INTERNATIONAL TRADE
For international import and export business, Incoterms (International Commercial Terms) are a series of terms frequently used in sales contracts.
The objective of which is to establish a series of rules for the interpretation of the commercial terms used in international transactions in relation to the distribution of expenses and the transmission of risks between buyers and sellers.
Incoterms must appear next to the export price, indicating the exact place where responsibilities are transferred.
The scope of these terms is limited to the rights and obligations of the parties in relation to a sale contract and, specifically, with reference to the delivery of the goods sold.
These terms are of voluntary
y acceptance by the parties. The big issues they intend to regulate are:
- The exact place where the delivery of the merchandise occurs.
- The moment in which the risk on the merchandise is transmitted.
- The distribution of the costs of the operation.
- The distribution of documentary procedures.
It is important to be clear that these terms apply to contracts of sale but not to transport contracts.
GLOSSARY OF EXPORT TERMS
· ASWP – Any Safe World Port - Any Safe Port in the World – It is quite common for sellers of goods to offer delivery to any safe port of the world at the buyer's choice
· BG – Bank Guarantee – Bank Guarantee – It is a financial instrument issued by a bank on behalf of its clients for the benefit of another party to whom the bank's client enters into a financial obligation. In the event that the client does not make a payment of the contract, the beneficiary of the bank guarantee can resort to it and receive his payment.
·BG 100% Payable Instrument – It is a type of bank guarantee that meets several conditions. It must be issued or guaranteed by a “top 25” world bank, it is irrevocable, accepting and transferable. It must also cover the entire amount of the contract and must be paid in cash, upon presentation of the recognized documents.
· Bill of Lading (B/L) - Bill of Lading - it is a contract that defines cargo transport conditions. This contract is provided by the carrier and delivered to the exporter (Seller) when the shipment is received and placed on board the vessel. The bill of lading is an essential document, as proof that the product was actually shipped and that the company took responsibility for ensuring delivery to the buyer. To request payment for shipment by letter of credit, the seller must deliver the B / L (Bill of Lading) to payroll or the issuing bank.
· BCL – Bank Comfort Letter - Bank Certificate of Financial Capacity - This is a letter issued by the buyer's bank to the seller. This letter indicates that the buyer has sufficient funds to cover the cost of the order. A BCL is one of the first pieces of documentation that a prospective buyer must provide to a seller in order to negotiate a deal. It is not, however, a payment agreement for the seller, nor does it hold the bank responsible in any way.
. Cash-In-Advance
With advance cash payment terms, an exporter can avoid credit risk because payment is received before ownership of the goods is transferred. For international sales, wire transfers and credit cards are the most commonly used cash payment options available to exporters. With the advancement of the Internet, escrow services are becoming another prepayment option for small export transactions. However, requiring payment in advance is the least attractive option for the buyer, because it generates unfavorable cash flow. Foreign buyers are also concerned that the merchandise will not be shipped if the payment is made in advance. Therefore, exporters who insist on this payment method as their only way of doing business may lose out to competitors who offer more attractive payment terms.
. CCC China Certification
The complete CCC certification process includes 6 clear steps. However, not all elements of the China Compulsory Certification (CCC or 3C) are of equal importance.
The 2 most important stages of the certification process are product testing (products must be tested by a CCC accredited testing laboratory in China and factory inspection (initial factory inspection must be performed by a certification body. (Chinese official as CQC).
. CQC. Voluntary Certification
The CQC marking is a voluntary certification approved by China, which validates the quality, safety and performance of products beyond the mandatory requirements.
. CCG – International Certification of Conformity
CCG Testing & Certification B.V. was established on July 1, 2016, the former TIRT Technology Service company was established on January 1, 2015. It is a CCC representative test laboratories in Europe. Its goal is to provide all European customers with a local service to support their expansion into the Chinese market. With this service, fast speed, personalized service and local service can be provided.
. ICC - International Chamber of Commerce (ICC)
. CCL – Local Chamber of Commerce (LCC)
· CIA – Cash In Advance – Prepayment - is a kind of sale in which the total amount of the purchase price must be a prepaid order. This is not standard procedure in the industry and trading in merchandise it is not advisable for the buyer to pay in advance for merchandise that has not been shipped.
