InternationalTradePractice

Chapter11PerformanceofImportandExportContract11.1PerformanceofExportContractEnsuretheIssuanceofL/CInspectionPreparationofGoodsShipment,Insurance,andCustomsClearanceDocumentsforProceedsSettlementinExportBusinessWrite-off,Rebate,andBusinessRecordsBookEstablishmentofBusinessRelationship(byFairs,Expos,Internetetc..)↓Negotiation(informofCorrespondencesorFacetoFaceTalks)↓ConclusionofInternationalBusinessContract(Inquiry,Offer,CounterOffer,Acceptance)↓UrgingL/C↓IssuanceofL/C↓ExaminationofL/C↓AmendmentofL/C↓PreparationofGoods(production,concludingthedomesticpurchasecontract)↓CharteringorBookingVessel(packinglist,shippingorder)↓CustomsClearance(inspection,makinginsurance)↓Shipment↓ArrangementofShippingDocumentsandSettlementofPayment↓Write-offofForeignExchange,Rebate,andAccountingFigure1OperationProgramofExportbySeaunderL/CPaymentEstablishmentofBusinessRelationship(byFairs,Expos,Internetetc..)↓Negotiation(informofCorrespondencesorFacetoFaceTalks)↓ConclusionofInternationalBusinessContract(Inquiry,Offer,CounterOffer,Acceptance)↓PayingtheDepositbyT/T↓PreparationofGoods(production,concludingthedomesticpurchasecontract)↓CharteringorBookingVessel(packinglist,shippingorder)↓CustomsClearance(inspection,makinginsurance↓Shipment↓SendingB/LbyfaxSendingB/Lbyfax↓PayOfftheBalanceofPaymentbyT/T

SendFullsetsofDocumentstotheBuyerorReleaseGoodsbyTelegraph

TakeGoods↓Write-offofForeignExchange,Rebate,andAccountingFigure2OperationProgramofExportbySeaunderT/TPaymentEnsuretheIssuanceofL/CUrgingL/CExaminationofL/CAmendmentofL/C

ExaminationofL/C1.ExaminetheClassificationofL/C2. ExaminetheCreditApplicantandBeneficiary3. ExaminetheCreditCurrencyandSum4. DescriptionofGoods5. ExaminetheExpiryDateandExpiryPlaceofCredit6. ExaminetheshippingTimeandValidity

ofCredit7. ExaminetheTransshipmentandPartialShipmentClauses8. ExaminethePayment9. ExaminetheShipmentDocumentsforPresentation10.ExaminetheSpecialClausesAmendment

ofL/C

Duringthecreditamendment,thefollowingpointsshallbepaidattention:(1)Incasethatseveralplacesofacreditneedtobeamended,thebeneficiaryshalltrytoinformtheapplicanttomakeamendmentforonceinordertosavetimeandexpense.(2)Forthecontentsamendedinthecredit,thebeneficiaryshallexaminethemcarefullytoo.(3)AccordingtoUCP600,partialacceptanceofanamendmentisnotallowedandwillbedeemedtobenotificationofrejectionoftheamendment.

PreparationofGoodsTheexportershalltakecareofthefollowingitemsduringthepreparation:Qualityandspecificationofgoods.Quantityofgoods.

Preparationtime.Packageshallbeincompliancewiththerequirementofcontractorcredit.InspectionThegeneralinspectionproceduresareasfollows:ApplicationInspectionIssuanceofinspectioncertificateShipment,Insurance,andCustomsClearanceProceduresofEffectingShipment

InsuranceCustomsDeclaration

DocumentsforProceedsSettlementinExportBusinessDocumentsforExportDocumentationandSettlementunderL/CpaymentRemedyfortheDocumentsinDiscrepanciesafterShipmentDocumentsforExport1.BillofExchange;Draft2.CommercialInvoice3.BillofLading;B/L4.InsurancePolicy5.CertificateofOriginC/O6.PackingListandWeightMemo7.InspectionCertificate1.BillofExchange;Draft（1）Thefollowingitemsshallbepaidattentionduringthepreparationofabillofexchange.(2)HowtoFillaBillofExchange（1）Thefollowingitemsshallbepaidattentionduringthepreparationofabillofexchange.Payer:Payee:DrawClause:BillExpiryDate:

