Chapter one: Procedures of Imoport & Expoer Trade
Trade terms
(There are three proceduces of Import&Export trade:
business
preparatory work; the negotiation and signing of a contract; the
performance of a contract International Trade Practice is a subject on
studying theories and practice in the process of trading tangible
commodities among countries
(Task: Students can acquire basic theorys,knowledge and skills of
International trade through this course.)
Features of International Trade
1 not only an economic activity, but also a foreign affairs.
2、cross-border trading and complexity of business transaction.
3、unstable natures.
4、more risks than domestic trade’s.
5、 more secoters being involved in and intermediary links.
6、fierce competition.
National law and International Treaty or Agreement
Import&export is closely related with United Nations Convention on
Contracts for the International Sale of Goods.
International trade practice
1、Defination and natures
2、Functions
3.Principles for the International Sales of Goods)
The basic contents of contracts for the International Sales of Goods.]
Article of contract
Price of Goods
Obligations of the buyer
Obligations of the seller
Prevention and settlement of disputes
4.Import procedure
5.Export Procedure
6.Negotiation and Performance
7.Modes of trade
Internatonal Trade Terms
Name, Quality, Quantity and Packing
Trasport of International Goods
Insuerance of International Goods
Price of International Goods
collection and payment
Inspection, Claim, Arbitration and Force Majeure
Export Business Negotiation and Conclusion of Contract
Performance of Import and Export Contract
Trade Forms
Abstract: This chapter intruduces the functions of the trade terms and
related trade practices, especially 13 trade terms in INCOTERMS2000, FOB,
CIF, CFR, FCA, CPT, CIP are key terms.
First section: Trade terms and International Trade Practices
Second section: Six main trade terms
Third section: Other trade terms
Forth section: Selection of trade terms
First, the meaning and functions of trade terms
Trade terms are also known as Price terms,which have two aspects: the
Conditions of Delivery and Price composition
Second, International customary practices concerning the trade terms
1 The Warsaw -Oxford Rules 1932 (Explanation about CIF)
2 The Revised American foreign Trade Definitions 1941 (Explanation
about 6 trade terms, key on FOB and FAS)
3 International Commorcial Terms for short (Formulated by
International Chamber of Commerce)
(1)the process of introduing Incoterms2000
(2)the reasons for revising Incoterms2000
Compartion with Incoterms1990, substantive changes have been made
in two areas in Incoterms2000:
First one, the obligations of the customs clearance and payment of duty
under FAS and DEQ;
Second, The loading and unloading obligations of sellers under FCA
3’The application scope of Incoterms2000
4’The contents and structures of Incoterms2000
5’Noticeable problems with Incoterms2000
FOB: Free on board….named port of shipment
1’The meaning of FOB
2’The obligations of both the seller and the buyer
Notice: the place of delivery, allocation of risks, the obligations and
payment of fright cost and insurance,the obligation and payment of
customs clearance, documents transmitation and )
（
Notices of using FOB
1 the precise meaning of “passing the ship’s rail”
2’on<The Revised American Trade Definitions 1941>
3’on< Link-up of vessel and goods>
4’The different explanations of FOB between The Revised American
Trade Definitions 1941 and Incoterms2000
First,expresstion difference : if the buyers want to deliver the goods
at the ports of shipment, they should add“Vessel” between FOB and
port’s name,for example “FOB Vessel New York”
Secondly ,different transport modes
Thirdly ,different limition of allocation of Risk
Forthly,
different parties on obligation and payment of custom
clearances
5’Division of loading costs
Variations of FOB:
1 FOB Liner Terms
2 FOB Inder Tackle (Lighterage is overtaken by the sellers)
3 FOB Stowed (Including the stow-cost)
4 FOB Trimmed (Including the Trim-cost)
5 FOBST (Stow-cost and Trim-cost are overtaken by the seller)
CIF: Cost Insurance and Freight…Named port of destination
1’The meaning of FOB
2’The obligations of both the seller and the buyer
Notice: the place of delivery, allocation of risks, the obligations and
cost-payment of carriage and insurance,import&export customs clearance
and cost-payment, documents of delivery)
Notices of using CIF:
Firstly, CIFcintract belings to shipment contract, that’s meanthat
division of risks and costs is separated.
Secondly, the sellers is responsible for marine insurance. The
insurance shall be contracted with underwriters or an insurance compaby
of good repute and, failing express agreement to the conltary, be in
accordance with minium cover of the Institute Cargo Clauses or any similar
set of chauses.
Third, The seller is responsible for chartering a ship.
Forth, CIF is Symbolic Delivety and Physical Delivety.
1’The conception of Wymbolic Delivery and Physical Delivery
2’Under the condition of Symbolic Delivety, the seller deluvety
goods by documents,and the buyer pay the price by documents,too
3’In CIF contracts, we must avoid these clauses such as “requiring
the seller is responsible the goods’ arrival” and “the buyer pay the
price on conditions of the goods’arrival”
Fifth, Division of unloading cost
Variations of CIF:
1’CIF Liner Terms
2’CIF Landed
3’CIF Ex Tackle
4’CIF Ex Ship’s Hold
FCA: Free Carrier
1’The meaning of FCA: Free Carrier
2’The obligations of both the seller and the buyer
Notice: the place of delivery, allocation of risks, the obligations and
cost-payment of carriage and insurance,import&export customs clearance
and cost-payment, documents of delivery
3’Notices of using FCA
First is about Carrier and delivery place: It should be noted that
the chosen place of delivery has an impace on the obligations of losding
and unloading the goods at the place. It depends on if it occurs at the
seller’s premises.
