1
Universidad Simón Bolívar
Sección de Lenguas con Fines Específicos
ID1124
English for International
Trade 2
Content researched and adapted by:
Prof. Marina Meza, Carlos Mayora and Rubena St. Louis
This edition, September, 2010
2
Contents
Course Objectives 01
Unit 1: E-commerce
1. What is e-commerce 02
2. The history of e-commerce 09
3. Consumer to business and business to consumer 12
Unit 2: Purchases and sales
1. Export traders 16
2. Documents in International Trade 19
3. The contract 21
4. Purchase and sales documents 26
5. Other important documents 34
Unit 3: International Transportation
1. Containers 37
2. Documents in International Transport 44
2.1 Bill of Lading 45
2.2 Airway bills 50
2.3 Road waybills and rail waybills 52
Appendix
Example of sample documents 53
Resource site
ID1124 English for International Trade II: http://englishid1124.pbworks.com/
3
Objetivo General Desarrollar en el estudiante destrezas orales y escritas que le permitan desempeñarse exitosamente en diversos contextos y situaciones laborales usando el contenido y la terminología propia de comercio internacional a un nivel intermedio. Objetivos específicos: Producción oral: Al finalizar este curso, el estudiante será capaz de:
Describir los procesos de compras y ventas internacionales.
Explicar las funciones de los documentos más frecuentemente utilizados en transacciones comerciales internacionales.
Discutir las ventajas y desventajas de los distintos medios de transporte utilizados en comercio internacional.
Discutir las ventajas y desventajas del comercio electrónico.
Realizar simulaciones de situaciones que surgen en el ámbito de comercio internacional. Comprensión auditiva: Al finalizar este curso, el estudiante será capaz de:
Identificar las ideas principales en discurso oral interactivo (conversaciones cortas, entrevistas, etc.).
Identificar las ideas principales en discurso oral expositivo (charlas, monólogos, etc.)
Identificar las ideas secundarias y detalles en discurso oral interactivo (conversaciones cortas, entrevistas, etc.)
Identificar las ideas secundarias y detalles en discurso oral expositivo (charlas, monólogos, etc.) Comprensión de lectura: Al finalizar este curso, el estudiante será capaz de:
Entender los términos específicos al área de especialización cuando aparecen en un texto.
Extraer información específica de textos relacionados con los temas de compras y ventas internacionales, comercio electrónico y transporte internacional como base para participar en discusiones y simulaciones sobre los mismos.
Evaluar la información extraída de textos relacionados con los temas de compras y ventas internacionales, comercio electrónico y transporte internacional como base para participar en discusiones y simulaciones sobre los mismos.
Producción escrita: Al finalizar este curso, el estudiante será capaz de:
Resumir información extraída de textos relacionados con los temas de compras y ventas internacionales, comercio electrónico y transporte internacional.
Escribir un texto expositivo que verse sobre el impacto o influencia de alguno de los temas estudiados.
Llenar los formularios en forma digital de compras – ventas internacionales.
Llenar los formularios en forma digital de la documentación para el transporte internacional.
Redactar un informe sobre una transacción comercial internacional basada en la documentación requerida.
Conocimiento de léxico: Al finalizar este curso, el estudiante será capaz de:
Identificar los términos específicos utilizados en la documentación de compras y ventas internacionales.
Utilizar los términos específicos utilizados en la documentación de compras y ventas internacionales en textos escritos y orales.
Definir los términos específicos utilizados en la documentación inherente en el transporte internacional.
Utilizar los términos específicos utilizados en la documentación inherente en el transporte internacional en textos escritos y orales.
4
Getting started
Discuss the questions below with your group and then do the exercise
which follows them.
1. What are the different types of trade discussed so far?
2. Who are the different people involved in this trade?
3. What role would they play in the process?
Vocabulary
Look at the terms below. Using what you have learnt about definitions, can you write
one for each term? Write the definitions for the following terms in your own words.
Then check your answers as you read the text. Do not use the text to find the
definitions.
Term Definition
1 Export trading company ______________________________________________ ______________________________________________
2 Export management company
______________________________________________
3 Distributor
______________________________________________ ______________________________________________
4 Retailer
______________________________________________ ______________________________________________
5 Import export agent
______________________________________________ ______________________________________________
6 Sales representative
______________________________________________
Export traders
Trade has existed ever since
Man recognized the need to
look for and obtain resources
to fulfill his needs. From early
man trading skins and salt with
neighboring tribes to Marco
5
Polo bringing silks, spices and technology from the Far East to the Western world, to
modern conglomerates trading millions of dollars on the stock exchange, trade has
been an essential part of our lives. Countries engage in trade for many reasons.
These include product availability, competitive prices and product image. But for the
goods to reach the customer, they must go through the import/export process and
pass through the hands of different players along the way.
The word import comes from the Medieval Latin importare which means to
bring in which, in essence, is done when goods are brought in from a foreign country,
while export is the process by which goods are shipped from one country to another.
There are two main methods of export: direct and indirect exporting. In direct
exporting, the manufacturer, assembler or processor of an exported good is in charge
of the entire marketing and distribution of the product and sells directly to
companies, known as direct merchants, in the foreign market. The direct merchant
then sells these goods on their domestic market. These merchants usually offer
complementary services such as maintenance, spare parts and technical support to
their customers.
However, a cheaper and less risky export route is through indirect export
where the manufacturer hires a local agent to find and deliver its goods to buyers
abroad. An example of indirect exporting is through an Export management company
(EMC) which handles trade for a domestic company which wants to sell its product
abroad. The EMC hires the dealers, distributors and representatives, manages the
advertising, marketing and promoting of the product, oversees marking and
packaging, and arranges the shipping. An Export management company can specialize
in one type of product, foreign market or both and is usually paid by commission,
salary or a retainer plus commission.
