Export India Online Training Course - Just ₹4,999.00

Export Documentation and Procedure

  • Module 1: Chapter 1 - Understanding Incoterms 2020

    In this module, we cover: The Role of Incoterms 2020 in International Trade, Identifying the Buyer and Sellers Responsibilities Under Incoterms 2020, Choosing the Correct Incoterm 2020 For Your International Trade Transaction, Identifying the Eleven Incoterms 2020 Rules, Packing Implications Under Incoterms 2020

  • Module 1: Chapter 2 - Understanding Cargo Insurance Sea and Air

    In this module, we cover: Examination of Clause A, B and C (Sea Freight), Choosing the Correct Insurance Cover, Examination of Clause Air (Air Freight), Insurance Premiums, Examination of Insurance Certificate, Implications of Marine Insurance Under CIF CIP Incoterms 2020 Rules

  • Module 1: Document Library

    Document downloads included: Incoterms 2020 PDF Download, Insurance Certificate Example, Marine Insurance Certificate Example, Clause A, Clause B, Clause C, Clause Air

    • Lecture 1
  • Module 2: Chapter 1 - How To Import and Export From India

    In this module, we cover: How to import products into India and export products from India

    • Lecture 1
  • Module 3: Chapter 1 - Sea Freight Rates, Cost Centres Air & Sea

    In this module, we cover: Conference Line Rates, Independent Line Rates, Containerisation, Identifying Your Cost Centres From Sellers Warehouse to Buyers Warehouse via Sea and Air, The Role of the Freight Forwarder, Selecting Your Freight Forwarder

    • Lecture 1
  • Module 3: Chapter 2 - Carriage By Sea

    In this module, we cover: Liner Bills of Lading, The Characteristics of Liner Bills of Lading, The Characteristics of Seaway Bills of Lading, How Bills of Lading are Generated, Bill of Lading Instructions

    • Lecture 1
  • Module 3: Chapter 3 - Air Consolidation and Rates, Air Freight Documentation

    In this module, we cover: Master Air Waybill, Air Waybill Instructions, Issuing Flight Details, The Role of the Consolidator and Air Freight Rates, House Air Waybill

    • Lecture 1
  • Module 3: Document Library

    Document downloads included: Bill Of Lading Instructions, Bill Of Lading Example, House Air Waybill Example 1, House Air Waybill Example 2, House Air Waybill Example 3, Master Air Waybill

    • Lecture 1
  • Module 4: Chapter 1 - Methods of Payment in International Trade

    In this module, we cover: Cash against Documents, Documentary Letters of Credit, Why Trade Under a Letter of Credit?, Definition of a Letter of Credit, Types of Letters of Credit, Standby Letter of Credit, UCP 600 The Rules of the Game

    • Lecture 1
  • Module 4: Document Library

    Document downloads included: Letter of Credit Example, Cash Against Documents Example

    • Lecture 1
  • Module 5: Chapter 1 - Pre-Shipment Inspection & Market Research

    In this module, we cover: How Pre-Shipment Inspection Works, Clean Report of Findings, Who Will Buy Your Product?, Pricing My Product

    • Lecture 1
  • Module 5: Chapter 2 - Methods of Selling & Negotiation Skills

    In this module, we cover: Methods of Persuasion, Defining Objectives and Targets, Setting Your Negotiation Strategy, Negotiation Skills

    • Lecture 1
  • Module 5: Chapter 3 - International Sourcing

    In this module, we cover: Understanding the Five Key Ways of Sourcing Products or Services

    • Lecture 1
  • Final Exam
    • Lecture 1

Video Length: 26m 3s

An inexperienced business may be faced with the following issues when attempting to purchase goods from an overseas supplier:

Issue 1: 

You have just received your first purchase from your overseas supplier but the goods are damaged. You want to hold the seller responsible and therefore demand a refund or replacement of goods.

Issue 2:

Your suppliers original invoice stated an agreed total of $X,XXX.00 One week later you receive an unexpected, second invoice for $XXX.00 to cover export packing costs. You are unwilling to pay for this unforeseen cost as your purchase order stated FOB – Free On Board (named port of Export).

ANSWER: 

In this case, you would simply have to work it out with your supplier in the hope that they value your business and and respect your viewpoint. Otherwise they may insist upon their terms or refuse to participate in any further business with you.