· CIF – Cost Insured Freight – Insured cost of goods - It is part of the operation standard for commodity traders. This means that the seller is responsible for the cost of transportation, as well as the insurance of it until the product reaches the port of destination · Commodities Exchange – This is an association that governs the rules of negotiation of a jurisdiction. Being familiar with the guidelines of the Stock Exchange in the jurisdictions in which you are doing business is always recommended.
· CB - Confirming Bank – A Confirming Bank is a bank that agrees to honor a letter of credit issued by another bank.
. CPT – Carriage Pay To
· DC – Draft Contract – Draft Contract - A draft contract is an initial contract drawn up and sent from the seller to the buyer. The buyer has the opportunity to make changes and send them back to the seller for their consideration. This process continues until both parties are satisfied with the terms of the contract.
. Documentary Collections (D/C)
A documentary collection (D/C) is an operation through which the exporter entrusts the collection of the payment of a sale to his bank (remitting bank), which sends the documents needed by his buyer to the importer's bank (collecting bank), with instructions release the documents to the buyer for payment. The funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for these documents. D/Cs involve the use of a draft that requires the importer to pay the nominal amount either at sight (document against payment) or on a specific date (document against acceptance). The collection letter gives instructions specifying the documents required for the transfer of title to the property. Although banks act as facilitators for their clients, D/Cs do not offer any verification process and have limited recourse in case of non-payment.
D/Cs are generally less expensive than LCs.
· FCO – Complete Commercial Proposal – Is issued by the seller, when the preliminary negotiations are finalized such as the issuance of a letter of intent (LOI) by the buyer and the performance of a "soft proof point" (proof of funds) in your accounts by the seller. The FCO is a document that defines the terms of the sale.
· FOB – If the terms of trade are FOB, the seller is obliged to have the merchandise delivered to a port of the buyer's choice on board a ship, which is also the buyer's choice.
Formal (Final) Contract – When the negotiation phase of the project contract is completed and both parties are satisfied, then a contract is drawn up and signed by both parties.
·· ICPO – This is a document prepared by commercial buyers and contains details of the quantity, type of merchandise and other necessary conditions in the terms that the buyer would like. Once presented to the seller, it is considered official and the company is obliged to complete the sale.
ICPO White Banking Coordinates – This is an ICPO, which includes details of the banking company so that the seller can perform a "soft probe" on his accounts to ensure that there are sufficient funds to cover the cost of the purchase.
· Irrevocable Letter of Credit – Irrevocable letter of credit - This is a document issued by the buyer's bank to the seller that guarantees payment, upon presentation of the required documents. An irrevocable document, it cannot be canceled and the buyer's bank is legally obliged to make the payment when the beneficiary complies with the conditions established in the letter of credit.
· Irrevocable Confirmed Letter of Credit – This is an irrevocable letter of credit confirmed by another bank, usually in the beneficiary's jurisdiction. The Confirming Bank is generally a bank that agrees to make the letter of credit payment on behalf of the issuing bank when the beneficiary meets the conditions outlined in the letter of credit.
.Transferable Letter of Credit– The beneficiary may or may not transfer all or part of the letter of credit to other beneficiaries. It makes it easier for the exporter to be able to guarantee payment to the producer of the merchandise to be exported. It allows small producers to collect merchandise and consolidate it in shipment.
. Issuing Bank - The issuing bank is the buyer's bank issuing bank guarantees and letters of credit on behalf of its client.
· LC / LOC – Letter of Credit – Letter of Credit - Letters of credit are documents issued by the buyer's bank to the seller that guarantees payment to the beneficiary of the letter of credit (the seller), provided that the terms and conditions established in the letter are met. This usually means submitting the required documents to a bank at the stated time.
· LOI – Letter Of Intent – Letter of Intent - A letter of intent is a document issued by the buyer to the seller indicating the interest of the buyers to enter into negotiations with the seller, in an attempt to purchase cement. The letter of intent is not legally binding, but it is a starting point for negotiations.
. LAB (FOB) – Free on board. In such contracts, the seller is obliged to have the merchandise packed and ready for shipment at the agreed point, either at its own facilities or at some intermediate point, and the buyer normally assumes responsibility for all costs and risks of land transportation. in the exporting country, as well as all subsequent transportation costs, including the costs of loading the merchandise on the vessel. However, if the contract stipulates "FOB ship", the seller assumes all transportation costs involved in loading the merchandise on said vessel.