Another type of indirect trading agent is the Export trading company (ETC)
which looks for potential buyers by identifying the needs of the foreign market and
then supplying domestic sources willing to fill this need. It can either take title to
the goods or work on a commission basis. An Import/Export company, on the other
hand, purchases goods directly from a domestic or international client and then
packs, ships and resells these goods.
6
There are also a number of intermediary players. For example, an import
export agent is one who rarely invests capital in inventory or deals in the
merchandise, products or services directly. Instead, this agent acts as an intermediary
between manufacturers and distributors in one country and buyers in another, finding
the appropriate market for the goods, making a solid connection and solidifying a
business relationship between both parties. They are paid a commission which is
usually 10% of the transaction. Manufacturers may also decide to have their own
representative who is an expert in their particular industry and can give technical
support. This specialization may differentiate them from the sales representative
who simply promotes the product and then passes the sale to the seller. A
distributor buys the imported product and then sells it to another for further
distribution to the buying public. Finally, there is the retailer who then sells the
merchandise to the customer.
There are many different kinds of agents involved in the import and export
trade and the best type would depend on the needs, and capabilities of the
manufacturer who whishes to place his product on an international market. From
export management companies to individual sales representatives, there is a group of
qualified individuals able to help in this process.
Reference
http://www.entrepreneur.com/startingabusiness/businessideas/startupkits/article41846.html
Checking your understanding of the text
1. Form three groups. Each group has to do the following:
1. Write six (6) questions based on the text. Remember to check the
grammatical structure of your question.
2. Give your questions to members of the 2nd group for them to answer.
3. Give the answers to members of the 3rd group for them to be corrected.
4. Discuss the answers with the entire class.
7
Scenarios:
With your classmates, discuss the following scenarios and propose a solution. Hand in
your solution to your teacher at the end of the session.
La Bella Dama, C.A., imports a large quantity of beauty care products for
women. However, they have no outlets in any of the major cities. What kind of
trade, on a national level, should they engage in? How should they get their
products sold?
Rodriguez e Hijos would like to export their product “Sabor de los Andes” to
Central America and the Caribbean. But they have no business contacts in these
regions. What would be the best type of export for them to engage in? How
should they get their products sold?
Your company needs to hire different types of traders for your Export division. Based
on the information in the text, write the profile for two (2) traders. Consider what
special characteristics each should have for their job. Why are these characteristics
important?
1. import/export agent
2. sales representative
3. manufacturer’s representative
8
Getting started
Let’s now look at a type of commerce that affects almost
everyone in the world. Take a few minutes to think about the
following:
What do you understand by “Electronic commerce”?
What inventions were necessary for E-commerce to
emerge?
How has electronic commerce changed the way in which
we trade?
What aspects of E-commerce would be of concern to customers and businesses?
Discuss these questions with your class. Write your ideas in the space below.
E-commerce
“...E-commerce is the most recent step in the evolution of business transactions.” Derek Slater
The availability of Internet has led to the development of E-commerce which is
becoming very popular these days. Most people think that E-Commerce is just
purchasing something on the Internet but this is a misconception. E-commerce has
been a part of global economic growth in one way or another. Even though e-
commerce has been around for years, it is a very broad term to define.
The term "electronic commerce" has evolved from its inadequate notion of
electronic shopping to mean all aspects of business and market processes enabled by
the Internet and the World Wide Web technologies.
What is E-Commerce?
Electronic Commerce (e-Commerce) is a general concept covering
any form of business transaction or information exchange executed
using information and communication technologies (ICTs). E-
Commerce takes place between companies, between companies and
their customers, or between companies and public administrations.
Electronic Commerce includes electronic trading of goods, services and electronic
material.
9
The best definitions view EC as a strategy to support the total delivery of
products and services to the customer, rather than just another set of tools and
technologies. EC offers fundamentally new ways of doing business, rather than mere
extensions of existing practices. It is, in the end, the strategic deployment of
computer-mediated business tools and information technologies to satisfy business
objectives.
Laudon and Laudon, authors of Essentials of Management Information Systems
define E-commerce as “…The process of buying and selling goods and services
electronically involving transactions using the Internet, networks, and other digital
technologies...” Electronic commerce is a means of enabling and supporting such
changes on a global scale. It enables companies to be more efficient and flexible in
their internal operations, to work more closely with their suppliers, and to be more
responsive to the needs and expectations of their customers. It allows companies to
select the best suppliers regardless of their geographical location and to sell to a
global market. It is the fastest growing segment of our economy. It allows even the
smallest business to reach a global audience with its product or message with minimal
cost. It includes commercial transactions on the Internet but their scope is much
wider than this. E-commerce also requires an extensive and reliable technology
infrastructure. The technology includes the hardware, software and related
technology underlying the business. So the performance of the technological
infrastructure can make or break an online business.
The scope of ecommerce
"...Ecommerce services are the silver bullet that will enable companies to take
advantage of the true business opportunities on the Web..."
Traci Gere, Analyst, The New York Times
Electronic Commerce (e-Commerce) is a term popularized by the advent of
commercial services on the Internet. Internet e- Commerce is however, only one part
of the overall sphere of e-Commerce. The commercial use of the Internet is perhaps
typified by once-off sales to consumers. Other types of transactions use other
technologies. Electronic Markets (EMs) are in use in a number of trade segments with
10
an emphasis on search facilities and Electronic Data Interchange (EDI) is used for
regular and standardized transactions between organizations.
An electronic market is the use of information and communications technology to
present a range of offerings available in a market segment so that the purchaser can
compare the prices (and other attributes) of the offerings and make a purchase
decision. The usual example of an electronic market is an airline booking system. An
Electronic Data Interchange (EDI) on the other hand, provides a standardized system
for coding trade transactions so that they can be communicated directly from one
computer system to another without the need for printed orders and invoices and the
delays and errors implicit in paper handling. EDI is used by organizations that make a
large number of regular transactions. One sector where EDI is extensively used is the
large supermarket chains, which use EDI for transactions with their suppliers.
