Logistics & Documentation

Logistics & Documentation

Main Clauses-International Commercial contract Product Specifications, Quality and Quantity          

Description Specifications Quantity Quantity Tolerances Test Certification Size-wise Breakup of Quantity Chargeable Weight (i.e. Net Weight) Penalty and Bonus Packing Marking

Main Clauses-International Commercial contract Price – – – –

Currency Unit Price Basis of Quotation (FOB, CIF etc.) Cost Distribution and Delivery

Terms of Payment –

Letter of credit

Right of Transfer –

Buyer/Seller Right to Assign/Transfer Contract (Generally not agreed upon, except to the successors)

Modification of the Contract – –

Cancellation of Previous negotiation/agreements Modification only after agreement in writing by all parties to the contract.

Main Clauses-International Commercial contract Delivery and Shipment • Period of Delivery (e.g. from the date of receipt of L.C) • Validity of L.C for shipment Destination • Terms and Condition of Delivery • INCO Terms • Passing of Risk and Title

INCOTERMS Incoterms are worldwide accepted commercial terms that defines the

respective roles of the buyer as well as of the seller in arrangement of the transportation and other responsibilities and it also clarifies when the ownership of the merchandise takes place.  Origin Terms

EXW (Ex-Works)

 International Carriage Not Paid by Seller FCA (Free Carrier) FAS (Free Alongside Ship) FOB (Free On Board)  International Carriage Paid by the Seller CFR (Cost and Freight) CIF (Cost, Insurance and Freight CPT (Carriage Paid To) CIP (Carriage and Insurance Paid To  Arrival At Stated Destination DAF (Delivered at Frontier) DES (Delivered Ex Ship) DEQ (Delivered Ex Quay - Duty Paid) DDU (Delivered Duty Unpaid) DDP (Delivered Duty Paid)

INCOTERMS FREE ON BOARD(FOB) “Free on Board” means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland water way transport.

INCOTERMS Cost, Insurance and Freight (CIF) The title and risk passes on to the buyer if delivered on board the ship by the seller who paid the transportation and insurance cost to the destination port. It is used for sea or inland waterway transportation.

Letter of Credit (LC) • A letter of credit is a document issued mostly by a financial institution which provides an irrevocable payment undertaking to a beneficiary against complying documents as stated in the credit. • The LC is a source of payment for a transaction, meaning that an exporter will get paid by redeeming the letter of credit. • It is the safest mode of payment through bank.

LC- Process Flow Chart 4. Copy of LC

Buyer

Seller 1. Mutual agreement on LC terms & conditions

8.BL and other docs for getting of goods

6. BL and other docs

2. LC Info 10. Payment

Buyer’s bank

7.BL and other docs for payment

Seller’s bank

5. Goods handed over to carrier & Bill of Lading to Seller

3. Opening of LC

Carrier 9.BL and other docs for receiving of goods

Types of LC • Revocable LC- Terms and conditions are changeable. Changes are made by the buyer in consent with the seller. • Irrevocable LC- No changes can be made

Payment modes on basis of LC • • • •

LC at sight LC at 30 days LC at 60 days LC at 90 days

Main Information on LC • • • • • • • •

FROM :( NAME & ADDRESS OF OPENING BANK ) TO :( NAME & ADDRESS OF ADVISING BANK ) TYPE OF L/C L/C Number DATE OF ISSUE DT. & PLACE OF EXPIRY NAME & ADDRESS OF THE APPLICANT NAME & ADDRESS OF THE BENEFICIARY

Main Information on LC • • • • • •

PARTIAL SHIPMENT TRANSHIPMENT SHIPMENT FROM SHIPMENT TO LATEST SHIPMENT DATE DESCRIPTION OF GOODS – – – – – – –

• •

Description of Materials Size Specification Tolerance Quantity Quantity Tolerance Price

DOCUMENTS REQUIRED Additional Conditions

Purchase Order (PO) A Purchase Order is a commercial document issued by a buyer to a seller, indicating the type, quantities and agreed prices for products or services that the seller will provide to the buyer. Main Informations on POBuyer Information Vendor Information Ship To Information FOB related Information Labeling Instruction Packing Instruction

Types of Commercial Documents The set of commercial documents, known variously as Shipping Documents or Principal Export Documents, is essential for smooth flow of international trade. The main types are as follows– Commercial Invoice – Bill of Lading – Cargo Insurance Policy/ certificate – Bill of Exchange.

Commercial Invoice  First basic and the only complete document for a shipment from among the set of commercial documents.  Document is needed at pre-shipment and postshipment stages for various purposes like,  Export Inspection Certificate  Clearance from excise and customs authorities

 Commercial invoice performs three main functions.  Document of Content  Bill by exporter  packing list.

 It also sets forth the terms of shipment and payment and can operate as Certificate of Origin.

Bill of Lading • Bill of Lading is an evidence shipment of goods. • This document evidences the mode, manner and date of shipment. • Bill of Lading, issued by the shipping company • Bill of Lading enables the lawful holders to claim goods at the destination. • Bill of Lading performs three functions-It is an evidence of the contract of transport, receipt of goods and document of title.

Insurance Policy /Certificate • For providing protection to cargo owners, cargo insurance is provided by the insurance companies. • Cargo insurance covers risk to the cargo while in transit from consignor to consignee. • The export contract/LC will specify the nature of the risk coverage as well as the insurable value

Bill of Exchange • Performs the role of bridging the huge gap between shipment of goods and receipt of sale amount. • Prepared by the exporter and given to the bank along with other commercial documents. • Bill of Exchange is defined as “an unconditional order in writing addressed by one person (exporter) to another (importer), signed by the person giving it, requiring the person to whom it is addressed to pay.