [if applicable].
• Any certification and/or inspection that may be required by
the foreign country / Buyer.
• It may need to be signed and / or notarized.
• The U.S. Department of Commerce may provide specific
requirements especially if the American firm is shipping to
a country for the first time.
COMMERCIAL INVOICE TRAP
• EXAMPLE:
– A customer asks an American firm to provide
two different Commercial Invoices. One is to go
with the shipment and the other one is to be with
a smaller value is to be mailed to the customer.
• WARNING:
– The customer knows the mail copy will arrive
before the shipment. So they can use the
mailed copy to pay less duty.
– This is illegal. Never provide invoices at
different amounts for the same goods!
FOREIGN CUSTOMS INVOICE
• This is similar to a Commercial Invoice but in
foreign form. It is for foreign inspectors and
frequently written in the language of the
foreign destination. The Buyer will usually
provide this in the necessary language.
EXPORT LICENSE
• Most U.S. exporters work under “no license required”
[NLR]. Others need a general “distribution license” [DL].
– If the item falls under U.S. DOC jurisdiction and is not
listed on the Commerce Control List [CCL] it is designated
as EAR99 and generally does not require an export
license.
– However, if the proposed export of an EAR99 item is to an
embargoed country, to an end-user of concern, or in
support of a prohibited end-use, the exporter may be
required to obtain a license.
EXPORT LICENSE
• If the company deals in products considered "controlled"
under U.S. or foreign laws, you must obtain a “Individual
Validated License” also called an IVL.
• The IVL license allows shipment of a specific item, to a
specific named consignee, to a particular country,
sometimes to a specific location, for a specific end-use.
• Contact the BIS Exporter Counseling Staff at U.S.
Department of Commerce at 202-482-4811 for individual
assistance.
ITEMS NEEDING A VALIDATED
EXPORT LICENSE [IVL]
• Defense articles and services
– National security items, all firearms
• Dangerous drugs and narcotics
• Endangered plants and wildlife
• Chemicals
– Precursors
– Fertilizers
– Other
• Radioactive materials
• Explosives
CERTIFICATE OF ORIGIN
• This document is usually countersigned by the local
Chamber of Commerce and on rare occasion by the
Consulate / Embassy of the destination foreign country.
It can save money when it certifies preferential duty rates
in countries offering favorable trade agreements to U.S.
exports.
• This document is often the one used for determining
lower import duty rates.
• WARNING - This is a simple Certificate of Origin—do not
get it confused with any specific one for a trade area.
EXPORT PACKING LIST
• This document itemizes your product in imperial and
metric weights, unit of measure, quantity of each
package, and how it is carried; i.e., box, crate, drum, etc.
• Units of measure on all international documents should
always be the same. Never use a mixture like one pallet
and one pallet of twenty-five cases!
• It may be duplicated in the foreign language of your
destination. Your Buyer should be able to determine the
total shipping weight, volume, and the contents of the
cargo from this document.
INSURANCE CERTIFICATE
• The Insurance Certificate is negotiable as soon
as it is signed. It certifies the amount of
insurance coverage provided on the shipped
goods. The minimum is usually of 110% of CIF.
• The insurance certificate must be
– negotiable in the same currency as the transaction
and
– it must specifically identify the insurance coverage
concerning all risks of the credit it covers.
INSPECTION CERTIFICATE
• The Inspection Certificate is requested by the Buyer
and usually certified by [1] an independent third-party
or [2] the affidavit of the Seller.
• It specifies that the goods either conform to the order
and / or indicates where discrepancies exist.
• A Complete Report of Findings usually accompanies
the certificate.
BOYCOTT REGULATION LAWS PROHIBIT
http://www.bis.doc.gov/ComplianceAndEnforcement/oacrequirements.html
• Agreements to refuse [or furnish information] or the
actual refusal [or furnishing of information] to do
business with Israel or in Israel with blacklisted
companies.
• Agreements to discriminate [or furnish information] or the
actual discrimination [or furnishing of information] against
persons based on race, religion, sex, national origin or
nationality.
• Implementing Letters of Credit containing prohibited
boycott terms or conditions.
BOYCOTT REGULATIONS
• “Tax Reform Act (TRA) requires U. S. persons to
report
– With the Export Administration Regulations (EAR)
quarterly requests they have received to take
certain actions to comply with, further, or support an
unsanctioned foreign boycott.
– The TRA requires taxpayers to report "operations"
in, with, or related to a boycotting country or its
nationals and requests received to participate in or
cooperate with an international boycott. The
Treasury Department publishes a quarterly list of
"boycotting countries.”
BUREAU OF INDUSTRY AND SECURITY
[BIS] ACTIVITIES
• “regulating the export of sensitive goods and
technologies in an effective and efficient manner;
• enforcing export control, antiboycott, and public
safety laws;
• cooperating with and assisting other countries on
export control and strategic trade issues;
• assisting U.S. industry to comply with international
arms control agreements;
• monitoring the viability of the U.S. defense industrial
base;
• and promoting federal initiatives and public-private
partnerships to protect the nation's critical
infrastructures”
SOURCE: http://www.bis.doc.gov/about/index.htm
SECTION 11: REVIEW 1
• You should now have knowledge of
– Roles and responsibilities of export
intermediaries
• Freight Forwarder and Customs Broker
– A thorough understanding of
• The three main categories within INCOTERMS
[E, F, and C], and
• The key components of the 8 main
INCOTERMS.
SECTION 11: REVIEW 2
• You should now have knowledge of key
document types and requirements
including
– Bill of Lading [B/L]
• Many types and conditions
– Invoices
• Pro Forma, Commercial, and Foreign Customs
– Export license types
• NLR, DL, and IVL,
– Certificate of Origin [simple]
SECTION 11: REVIEW 3
– Export Packing List
– Insurance Certificate
– Labeling
– Boycott regulations
– Export regulations [ECCN] and BIS activities