Seller Purchase order Customer
Payments
Shipping notices
Invoices
Basic transactions in EDI
Internet Commerce
Information and communications technologies can also be used to advertise and
make once-off sales of a wide range of goods and services. This type of e-Commerce
is typified by the commercial use of the Internet.
Computer
Computer
11
The three application types of E Commerce
The Internet can, for example, be used for the purchase of books that are then
delivered by post or the booking of tickets that can be picked up by the clients when
they arrive at the event. It is to be noted that the Internet is not the only technology
used for this type of service and this is not the only use of the Internet in e-
Commerce.
Categories of E-commerce
Electronic commerce can be sub-divided into four distinct categories as shown
in the figure:
business-business
business-consumer
business-administration
consumer-administration
Categories of electronic commerce
The business-business category would be a company that uses a network for
ordering from its suppliers, receiving invoices and making payments. This category of
electronic commerce has been well established for several years, particularly using
Electronic Data Interchange (EDI) over private or value-added networks.
The business-consumer category largely equates to electronic retailing. This
category has expanded greatly with the advent of the World Wide Web. There are
12
now shopping malls all over the Internet offering all manner of consumer goods, from
cakes and wine to computers and motor cars.
The business-administration category covers all transactions between
companies and government organisations. For example, in any developed country
details of forthcoming government procurements are publicised over the Internet and
companies can respond electronically. However, in the wake of a growth of both the
business-consumer and business-administration categories, governments may extend
electronic interaction to such areas as welfare payments and self-assessed tax
returns.
Advantages and disadvantages of E-commerce
There are a number of advantages for both the consumers or customers and
businesses of E-commerce.
Consumer Benefits Business Benefits
Easier cost due to comparative shopping Access to a larger market place
Change in traditional store hours Reduced overhead costs
Instant access to a greater number of
stores
Consumer disadvantages Business disadvantages
Increased risk of fraud Not all consumers are online
Increased costs due to shipping and
handling
Increased market barriers
Cannot see/touch the merchandise
before buying
Truly rely on “word of mouth” to get
business name/site out.
Hard to return unwanted merchandise
So, considering all the publicity with e-commerce why should any business
participate? The answer is simply the future. As technology and consumer wants and
needs continue to progress businesses will have to do business via the Internet if they
want to remain in business.
13
Checking your understanding of the text.
Work in small groups to do the following: 1. Write your own definition of E-commerce. Give examples to support
your definition.
2. What are the major categories of e-commerce? Give local examples of
each.
3. Make a list of the acronyms (letter of the first word of the term) found
in the text. Write the word out in full and then write an example of
each.
Write the acronym for the following terms. The first one is done for you. 1. Business-to-Consumer B2C
2. Business-to-Business _______
3. Consumer-to-Consumer _______
4. Consumer-to-Business _______
Scenario
With your classmates, discuss the following scenario and propose a solution. Hand in
your solution to your teacher at the end of the session.
One of your friends has the option to either set up an online business or rent
space and trade in the traditional way. What advice can you give? Explain some of
the advantages and disadvantages for businesses that want to go online. Present your
work as a dialogue.
Brainstorm ideas (what information would you need)
Think about the vocabulary and grammar you would need to use.
Write out the draft of the dialogue.
14
Getting started
The people in the photos below have made a great contribution to ecommerce as we know it today.
Do you recognise any of them?
Do you know what their contribution has been?
Hint: One of them began the largest online shopping empire today.
Jeff Bezos
Tim Berners-Lee Marc Andreessen Find out as we read....
...A short introduction to the history of e-commerce Not that long ago if you wanted to buy something then you would have to go to
the local shops. If they didn't have what you wanted then
you would either have to do without or buy a substitute.
With the development of the Internet a phenomenon known
as 'electronic commerce' or 'ecommerce' for short, has been
growing to such an extent that it is starting to become the
way to shop for many people. But how did this begin?
E-commerce, or electronic commerce, consists of the
buying and selling of services or products over electronic means like the internet.
Originally, electronic commerce referred to electronic commercial transactions such
as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). Electronic
Data Interchange was first introduced in the 1960s and was a set of rules that helped
large businesses transfer documents or business data from one computer system to
another without the intervention of humans. However, businesses could use different
15
EDI formats and so it was often difficult for one organization to interact with another.
This problem was solved in 1984 when the American National Standards Institute
(ANSI) created ASCX12, a standardized protocol for computer transactions. Electronic
Data Interchange also helped Electronic Funds Transfer (EFT) where money is
exchanged or transferred from one account to another through computer based
systems. This also led to other electronic money transactions such as the use of
automatic teller machines (ATM), credit cards and telephone banking.
E-commerce and the internet
But the story of e-commerce is intrinsically linked to that of the internet. By
the late 1960s, the military had developed ARPAnet to ensure communications in the
event of a nuclear attack. This system was linked to four large U.S. research
universities and relied on large computers. In 1971, researchers developed the
Terminal Interface Processor (TIP) for connecting to the ARPAnet from an individual
computer and in 1982 ARPAnet switched to Transmission control Protocol and Internet
Protocol (TCP/IP) which powers today’s modern internet. In spite of this, internet
use, the sending of emails and participating in listservs and newsgroups, was still
mainly in the hands of academics. This was soon to change when in 1990, Tim
Berners-Lee proposed the first web browser program and the previous academic
telecommunication network was now at the disposal of the world through the World
Wide Web. Companies soon began providing networking services to the public. One
such company, CompuServe, was the first to provide internet connectivity through its
e-mail, message boards and chatrooms. In the mid 1980s, it had introduced a new
service called the Electronic Mall where users could purchase items from 110 online
merchants. This, however, had not been a success at the time.
In 1993, Marc Andreesen at the National Center for Supercomputing
Applications (NCSA) introduced the first widely distributed web browser, Mosaic which
enabled users to have a point-and-click access to the web. The following year, Mosaic
was transformed into the downloadable Netscape browser which included an
important security protocol called Secure Socket Layer (SSL). This encrypted
messages on both the sending and the receiving side of an online transaction thereby
ensuring that personal information could be secure. Within two years, third party
16
services for processing online credit card sales had appeared, with First Virtual and
CyberCash being two of the most popular. In 1995, Verisign began developing digital
IDs which verified the identity of online businesses. The company later switched its
focus to certifying that the web site’s servers were properly encrypted and secure.