Bill

isusuallyissuedinduplicatewiththeequaleffectiveforce,theotheroneisinvalidifoneishonored.BILLOFEXCHANGENo.1For2

3(amountinfigure)(placeanddateofissue)At4sightofthisFIRSTBillofexchange(SECONDbeingunpaid)Payto5oforderthesumof3(amountinwords)valuereceivedfor6of6(quantity)(nameofcommodity)Drawnunder7L/CNo.7dated7To:8Forandonbehalfof

9

(signature)

(2)

HowtoFillaBillofExchange

(2)

HowtoFillaBillofExchange

BillNo.AmountinFigurePlaceandDateofIssuanceHonorExpiryDatePayee:ValueReceivedForDrawnunderTo(Payer,Drawee)ForandonBehalfof(Drawer)

2.CommercialInvoice(1)Definition(2)ThestipulationoncommercialinvoiceinUCP600UCP600(3)FillingaCommercialInvoice

FillingaCommercialInvoiceFUJIANTIANHUIIMPORTANDEXPORTCO.LTD.COMMERCIALINVOICE1)8FloorInternationalBuildingWuxiRoadFuzhouFujianChina.Cable:“TIANHUI”or“3838”Telex:92138SHOECN.Fax:(0591)78102562)TO3）INVOICENO.4)INVOICEDATE5)L/CNO.6)DATE7)ISSUEDBY8)CONTRACTNO.9)DATE10)FROM11)TO12)SHIPPEDBY13)PRICETERM14)MARKS15)DESCRIPTIONOFGOODS16)QTY17)UNITPRICE18)AMOUNTTOTALAMOUNTINWORDS:TOTALGROSSWEIGHT:TOTALNUMBEROFPACKAGE:19)ISSUEDBY20)SIGNATURE1)Seller’saddress(thebeneficiaryofL/C)2)Buyer,alsocalled"title3)InvoiceNumber4)Invoicedate5）、６）、７）writetheconcerningcreditnumber,theissuancedateofL/Candtheissuingbank’snameofL/C.８）、９）contractnumberandcontractdate10)departureport11)destinationport12)nameofthetransportationvehicle13)tradeterm

14)shippingmark

15)descriptionofthegoods-----complyingtothedescriptionofthegoodsintheL/C16)、17)、18)thequantityofcommodities,unitprice,andthetotalamount19)theissuer-----accordingtoUCP600,acommercialinvoicemustappeartohavebeenissuedbythebeneficiary20)Signature-----thesignatureoftheauthorizedsigner

3.BillofLading;B/L(1)IntheArticle20ofUCP600,thestipulationsaboutthebilloflading.(2)IssuanceofaBillofLading1）SHIPPER10)B/LNO.CARRIER:SINOTRANSSINOTRANSFUJIANCOMPANYOCEANBILLOFLADING

2）CONSIGNEE3）NOTIFYPARTY4)PLACEOFRECEIPT5)OCEANVESSEL6)VOYAGENO.7)PORTOFLOADING8)PORTOFDISCHARGE9)PLACEOFDELIVERY11)MARKS12)NOS.&KINDSOFPKGS.13)DESCRIPTIONOFGOODS14)G.W.(kg)15)MEAS(m3)

16）17)TOTALNUMBEROFCONTAINERSORPACHAGES(INWORDS)

FREIGHT&CHARGESREVENUETONSRATEPERPREPAIDCOLLECTPREPAIDATPAYABLEAT21)PLACEANDDATEOFISSUETOTALPREPAID18)NUMBEROFORIGINALB(S)L22)LOADINGONBOARDTHEVESSEL19)DATE20)BYFillingaBillofLading:FillingaBillofLading:1)Shipper----itisusuallythebeneficiaryofL/C,namelythesellerofthecontract.

2)Consignee----ThemostimportantiteminB/L,itdecidestheownerofthecargoandthetransferoftheownership.So,theconsigneeshallbewrittenstrictlycomplyingwiththestipulationoftheL/C.