. NCNDA
Non-Circumvention, Non-Disclosure & Working Agreement
NCNDA stands for Non-Circumvention Confidentiality Agreement
· IMPFA - NCNDA Formats used by the suppliers of a product and the applicants for it, accepted within a period, terms and conditions that have been agreed by the parties, in cooperation with each other and with third parties for mutual benefit. This document will be based on LOI letters of intent, Bank Letters with their guidelines such as BCL, ICPO, SOFT OFFER Letter of Offer and must be signed and sealed by the parties to give its due value.
Any information contained in these documents is strictly confidential and may not be changed, under any circumstances, by another intermediary, broker, merchant or any private company or by persons who are not the final suppliers or purchasers for specific purposes thereof. , without the prior written consent of the parties involved.
. ICPO
Irrevocable Corporate Purchase Order
It is used to purchase goods under specific terms and conditions
An ICPO can work for the final buyer with the supplier negotiating with each other, but not for an intermediary. A broker works with different applications. Again, brokers cannot “irrevocably offer to buy” goods when they are not buying.
. IMFPA
Irrevocable Master Fee Protection Agreement
In an IMFPA, the objective is to reach a private agreement for the placement or purchase of a commodity or other merchandise clearly identified and negotiated in bulk.
· Ocean Bill of Lading – Bill of Lading - Another term for the bill of lading, referring to transportation by ship. For more information, see "Bill of Lading".
· POF – Proof of Funds – Generally, proof of funds is obtained by conducting a soft probe on the buyer's accounts. Proof of funds is normally required by a seller to further negotiate the sale.
· PB _ Performance Bond – Performance Bond - Performance Guarantee - This is of a kind of bank guarantee issued by the seller to the buyer. Ensures that the seller complies with the terms of the contract. Usually posted in the amount of five percent (5%) of the total contract amount, a deposit may be triggered by a buyer in the event that the seller breaches the contract and fails to provide the merchandise that was stipulated in the contract. contract.
· Prime Bank – The 25 best banks in the world. These banks are reliable (or in most cases mandatory) in the trading of goods.
. PB 2% Performance Bond
The Performance Bond (PB) is a guarantee that follows the goods to the port of destination where, if the goods are rejected for good reason, then the PB backed by a B.G. (Bank Guarantee)
· Revolving Letter of Credit - A revolving letter of credit is a renewable letter of credit that can be used multiple times. These financial instruments are put into practice when the seller must make several multiple transfers to a single buyer, which allows the seller to request payment for each shipment without the need for a letter of credit for each shipment.
· RWA – Ready Willing and Able - Ready, available and able - Ready, willing and able.
This is a document that is issued by the buyer's bank. The bank confirms that your client has sufficient funds in his account and is willing and able to enter into the contract
· SBLC – Standby Letter of Credit – A standby letter of credit is a letter of credit that works as a bank guarantee from the buyer that there are sufficient funds to cover all shipping costs. Standby letters of credit are not normally used.
If the seller wants payment guaranteed by the buyer's bank, a normal letter of credit is used.
· Sight LOC – Sight Letter of Credit – Credit Sight Letter - This is a letter of credit payable upon presentation of the letter of credit, as well as the additional documentation, as stipulated in the letter of credit.
· SWIFT – Society for Worldwide Interbank Financial Telecommunication – Society for Worldwide Interbank Financial Telecommunications - This is a global service that is responsible for facilitating communication between banks. Most payments are made through SWIFT.
· SGS Inspection – SGS Inspection - Société Générale de Surveillance – the merchandise before leaving the port, an inspection of the sale is carried out by SGS, the company most respected independent inspection agency in the world of commercial transactions.
SGS inspections reassure the buyer that the product is of high quality if it is approved by SGS inspectors.
· Soft Probe – It is a confirmation method used by banks so that a seller can assess the creditworthiness of a buyer. These queries are not registered in the bank, it is nothing more than the confirmation or not of the availability of the buyer.
Mgtr. Juan L. Burgoa, MBA
Master International Business
International Broker
GBS-NET, LLC.
IMPORT- EXPORT
Global Business Solutions
International Business Engineering
GBS-NET, LLC.
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