Finally, the development of a high-speed Aysmmetrical Digital Subscriber Line (ADSL)
in 1998 allowed users of the web to access internet speeds at higher bandwidths and
to be always connected.
The start of e-commerce as we know it
In 1991, the National Science Foundation lifted a ban previously placed on
commercial businesses operating over the Internet thereby opening the doors to
electronic commerce. Four years later, two important companies came onto the
scene. In July, 1995 Jeff Bezos made his first sale on Amazon.com from his garage in
Seattle, Washington. Within 30 days, books had been sold in all 50 U.S states and in
45 countries around the globe. Amazon set the standard for customer oriented e-
commerce as potential buyers could search for, and browse books by keyword, author
or subject and get personalized recommendations. Amazon’s patented “one-click”
checkout system ensured a quick and secure purchase. Amazon products now include
electronics, home and garden equipment, music, DVDs, video games, digital
downloads, clothing and jewelry on seven different international websites.
Around the same time, Pierre Omidyar, a software programmer, introduced a
simple website called AuctionWeb. Omidyar wanted to know if people would be
willing to bid on each other’s used items and so he posted a broken laser pointer for
sale on line. Within a day it had been sold for $14.83. Omidyar put online buying and
selling in the hands of the public and in 2008, eBay, its official name as of September,
1997, had expanded worldwide and had more than 7.7 billion dollars in revenues.
E-commerce has changed the way in which people shop, putting at their
disposal a wide variety of goods and products at competitive prices and allowing
retailers to know about customer needs. None of this would have been possible
without the technological advancements begun in the last century.
17
Checking your understanding of the text
Do the following activities in pairs.
1. Choose two (2) of the following and explain their role in the
development of e-commerce:
a. Electronic Data Interchange
b. Netscape browser
c. Secure socket layer (SSL)
d. ADSL
2. Why do you think that the Electronic Mall from CompuServe was not successful
when it was first introduced in the 1980s? What changes do you think would
have been needed to make it successful?
3. In what way was Pierre Omidyar’s initiative important to e-commerce?
4. Make a list of the acronyms (letter of the first word of the term) found in the
text. Write the word out in full and then write an example of each, where
possible.
Getting started
Shopping online for the first time? Discuss with your classmates what you, as a customer, would need to have to engage in online shopping. An online shopper? Discuss with your classmates any problems you or anyone you know, have experienced when purchasing an item online. Share your ideas with the class.
Before reading the text. Review the different types of ecommerce by writing the acronym which corresponds
to the definition. Read each definition clearly and then determine the type of
ecommerce it describes. Then write the corresponding acronym next to it. One has
been done for you.
18
Acronym Definition
_______ Business transactions that are carried out between
consumers.
B2C Business that sells its products or services directly to the
consumer.
_______ Consumers who present themselves as a buyer group.
_______ Business that sells its products or services directly to
another business.
Think of an example of each type of ecommerce. Write them in the space below.
1. ____________________________________________________________________
2. ____________________________________________________________________
3. ____________________________________________________________________
4. ____________________________________________________________________
Check your answers as you read the following text.
E-commerce: Consumer to Business – Business to Consumer.
Since the creation of the first World Wide Web server and browser by Tim
Berners-Lee in 1990, ecommerce has grown and expanded throughout the world.
From the first online Pizza hut in 1991 to Amazon, many people have, at one time or
another, engaged in ecommerce either as a customer or an entrepreneur. People can
engage in many different types of ecommerce. In Business to business, companies
sell products to each other, as in the case of a wholesaler selling to a retailer. In
Business to consumer, on the other hand, the public can purchase articles placing
them in virtual shopping carts and without human interaction. In Consumer to
consumer, people can place their items online for sale to others while in consumer to
business, a client places his needs on the internet and companies vie to obtain the
contract for fulfilling them.
19
There are certain processes that
both customers and entrepreneurs go
through when engaging in ecommerce. In
order to engage in online commerce,
customers must first have access to the
Internet either through a computer or
mobile device. They must then select the
site they wish to visit and the item they
wish to purchase. Once the decision has
been made, the item is placed in a
shopping cart, or basket, which keeps a
record of all the items the customer wishes
to purchase. The customer can continue
shopping or proceed to the Check out for
payment. First visitors to the site are
required to create an account, filling in a
form with personal data and then choose a
user name and password. Subsequent visits to the site will require this information.
Once the customer has arrived at checkout and the order is confirmed payment
details are required. Once payment has been confirmed via email, the order is then
processed and shipped to the customer.
If, on the other hand, an online business is to be set up, there are several
things which must be taken into consideration. One of the most important is the
setting up of the website, the domain, through which the product will be known and
the client can do business with the seller. Part of this process includes the selection
of a server, whether Linux or Windows based, which will ensure that service is always
available, and most importantly, security. Creating an attractive website,
professionally designed with an authentic look is more likely to attract online clients
is the next step. Information to be displayed may include a detailed description of the
product, type and quantity, prices, discounts, legal information, customer service
information and means of payment. For purchasing to be done, specially designed
20
software, is needed which will allow the transaction to be carried out. When the
customer reaches the checkout, the software will calculate the total order including
taxes, freight and offer the customer different payment options.
Security and customer privacy are essential for online commerce and so special
software that records the orders the client has placed, the processing of the order
and the cash transaction mechanisms is used. Security protocols and digital
signatures are encryption techniques used to ensure that the client’s personal
information is safe from hackers and virus attacks. The Secure Socket Layer (SLL)
allows websites to have a locked padlock which tells customers that the site is secure.