3)NotificationParty----usuallytheapplicantoftheL/C

4)PlaceofReceipt----theplaceofreceiptforthecarrier

5),6)Writingthevessel’sname,thevoyagenumber

7),8)PortofLoadingandPortofdischarge:theyshallbeassameasthestipulatedinL/C.9)PlaceofDelivery----theplacewheretheshippingcompanyorthecarriermakesdeliveryofthecargo10)B/Lnumber----writtenaccordingtotheD/Rnumberonthereplysheetofthebookingorder.11)ShippingMark----assameasindicatedonthecommercialinvoice.12)NumbersandKindsofPackage----thenumbersofthewholeouterpackages13)DescriptionofGoods----thewholedescriptionorthenameofthegoods14),15)GrossWeightandMeasurementofGoods----inaccordancewiththegrossweightsandmeasurementsindicatedonthepackages.16)theindicationaboutfreightaccordingtothestipulationofL/C,namely,thewords“FreightPrepaid”or“FreighttoCollect”.17)thetotalnumberofthecontainerorpackagesinwords18)thenumberoftheoriginalbillsoflading19),20)theonboardnotationandthesignature----abillofladingmustbeindicatedwith“shippedonboard”notation.AccordingtoUCP600,thedatestatedintheonboardnotationwillbedeemedtobethedateofshipment.21)PlaceandDateofIssue----theissuancedateoftheB/Lwiththeonboardnotationisdeemedastheshippingtimeunlessthedateofshipmentisindicatedonthenotationofonboard.22)SignatureofB/L

23)EndorsementofB/L

4.InsurancePolicyInsurancepolicyisawrittendocumentcertifyingthatacontractisconcludedbetweentheinsurer(namelyinsurancecompany)andtheinsured(theinsurant,usuallytheimporterortheexporter).Aninsurancepolicyisadocumentservingasevidenceuponwhichtheinsuredmaylodgeaclaimagainsttheinsurerintheeventthattheinsuredcargosuffersthedamageorlosswithintheinsurancecoverage.UnderthecontractwithtradetermCIForCIP,itisoneoftheexportersobligationtodelivertheinsurancepolicycomplyingtothestipulationoftherelativeL/Cwhentheexportermakesnegotiationwiththeconcerningbankortheimporter.5.CertificateofOriginC/OTypesofCertificateofOriginCertificateofOriginofTheRepublicofChinaisalegaldocumentGeneralizedSystemofPreferencesGSP1.Goodsconsignedfrom(Exporter’sbusinessname,address,country)FUJIANZHONGYIIMPORT&EXPORTCO.,LTDF．18FUXIANGBUILDINGNO.119WUSIFUZHOUFUJIANP.R.CHINAReferenceNo:GENERALIZEDSYSTEMOFPREFERENCESCERTIFICATEOFORIGIN(Combineddeclarationandcertificate)FORMAIssuedinTHEPEOPLE’SREPUBLICOFCHINA(country)SeeNotes,overleaf2.Goodsconsignedto(Consignee’sname,address,country)STURMHANDELSGMBHD-72108ROTTENBURG.GARTENSTR.88GERMANY3.Meansoftransportandroute(asfarasknown)FROMFUZHOUTOHUMBURGBYSEA4.Forofficialuse5.ItemNumber016.MarksandnumbersofpackagesSTURMZY02TB08019HAMBURGC/No.1-5507.Nunberandkindofpackages;descriptionofgoods550CTNS（SAYFIVEHUNDREDANDFIFTYCARTONS）3ITEMSOFRUCKSACK（CANVAS&NYLONBAGS）*********8.Origncriterion(seeNotesoverleaf)“P”9.Grossweightorotherquantity14740.00KGS10.NumberanddateofinvoicesINVOICENO.：ZY07540INVOICEDATE.：JULY.20.200811.CertificationItisherebycertified,onthebasisofcontrolcarriedout,thatthedeclarationbytheexporteriscorrect.中華人民共和國福建出入境檢驗(yàn)檢疫局（蓋章）

曾建雄FUZHOU.5-AUG-2008Placeanddate,signatureandstampofcertifyingauthority12.DeclarationbytheexporterTheundersignedherebydeclaresthattheabovedetailsandstatementsarecorrect;thatallthegoodswereproducedinCHINA(country)andthattheycomplywiththeoriginrequirementsspecifiedforthosegoodsintheGeneralizedSystemofPreferencesforgoodsexportedtoGERMANY(importingcountry)FUJIANZHONGYIIMPORT&EXPORTCO.,LTD陳天成

FUZHOU,5-AUG-2008Placeanddate,signatureofauthorizedsignatory,ORIGINAL6.PackingListandWeightMemoApackinglistismadetoindicatethedetailsaboutthepackageofexportedcommodities;whileaweightlistismadetolistthegrossweightandnetweightofeachindividualcommodity.7.