IDENTIFYING THE BUYER AND SELLERS RESPONSIBILITIES UNDER INCOTERMS 2020

In the case above there was no preset clear terms agreed covering all aspects of the transaction. This problem existed until the early 1930’s at which point INCOTERMS were introduced to the world of international trade to resolve these issues.

There are eleven internationally recognised terms of delivery, compiled by the International Chamber of Commerce to facilitate International trade and to identify the buyer and sellers’ responsibilities under any one of the eleven terms in respect of:

  • Where the RISK for the cargo passes from the Shipper (seller) to the Importer (buyer).
  • Which COSTS should be included in the sellers’ Invoice.
  • At what PRECISE PLACE should the seller deliver to goods to.

If Incoterms 2020had been used in the sales contract in the introduction, the issues would have been clearly established from the start:

Under FOB subject to Incoterms 2020:

Issue 1:

The RISK for the cargo passed from the seller to the buyer once the goods were placed ON BOARD the carrying vessel. Both parties would have to ascertain whether the damage occurred before or after the goods were placed on board the vessel. If before, the seller would be responsible, if after, the buyer would be responsible.

Issue 2:

Incoterms 2020 clearly shows which party is responsible for various costs involved in the transaction. Incoterms 2020 tell us that the cost of export packing is included in the selling price, therefore the seller should not charge the buyer anything extra or in this case the second invoice of $XXX.00.

Important! Our first lesson here is to always state on the purchase order/sales order your terms of delivery followed by stating: SUBJECT TO INCOTERMS 2020. NEVER just put the term of delivery alone.

Correct: FOB (named port) Subject to Incoterms 2020
Incorrect: FOB (Named Port)

CHOOSING THE CORRECT INCOTERM 2020 FOR YOUR INTERNATIONAL TRADE TRANSACTION

Incoterms 2020 is the foundation stone of Importing and exporting. Your involvement in the logistics and documentation associated with any export or import shipment is dictated by the incoterm 2020 both the buyer and seller agree upon.

For example, if I sell my product to an overseas customer EX WAREHOUSE subject to Incoterms 2020, I am the “LAZY exporter”, I do not need to have any knowledge about export documentation such as Certificates of Origin, Bills of Lading, or Air way bills, I certainly don’t have to know about freight rates, how to book cargo with an Airline or shipping line or how to work with a freight forwarder.

By quoting Ex Warehouse, in reality I am saying to the supplier “COME AND GET IT” my sale is a domestic sale. It’s the overseas buyer that does all the work mentioned above. The Ex Warehouse term is often used by the novice exporter who is not familiar with the “ins and outs” of international sales. Of course many importers (buyers) will not want to do all the hard work!!

The seller must be prepared to respond to any Incoterm 2020 requested by the importer (or buyer)
If I quote C.FR subject to Incoterms 2020 now I am the ACTIVE seller and the buyer is the “lazy buyer” in so much as, I have to arrange export documentation such as Certificate of Origin, Bills of Lading or Airway bills, I must understand freight rates, how to book cargo with an airline or shipping line or how to work with a freight forwarder. I must learn and understand what is required of me.

Let’s now take Incoterms 2020 a step further. First of all what is meant by the word Incoterms 2020 and what is its purpose? The word Incoterms is an acronym, a word made out of the letters of other words. IN stands for “international” CO stands for “commercial” and TERMS remain “terms”. 2020 indicates the latest edition published in 2020. Hence IN CO TERMS 2020.

What is the purpose of Incoterms 2020?

Incoterms are used by both buyer and seller to reflect their involvement in documentation and logistics but this is a bi-product of Incoterms 2020. The true purpose is to address the buyers and sellers responsibilities.

Responsibilities under the three headings.

  • Precise place of delivery
  • Division of cost
  • Where the risk for the goods of the order passes from the buyer to the seller

Lets briefly look at all eleven Incoterms 2020 that are internationally recognised.

For any mode of modes of transport we have the following terms:

EXW: EX WORKS OR EX WAREHOUSE
FCA: FREE CARRIAGE TO NAMED PLACE OF DELIVERY
CPT: CARRIAGE PAID TO NAMED PLACE OF DESTINATION
CIP: CARRIAGE AND INSURANCE PAID TO NAMED PLACE OF DESTINATION
DAP: DELIVERED AT PLACE OF DESTINATION
DDP: DELIVERED DUTY PAID
DPU: DELIVERED AT PLACE UNLOADED

For sea and inland waterway transport we have the following:

FAS: FREE ALONGSIDE SHIP
FOB: FREE ON BOARD SHIP AT NAMED PORT
CFR: COST AND FREIGHT TO NAMED PORT OF DESTINATION
CIF: COST INSURANCE AND FREIGHT TO NAMED PORT OF DESTINATION

Let’s now examine the term FOB subject to Incoterms 2020 under Place, Cost, Risk.