However, before financial transactions can be undertaken on the web, a
merchant account must be obtained. This is a bank account which will accept the
customer’s online payments. This is done through a payment gateway, an online
processor that connects the credit card to the bank’s account verifying information,
transferring requests and authorizing the credit cards in real time. Providers like
Verisign provide this service. Finally, advertisement is important in promoting the
new business. New websites should be registered with search engine companies such
as Google, Yahoo and Bing.
For those who wish to purchase or engage in ecommerce as an entrepreneur
these are a few of the basic procedures to be carried out. Security, whether it be
financial information or personal data is essential to ecommerce and care should be
taken to ensure that both those who buy and sell are able to do so confidently.
Checking your understanding of the text. Go back through the text and highlight the information regarding:
Security protocol
Merchant account
Domain
Payment gateway
Now, explain these terms in your own words. Use this information to answer the
following question:
21
“What are the most important aspects to take into consideration when starting an
online business? Why are these important?
With your classmates discuss the following scenarios and suggest a solution. Choose
one (1) of the scenarios and hand in the activity at the end of this session.
Scenario: Your grandparents would like to make an online purchase but they have
never done so before. They have found three websites: Ebay, Amazon and Mercado
Libre. Help them to decide on the best site to use. Then explain, step by step, the
process to complete their purchase.
Scenario 2: One of your friends is interested in setting up an online business. He
comes to you for advice. Explain what steps are necessary.
Read and discuss the scenario
Decide on the information you need to have to complete the task. (Find the
necessary vocabulary and grammar).
Present your scenario as a dialogue either between you and your grandparents
or you and your friend.
22
Discussion:
1. In small groups make a list of the documents you believe would be needed to engage in
a. Domestic trade
b. International trade
c. Both domestic and international trade
Why would these documents be necessary? Share your list and reasons with the class.
Documents needed in International Trade
Those who work in International trade know that a number of different documents,
commercial, administrative, insurance and transport, are required for foreign transactions to be
undertaken. These different transactions imply the need for different contracts and it is
precisely this which differentiates international from local trade. Although the documents may
depend on the type of transaction and may vary from one country to another, a few are
essential for trade and include commercial invoices, packing lists, insurance and shipping
documents.
Documentation is needed for several reasons. First and foremost, they are proof of
contract, that is, the sale and conditions under which the goods have been acquired. Secondly,
they give title to the goods or the right to collect them from the carrier. Documents also give
information on the goods themselves, the contents and the purchase price and they are also
needed for customs in order for the relevant taxes and duties to be applied. Finally, documents
are also proof of compliance that the conditions laid out in the contract have been fulfilled.
Documents used in International trade fall into several categories and, as seen below,
often overlap.
1. Transaction documents are those which show proof that a business transaction has
taken place. These documents are kept for accounting purposes and are also needed
for banking transactions and payment procedures. A key example is the commercial
invoice.
2. Export documents vary from country to country and are those required by customs.
These include licenses, export declarations, inspection certificates, permits and
commercial invoices.
23
3. Transport documents are issued by a shipping line, air cargo carrier or land transport
provider and detail the terms of transport of the cargo. The most important transport
document is the Bill of Lading.
4. Inspection documents are usually issued by a third party and certify the quantity and
quality of the shipment. This is often done at the request of the buyer.
5. Insurance documents are required to show that the shipment is insured and is often in
the form of a policy or a certificate.
6. Banking and payment documents include letters of credit, various advices and all other
documents used in trade.
7. Import documents are required by customs and may vary from country to country. An
entry form and a commercial invoice is the minimum required. Certificate of origin,
consular invoices and Blacklist certificates may also be required.
These are few of the categories of documents needed in trading internationally.
Additional documents may be required depending on the type of merchandise to be imported or
special requirements dictated by the countries involved in trade. The following units of this
guide will look in more detail at these documents.
Reference
Hinkelman, E.G. 2005 Dictionary of International Trade, 6th Edition, California, USA, World Trade Press
After reading:
1. Find the following pronouns in the text and say what each one refers to:
1. this Paragraph 1, line 4 ______________________________
2. a few Paragraph 1, line 5 ______________________________
3. they Paragraph 2, line 3 ______________________________
4. them Paragraph 2, line 3 ______________________________
5. this Paragraph 3, line 14 ______________________________
2 Test your classmates by creating a challenging exercise based on the information in the
text.
24
The Contract
Discussion:
Discuss with your classmates the following questions. Then share your ideas
with the class.
1. What are the reasons for drawing up a contract?
a. What are the two main types of contracts?
b. What would be the advantage or disadvantage of each?
2. What type of clauses would you need to include in the contract? What areas would they
cover?
The contract
A contract is a “…pact or agreement, oral or written, whereby two or more parties bind
themselves to certain obligations, and whose fulfilment is legally enforceable…” 1. That is, a
contract clearly states the obligations of the parties involved, the seller offering the product and
the buyer making an acceptance. Most international contracts are regulated by the United
Nations Convention on Contracts for the International Sales of Goods (CISG) signed in Austria
on 11th April, 1980 and which came into effect on 1st January, 1988. The CISG establishes a
uniform code of legal rules for the drafting of international sales contracts, the obligations of
both the buyer and the seller and remedies for breach of contract. The main objective of the
CISG is to eliminate any ambiguity that might be caused by domestic trade laws which it
supersedes. As each party is acquainted with the trade laws of its own country, it might want
these laws to be applied to the transaction and this might lead to conflicts during negotiation.
By using internationally accepted rules, these problems can be avoided.
The Contracts for the International Sales of Goods applies only to the international sale
of goods between parties whose places of business are located in countries that have ratified
the treaty unless said parties have specifically agreed that the CISG, or specific parts of the
convention, do not apply to their contract. To the contrary, the companies are bound by this
agreement. As of 11th August, 2010, the CISG had been ratified by 76 countries.