Second is Passing of Risks: It’s possible that the risks pass ahead.
Third is divisions of obligation and costs.
CPT: Carriage Paid to
1’The obligations of both the seller and the buyer: Comparing with
FCA,other obligations are wimilar with FCA,besides the wdller must
contract on usual terms at his own expense for the carriage of the goods.
2’Notices of using CPT:
The allocation of risk.
Division of obligations and cost
The difference and the same between CPT and CFR
CIP: Carriage and Insurance Paid to
Compared with CPT, obligations are similar with CPT, except the
seller must cover insurance and pay the insurance cost.
Among 13 trade terms, only CIF and CIP involve the insurance.
The differences between CIP and CIF:
1’Mode of transport
2’The place of delivery and the allocation of risk
3’The division of loading and unloading cost
4’The kinds and the time of providing the transport documents are
different.
Section 3: Other trade terms
EXW: Ex Works (Ex Warehouse,Ex Mine,Ex Plantation)
1’The obligations of both the seller and the buyer
This term thus represents the minium obligation for the seller, and
the buyer has to bear all costs and risks involved in taking the goods
from the seller’s premises.
EXW is the price of physical delivery.
EXW may be used irrespective of the mode of transport.
2’Notices of using EXW
Link-up of vessel and goods
Packing and shipment of goods
According to the minium obligatin for the seller,the seller aren’t
responsible for the loading of the goods on departure and to bear the risks
and all the costs of the loading.
About all customs formalities for the export of the goods.
The costs of inspections: The buyer must pay the costs of any
pre-shipmnet inspection, including inspection mandated by the
authorities of the country of export.
FAS: Free Alongside Ship
1’The meaning of FAS:
2’Notices of using FAS:
Differnet explanations between the Revised American Trade
Definities 1941 and Incoterms 2000
The seller to clear the goods for export
Link-up of vessel and goods
DAF: Delivered At Frontier
1’The meaning of DAF: The term “frontier” may be used for any
frontier including that of the country of export.
Notice: The seller hasn’t the obligation of unloading in
Incoterms2000
2’Notices of using DAF:
The differences between DAF and CPT
Mode of transport: This term may be correspective of the mode of
transport when goods are to be delivered at a land frontier. When delivery
is to take place in the port of destination on blard a vessel of on the
quay(wharf), the DES of DEQ terms should be used.
DES: Delivered Ex Ship
1’The meaning of DES:
2’Notices of using DES:
Link-up of vessel and goods
The difference between DES and CIF: If ship can pull in to shore
directly, DES is the real arrival price.
Firstly, different place of delivery
Secondly ,different allocation of risks
Thirdly, different responsibilty for the costs
Forthly, different properties of delivery
DEQ: Delivered Ex Quay
The seller has to bear costs and risks involved in bringing the goods
to the named port of destination and discharging the goods on the
quay(wharf)
Notice: The DEQ term requires the buyer to clear the goods for import
and to pay for all formalities duties,taxes and other charges upon import.
Modes of transport: This term can be used only when the goods are to
be delivered by sea or inland waterway or multimodal transport on
discharging from a vessel onto the quay (wharf) in the port of destination
DDU: Delivered Duty Unpaid
DDU is also suit to the trade in Free Trade Area and countries which
sign tariff agreement.
DDP: Delivered Duty Paid
Under DDP the seller clear the goods for import and pay any duty as
a consequence thereof.
DDP represents the maximum obligation,costs and risks, so the price
that the seller charged is highest.
Summary of Trade terms
1’The “E” term: Departure
2’The “F” term: Main Carriage Unpaid
3’The “C” term: Main Carriage Paid
Notices: Allocation of risks and costs is separated
The “F” term and the “C” term are all belong to
“shipment” contracts.
4’The “D” term: Arrival
The “D” termcontracts are belong to “arrival” contracts
Under these terms seller can’t responsible for unloading the
goods except DEQ
5 kinds of trade terms tabulate the contrast
Relatins of trade terms and contract’s property
1’Trade term depermine the property of sales contracts
2’Avoiding contradictions between trade term and conditions in sales
contracts
3’Notice trade term and term in the contract of transportation in
the deal contract linking up each other
Packing and inspection of goods
Except EXW, the buyer must pay the costs of any pre-shipment
inspection except when such inspection is mandated by the authorities of
the country of export.
Select the main factor that the trade term should be considered for
use
1’Transport conditions
2’source of goods
3’Factor of the freight charges
4’Risk in the transportation way
5’Whether going through the customs chearance of the cargoes
imported and exported formalities has difficulty
Summaries of this chapter:
This chapter has told 13 kinds of prices term of Incoterm2000 mainly,
among them need to grasp FOB, CFR, CIF, FCA, CPT and CIP six kinds of terms
especially.
Grasping it from the place of delivery mainly to every kind of trade
term, the risk shilts the demarcation line, is it transport to handle and
obligation and relevant burden, responsibility and between burden and
suitable transportation way, etc. tespest of expenses that imports and
exports declare at the Customs of expenses of insurance consider.