InspectionCertificateAllkindsofinspectioncertificateareusedtocertifythenature,quantity,weightandsanitarysituationofthegoodsrespectively.InChina,inspectioncertificateisusuallyissuedbytheEntry-ExitInspectionandQuarantineofthePeoplesRepublicofChina.Thecertificatealsomaybeissuedbytheexporterormanufacturerdependingonthespecificsituationifthereisnospecificstipulationintheconcerningcontractorcredit.DocumentationandSettlementunderL/Cpayment

1.NegotiationunderL/CwithShipmentDocuments2.SettlementafterthePaymentfromtheReimbursingbank3.SettlementonaFixDateRemedyfortheDocumentsinDiscrepanciesafterShipment1.CoveringSuggestion2.TelegraphSuggestion3.CollectionwithDocumentsWrite-off,Rebate,andBusinessRecordsBookForeignExchangeWrite-offforExportProceedsValueAddedTaxRebatesforExportBusinessRecordsBookForeignExchangeWrite-offforExportProceedsValueAddedTaxRebatesforExportInordertoindicatecost,proceedsandpayment,thebusinesstransactionswiththerelatingenterpriseshomeandabroad,theinternationaltradeenterprisessometimeswillrequiretheirbusinessoperatorstomakerecordsforallbusinesseswhichtheyareoperating.Thebusinessrecordsisusuallydesignedbythemselves,recordingallthebusinessdetailswithinafinancialyearincludingoperationprocess,concerningdates,costandpayment,charges,billstransferredandtheconcerningreceiptandsignaturesandsoon.

11.2PerformanceofImportContractIssuanceofL/CCargoDeliveryEffectCargoInsuranceDocumentsExaminationandPaymentCustomsClearanceandDutyInspectionImportClaimforCompensationIssuanceofL/C

ThegeneralproceduresofopeningL/Careasfollows:1.FillingintheformofApplicationforLetterofCreditandopentheL/Cthroughthebank2.PayingdepositandcreditopeningchargesCargoDeliveryUnderthecontractofFOB,theimporterisresponsibleforthedeliveryofcargointhenominatedportoftheexporter.TheexportershallinformtheimporteroftheshipmentdateafterreceivingL/C.Then,onreceiptoftheaboveadvice,theimportershallcontacttheforwardertoarrangeforcharterorbookingvessel.Followingit,theimportershallinformtheexporterofthevesselname,shipmentshippingdatewithinthespecifiedtimesothatthecounterpartmayarrangeforthecargoforshipment.EffectCargoInsuranceInsuranceforeachshipmentOpencoverDocumentsExaminationandPaymentAfterreceivingthedraftandtheshipmentdocuments,thepaymentbank(usuallytheissuingbank)willcheckandexaminetheminaccordancewiththeclausesofcredit.CustomsClearanceandDutyFillinginImportCustomsDeclarationFormCustomsExaminationCustomsDutyPaymentCustomsReleaseInspectionCheckandAcceptofGoodsDeliveryImportClaimforCompensationAgainstWhomtheClaimisMadeClaimingEvidencesClaimingExpiryTimeAgainstWhomtheClaimisMade

ClaimingagainstthesellerClaimingagainstcarrierClaimingagainstinsurerCasestudy

Case1Case2Case3Case4Case1:

Oneofourtradecompaniesestablishesanexportcontractofgarmentwithaforeignbusinessman.ThecontractstipulatesthatthepaymentshouldbemadeagainsttheirrevocableL/Cpayablebysightdraft.ThebuyerissuestheL/Ctotheadvisingbankwithinthecontractualstipulatedissuingtime.TheL/Chasbeentransferredtousthroughtheadvisingbank.AfterweaudittheL/C,wefindthatthestipulationsoftheshippingdateandtheprohibitedtransshipmentontheL/Carenotinaccordancewiththoseonthecontract.InordertosavethetimeandamendtheL/Cforshipment,wecabletheissuingbanktoamendtheL/Cwithoutdelay.WerequiretheissuingbanktosendustheamendmentnoticedirectlyaftertheyamendtheL/C.Question:(1)Whatistheconsequenceofouraction?(2)WhatisthecorrectchanneloftheamendmentoftheL/C？Case2:

OneofourtradecompaniesestablishesanexportcontractofChristiangiftswithaforeignbusinessman.ThecontractstipulatesthatthedeliveryshallbeontheCIFbasisandthedateofdeliveryisonorbeforeDec.1,2001.Howeverthebuyerdoesn‘tstipulatetheissuingdateoftheL/Cinthecontract.ThebuyerbeginstourgefortheestablishmentoftheL/CatthebeginningofNovember.Afterseveralurgesforestablishment,theL/CwhichisopenedbythebuyerreachesusonNov.25.WecompletetheshipmentonDec.5forthelateL/C.Whenweofferthedocumentstothebank,thebankdishonorstousforthediscrepanciesoftheL/C.Question(1)Whetherthebanksdishonorisreasonable?Why?(2)Whatareourmistakesinthiscase?

Case3:

OneofourforeigntradecompaniesexportsaparcelofMotoronthebasisoftheirrevocableL/Cavailableatsight.TheshipmentstipulatedinthecontractisinSeptember2006.Afterwesignthecontract,theotherpartyestablishestheL/Contime,andweshipthegoodstimelyaccordingtotherequirementsintheL/C.HoweverWhenwemakedocumentsthemakingmemberwritesthenameofcommodityinthecontractasMACHINERYANDMILLWORKS，MOTORSwhichisinaccordancewiththatintheL/C.ButthegeneralnameofcommodityshouldbeMOTORSintheB/l.Question:Whetherthepayingbankcandishonorthemoneyfortheabovereason.Why?Case4:

OneofourforeigntradecompaniesreceivesasightdocumentaryL/Cfromaforeignbuyerthroughtheissuingbank.TheL/CstipulatesthattheshipmentcannotbeeffectedlaterthanMarch15,2001.Howeverwecannoteffectshipmentdulyfortheshortageofshippingspace.WecabletothebuyertoextendtheshipmenttoApril15onMarch5.ThevalidityoftheL/Cisextendedatthesametime.WereceivethebuyercablethattheyagreetoacceptthecableofMarch5,theshipmentischangedtobenotlaterthanApril15.ThevalidityoftheL/Cisextendedforonemonth.Wearrangeforshipmentimmediatelyonreceiptoftheircable.WecompleteourshipmentonApril12andpreparethefullsetofdocumentstonegotiatewiththebank.Butthebankrefusestocollectthedocument.Question:Whatisthereasonforthebanktocollectthedocuments?Why?Reflectionquestions:1.WhenweaudittheforeignopenedL/C,whatshallwepayattentionto?AccordingtotheInternationalpractice,howshallwetreatandprocesstheamendmentnoticeoftheissuingbanksL/C?2.WhatistheNegotiationunderL/CwithShipmentDocuments?WhatarethedifferencesbetweentheNegotiationunderL/CwithShipmentDocumentsandtheSettlementafterthePaymentfromtheReimbursingbank?3.WhatistheTelegraphSuggestion?WhatisthesecurityfortheTelegraphSuggestiontotheexporter?4.WhataretheattentionitemsforustoamendtheL/C?5.Whatarethemethodstoprocessthediscrepancy?6.WhatarethemethodsfortheExportdocumentsforpayment?

1.1TradeTermsandCustoms

DefinitionsandfunctionsofinternationaltradetermsDefinitionFunctionInternationaltradecustomsDefinitionNatureThreemaininternationalrulesontradeterms

1.2FOB,CFRandCIF

Amongthe11tradeterms,FOB,CFRandCIFarethemostcommonlyusedterms.Nowadays,theyareusedastradetermsforsymbolicdelivery.Symbolicdeliverycreate