1 Ventura, Luis Clemente, International trade contracts: a practical guide For exporters, San Salvador: IICA, 2007.
25
Although contracts may be drawn up according to the wishes of the two parties, it is
important that certain aspects be taken into consideration for a smooth business transaction to
occur. The following are the key elements which must be taken into account when drawing up
a contract.
1. Contract date: This specifies the date on which the contract is signed and is of
importance if the date of delivery of the goods is fixed with reference to this date.
2. Identification of the parties: This identifies the names of the parties, i.e. the buyer
and the seller, their relationship to each other and the names of the individuals authorized
to act on their behalf.
3. Goods: It is important that a complete and accurate description of the goods be made so
that the contract can be enforced if so needed. The following information should be
included in the contract:
a. Type and quality of the goods.
b. Quantity of the goods. Specify the number of units or other measures of quantity
such as weight.
c. Price. Indicate the unit or price related to the measure of quantity, for example
per kilo.
4. Packing arrangements: Specify the type of packaging required as this is especially
important in the case of goods that can be damaged in transit.
5. Transportation arrangements: The name of the freight carrier and the party
responsible for payment should be supplied here. Information needed includes:
a. Name of the carrier.
b. Type of storage required.
c. Notice provisions. This requires the seller to notify the buyer when the goods
are ready for delivery. This is very important in the case of perishable goods.
d. Shipping time. Specify the exact date or an estimated time by which goods
should be shipped.
6. Costs and charges: Specify the party to pay any additional charges if needed.
a. Duties and taxes: Indicate the party to pay for import, export and any other fees
or duties and for obtaining the required licenses.
26
b. Insurance costs: Identify the party that will be responsible for paying for the
insurance while the goods are in transit. Usually the seller is responsible for the
title of the goods until these pass into the hands of the buyer. It is important to
indicate the time at which the title of goods will change hands especially if the
goods are lost during transit.
c. Handling and transport: The party responsible for paying for shipping, handling,
packaging, security and any additional costs must be specified.
d. Terms defined: The use of INCOTERMS is required to assign responsibility for the
cost of transport and for risks.
e. Insurance: The type of insurance, the beneficiary, the party who is responsible
for obtaining and payment and the time period by which the policy must be
obtained should be clearly stated in the contract.
7. Payment: In a one-time transaction, the seller will often require a secure form of
payment before shipment of merchandise and the buyer will require that goods have
been passed through customs and received before emitting payment. If advance
payments cannot be obtained, documentary credit must be obtained.
a. Method of payment: This indicates the form of payment, for example through a
letter of credit.
b. Medium of exchange: This refers to the currency which will be used.
c. Exchange rate: Specify a fixed rate for the currency.
8. Import documentation: Indicate the import and export documents that each of the
parties will be responsible for obtaining, completing and presenting to the relevant
authorities.
9. Inspection rights: Insure that the buyer has the right to inspect the merchandise before
taking delivery to determine whether or not goods meet the contract specification.
Indicate the person to carryout said inspection.
10. Warranty provisions: Specify the warranty on the property and fitness of the goods.
Limit, extend or define said warranties. For example, the seller can warranty that the
goods will be of the same quality as the sample good shown by the manufacturer’s
representative.
27
11. Indemnity: Agree that one of the parties will not hold the other responsible for any
flaws due to specific causes. For example, if the merchandise is flawed due to
manufacturing or design.
12. Enforcement and remedies:
a. Time: Specify the time in which the
b. Modification of contract: This should be done in advance of signing.
c. Cancellation: State reasons for cancellation of the contract and advance
warnings of the same.
d. Contingencies: Specify the events which are required to occur before the
contract is enforced.
e. Governing law: Choose the law of a specific country which will govern
interpretation of the contract.
f. Choice of forum: Identify the place in which any dispute arising between the two
parties might be settled.
g. Arbitration provisions: Arbitration it is a method of dispute resolution relating to
international contracts of sale. A well-prepared clause on arbitration provides a
basis to duly conduct arbitration in case of litigation.
h. Severability: Provide that individual clauses can be removed from the contract
without invalidating the whole. For example, a clause may be invalid or
unenforceable for a reason but this does not mean that the rest of the contract is
invalid.
To summarise, a contract is an agreement between one party (the seller or vendor)
which makes an offer and another party (the buyer) who accepts said offer. A contract should
indicate where the goods should be delivered, who should arrange for transport and be
responsible for obtaining and paying for insurance. Obligations with regards to customs
procedures and the payment of any duties and taxes should also be stated. Besides details
with regard to delivery, the contract should also cover payment of the merchandise. This
includes the currency in which payment will be made, the amount to be paid, when payment is
due as well as the method to be used. It is advisable that internationally agreed Incoterms be
used to specify the terms being used in the contract. When there is no physical delivery of
goods, as in the case of services, Incoterms cannot be used in the contract. Instead, the
28
services to be provided should be clearly defined and to what standards. International
customers should also be advised of the manner in which the services to be provided work and
the way in which complaints will be handled. Finally, both parties should agree on the law
governing the contract in case disputes need to be settled.
References
Hinkelman, E.G. 1992 Importers Manual USA, 4th Edition, California, USA, World Trade Press.
Ventura, Luis Clemente, 2007 International trade contracts: a practical guide For exporters, San Salvador: IICA.
After reading:
1. In groups of four, share the following information: What does each person consider to
be the six most important facts learnt about contracts? Why? Are there any common
facts among the group? Which ones? Do you have the same reasons? Decide on a
group spokesperson and present your ideas to the class.
Vocabulary:
1. See if you can guess the meaning of the following words based on their use in the text.
a. To be bound by _______________________________
b. The drafting of _______________________________
c. Drawn up ________________________________
d. Enforce.. ________________________________
e. Perishable goods ________________________________
f. Flaws ________________________________
Writing
Discuss the importance of contracts in foreign trade. Why should both parties sign a contract?
What clauses should be included and why?
Research
Find a copy of a contract and see if it contains all of the relevant information required as stated
in this text.