The PLACE of delivery is On board the vessel.

The RISK passes from the buyer to the seller at the same point, that is when the goods are placed on board the vessel.

The DIVISION of cost is:

Sellers Costs:

PRODUCTION
EXPORT PACKING
EXPORT LICENSE (if required)
EXPORT ENTRY
DELIVERY TO PORT OF EXPORT
PORT CHARGES

Buyers costs:

SEA FREIGHT
INSURANCE (if required)
IMPORT DUTY AND TAXES
CLEARING AGENTS FEE
COLLECTION AND DELIVERY TO WAREHOUSE OF FINAL DESTINATION

Please refer to the document library for break down of Place-Cost-Risk for all eleven terms of delivery subject to Incoterms 2020.

TIP! For all eleven terms of delivery the place of delivery and the point where the risk passes is always the same point.

Lets now talk about export packing WHICH IS VERY IMPORTANT AND SO OFTEN OVERLOOKED BY THE BUYER. Incoterms 2020 addresses the subject of packing.

Packaging

In all eleven terms the Seller is responsible for packing the goods for the appropriate mode of transport.
There are many different types of packing, from a wooden box to brown paper and twine!! Your supplier may know their product inside out but not necessarily know how to pack properly ready for export. Never leave it to chance, be “Proactive” not “Reactive” a saying you will hear many times during this course. Always think WHAT IF?

What if my box is over stacked by a pile of heavy wooden boxes, will it survive the journey in the container? Ask you supplier “how will you pack my order?” Ask for photos of their packing, take into consideration how the goods will be delivered, air, sea or possible truck and ask yourself if this packing is sufficient to survive the journey. If your answer is NO, then give the supplier exact packing instructions, if you are not sure yourself ask a freight forwarder for help, they know everything about proper packing for different modes of transport. Above all, do not issue negative packing instructions like “pack suitably for sea freight” or ”pack suitably for air freight”. What’s suitable packing for sea freight? Your consignment wrapped in the daily news and tied together with string?

It is important to remember goods are not covered by insurance due to loss damage or expense caused by INSUFFICIENCY or UNSUITABILITY of packing or preparation of the subject matter insured.

We will be looking at Marine Insurance next, but before we look at insurance in any detail this is what Incoterms 2020 says about Marine Insurance under CIF:

The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover CLAUSE C. It is well to remember this when we later examine Marine Insurance.

Under CIP the seller is required to obtain insurance under CLAUSE A.

Remember that your term of delivery should always read “subject to Incoterms 2020”. By doing so you are stating that the definition of

  • PLACE
  • COST
  • TRANSFER OF RISK

is subject to the definition in Incoterms 2020 and not the private interpretation of the buyer or the seller, it eliminates ambiguity and mis-interpretation of the particular delivery term being used.

Never put on your purchase order just “FOB” (or any other term of delivery). It begs the question, who’s interpretation of place, cost and transfer of risk, the buyers or sellers? That’s when arguments break out between both parties.

We highly recommend that you purchase Incoterms 2020. You may be able to purchase a copy from your local Chamber of Commerce.

TIP! Ask the International Dept of your Local bank, they sometimes have free copies available for their customers or tap in INCOTERMS 2020 in a search engine and you will be overpowered with information.

What have you learned from this section on Incoterms 2020?

You learned that Incoterms 2020 is the foundation stone of Importing and exporting because:

It eliminates misunderstanding and disputes which could arise between the buyer and seller.

Regarding the interpretation of:

  • Place of delivery
  • Division of cost
  • Where the risk passes from the seller to the buyer

It also dictates the buyers and sellers involvement with documentation and logistics in an export exercise. Remember, EXW the “lazy mans” way of exporting? The exporter (seller) makes the goods available at his warehouse door and the importer (buyer) does all the work. The opposite applies in C.FR WHERE the importer (buyer) is the “lazy man” and the exporter (seller) does all the work.

You have learned that the question of packing must be addressed, never leave it to chance, be PROACTIVE NOT REACTIVE.

Lastly, you have also learned that if you, the buyer insures your goods under CIF, your insurance contract will be void if the damaged goods were insufficiently packed.

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