29
Discussion
Discuss in small groups the following:
a. What is an invoice?
b. What information should we find on a commercial
invoice for
i. Local or internal trade
ii. International trade
Make a list and share with the rest of the class.
Vocabulary
Make a list of the words you would expect to find on an invoice. Are any of these words special
terms? If so, which ones? Share your list with the class.
Purchases and Sales documents
When you travel by train, you need a ticket as proof that you have
paid. When you send a consignment of goods by rail or road you also need
a receipt to prove the transport company has taken the goods. A
consignment note is both a ticket and a receipt. When companies buy
goods, they send a purchase order to the suppliers. If the buyers are
regular customers, the suppliers send the goods and then send an invoice. The buyers do not
always pay the invoice immediately. The suppliers usually send a statement at the end of the
month, which shows all the transactions between the suppliers and the buyers in that month.
The buyers then pay the amount outstanding on the statement.
What is a purchase order (PO)?
A purchase order is a form used to request goods and services. It contains a unique
purchase order number and tells us what you want, the billing address and the shipping
address. It is also a payment agreement between a buyer and a seller (person who is
30
supplying the goods/services). A purchase order represents the formal and final agreement
to a purchasing transaction with a seller. It identifies the:
seller
material to be ordered
quantity
price
delivery date and terms of delivery
terms of payment
Sometimes, when the suppliers receive an enquiry, they send a pro-forma invoice.
This is a quotation, which looks like the final invoice so the buyers know how much they have
to pay. If the suppliers do not know the buyers, the buyers might pay in advance against the
pro-forma when placing their order.
There are documents that must be completed and handed when international business
transactions are carried out, these documents are exchanged by the buyer and seller and used
as proof that a business deal has taken place between the parts involved.
31
The essential documents for purchasing and selling in international transactions are the
Proforma - Invoice, the Commercial Invoice and the Consular Invoice. The ability to
successfully finance an export sale depends on whether the sale is arranged properly or not. A
detailed pro forma invoice -- or export quotation letter -- is one tool that can help to reduce the
risks associated with international transactions.
What is a Pro Forma Invoice?
The starting point of the export contract is in the form of offer made 'by the exporter
to the foreign customer.' It is an estimate given as a reply to an inquiry. It normally forms the
basis of all trade transactions. The term pro forma is from the Latin term, which translates
‘as a matter of form.’ This document is very important in the exportation process, and a
company often includes it in their response to a potential trade buyer.
A “Proforma Invoice” is an official quotation in an invoice format specifying price with
tax and shipping charges — this allows the customer to present the Proforma Invoice to their
Accounting Department and to arrange a prepayment. The Proforma guarantees a price and
terms for a 60-day period of time while the customer acquires and/or transfers the funds. It
facilitates financing because, in addition to describing the product and setting the price and
time of shipment, it can be used to establish the terms of sale and payment. It is most
commonly requested by customers pre-paying orders via bank money transfer before shipping
an order.
A pro forma invoice is an advance copy of the final invoice. The pro forma invoice
is often used by the importer to apply for a letter of credit (L/C) and foreign
exchange (import) allocation. It is the document that creates the link between an export
operation and an import operation. It is not mandatory. It is usually issued to first time buyer or
when foreign buyer asks for one. A Pro- forma is also used as a pre-payment documents, this
may happen with new customers whose credit status is unknown; for information, it may be
used as a quotation; and when goods are sent on approval, that is, when the seller sends
samples of goods to the buyer who can then inspect them before he decides to buy. Preparing
a pro forma invoice can also help to anticipate financing costs, which, in some cases, can be
built into the selling price of the export.
32
PRO – FORMA INVOICE
The company letterhead
Pro-forma Invoice
SHIP TO:
Company Name: Consignment Note No.
Attention Of: No. of Pieces:
Street/Number: Total Weight:
Town/Area Code: Dimensions:
State/County:
Country: Phone No.
Your VAT Number ..................................
Reason For Export...................................
I declare that to the best of my knowledge that the above information is true and correct and that the goods are of
............................ origin.
For and on behalf of the above named company.
Name (print) Signature
Date Position in company
33
COMMERCIAL INVOICE
The Commercial (or Export) Invoice is the seller's bill of sale for the goods sold,
specifying type of goods, quantity and price of each type and terms of sale. It is a very
important document and is required by banks when they issue credit. This is an invoice used in
exporting and includes details of shipment, freight and insurance. It is one of the shipping
documents. It must be carefully made out, as it is the basis for the Bill of Lading.
The Commercial Invoice is considered the most important document in international
trade, because goods are not allowed to clear customs at the destination without one. This
document is usually the one that all the service providers first look to for information about your
shipment. It is essential to prepare the commercial invoice as clearly and accurately as possible
to avoid problems with your shipment.
The Commercial Invoice fulfils these functions:
1. It is a bill or record of transaction between seller (shipper) and buyer (recipient), listing
a complete description and sale price of the goods, the name and addresses of shipper,
recipient, and buyer (if not the recipient), and if possible, purchase order or reference
numbers for the transaction.
2. The commercial invoice is the basis for foreign Customs' identification, classification,
duty/tax assessment, and final approval of entry of the goods.
3. The commercial invoice is the document that confirms the value of goods for insurance
purposes.
The Commercial Invoice is the one single document that describes the entire
transaction from start to finish. The basis for all other export and import documents, the
Commercial Invoice is, in reality, a bill for the goods from the seller to the buyer. It is also the
primary shipping document used by customs worldwide for commodity control and valuation.
Some countries also require other "invoices" which need to be prepared in addition to
the commercial invoice. These forms are often country-specific, and they can usually be
purchased from the foreign consulate. This document may also be prepared by the importer or
their customs broker. They are referred to as Consular Invoices.
34
Commercial Invoice
Export References:
Baking Technologies, Inc. quote number BT10102 Invoice No:
BT-1638
Mendez Panaderias S.A. purchase order number M3652
Exporter Name and Address:
Baking Technologies, Inc.
45 South 7th Street
Minneapolis, MN 55402
Ultimate Consignee Name and
Address:
Mendez Panaderias S.A.
Col. Roma
Mexico D.F., C.P. 06760
Sold To Name and Address:
Mendez Panaderias S.A.
Col. Roma
Mexico D.F., C.P. 06760
Intermediate Consignee/Consigned
to:
Galfiro Montemayor Brokers
Avenida de Colombia
1025 Veracruz, Mexico
Notify Party Name and Address:
Mendez Panaderias S.A.
Col. Roma
Mexico D.F., C.P. 06760
Phone: 5 25 1 348 1572
Contact: Carlos Mendez
Date of Shipment: 14JAN02
AWB/BL Number: MXVZ 9707503
Currency: USD
L/C N°: 120ICCI000-990093
Conditions of Sale and Terms of
Payment:
Freight: Pre-Paid
Title Transfer Occurs At: Minneapolis,
Minnesota
CPT Veracruz, México per Incoterms
2000
Payment Terms: Payable by L/C
Transportation:
Via: Ocean
From: Port of Houston, Texas to Port of
Veracruz, Mexico
Total Number of Packages: 4
Total Net Weight (kgs): 1,815
Total Gross Weight (kgs): 2,722
Line No.
Item Number,
Harmonized Number,
Product Description
Country of
Origin
Quantity
Unit Price
Total Price
1.
Model BT002043
Baking/Kneading
Equipment
Tariff Classification 8438.10
port Packing/Crating
U.S. Inland freight:
Minneapolis to Chicago
Forwarding fees
Ocean freight
Total CPT Veracruz, Mexico
per Incoterms 2000
USA
4
75,500
USD 302,000
800
300
540
5,760
USD 309,400
Please Note: These commodities, technology, or software were exported from the United States in accordance with
the Export Administration Regulations. Diversion contrary to U.S. law prohibited.
Authorized Signature: Company: Baking Technologies, Inc.
Name: Douglas R. Jacobson Title: Export Manager
Date: 03JAN02 Telephone Number(s)
Voice: 987 654 3210 Facsimile: 987 654 3211
35
Consular invoice
The Consular Invoice is a special form available through the embassy or consulate of
the importing country. It is a statement that provides customs authorities in the importing
country with an official document, signed by exporter or his authorized agent, specifying the
consignor, consignee, prices, quantity, quality and nature of the shipment. This information is
used to classify the goods for tariff rates, duties and other import taxes and charges. The
Consular Invoice is necessary for importing goods into some countries. It states the value for
the customs authorities in the importing country. The exporter must guarantee that all the
details on the invoice are accurate, and must sign it.
This invoice requires a detailed description of the goods and has spaces for showing
marks, numbers, weights, value of the goods, their origin, and a declaration about the accuracy
of the contents of the invoice. Often it is in the language of the importing country and must be
filled out in that language. It must be totally error-free. Forms are purchased from the
Consul of the importing country and as many as six copies must be completed. The Consul
must then legalise these documents. Other documents, such as the commercial invoice, usually
have to be presented to the Consul at the time the consular invoice is validated.
After reading:
1. Form groups of four. Select one of the documents presented in the text. Discuss with
your group the importance of this document to international trade. Discuss the main
parts of the document and the information that it should contain. Present the
information to your class. Make notes on the presentations given by the other groups.
Writing:
What are the major documents needed in purchase and sales? Compare and contrast these
and discuss their importance to trade.
36
Consular Invoice
THE GOVERNMENT of BRAZIL
Port of Loading
Date: Port of Discharge
Invoice No: Date of Departure
Issued At: Carrier
EXPORTER CONSIGNEE
Marks arid
Numbers
Quantity Description of Goods Value of
Shipment
Total (FOB, C&F, or CIF)
Other Charges Amount of
Charges
Total
Certified
Correct By:
Witnessed By:
Fee Paid:
References
Platt, G. (1999). Guide to the Finance of International Trade. Trade Services Marine Midland Bank. The Journal of
Commerce.
STEP’s International Finance and Logistics Group. http://www.sasktrade.sk.ca/membersonly/financelogisitic.shtml
Documents from http://www.export911.com
37
Discussion:
1. Have you ever received a parcel or package from abroad?
Can you remember what documents you had to sign or were
attached to the parcel?
2. In your groups, look at this list of documents. Discuss what
each one represents and why it would be necessary to have this document. Share your
ideas with the class:
certificate of origin insurance packing list
blacklist certificate inspection certificate certificate of analysis
Other important documents
While the Pro forma, commercial and consular invoices are all important documents
needed in international trade, there are other important documents that the importer or
exporter must have on hand when trading. Here are only a few:
A certificate of origin
This is a signed document evidencing the country of origin of the goods and is often
required by the buyer’s country to determine the tariff rates. It some countries it is prepared
by the seller on a standard form and then certified by a certifying authority, either the city or
regional chamber of commerce or the chamber or commerce and industry. Other countries
sometimes require that this certificate be issued by a third party, for example, the Chamber of
Commerce and be notarized, legalized or visaed by the embassy or consulate of the importing
country. A certificate of origin should contain a description of the goods being purchased
including information on the consignor, consignee and the details should conform to that found
on other documents like the letter of credit or the commercial invoice.
Inspection certificate
This certificate is issued by a recognized independent inspection body declaring the
results of an examination of the goods prior to shipping. This is done by the buyer to protect
himself from paying when substandard or worthless goods have been shipped. This is important
for the buyer as banks’ liabilities and responsibilities under documentary credit are limited to
documents and not goods represented by the documents. In some countries and for certain
38
commodities this must be done by a government entity. The usual independent body which
serves buyers and sellers is the Société Generale de surveillance. Key elements of an inspection
certificate include the details regarding the shipment, the date of inspection, statement of
sampling methodology, statement of results and name, signature and stamp or seal of the
inspecting authority.
Packing list and specification
This document is prepared by the shipper and lists the kinds and quantities of the
merchandise of a particular shipment. The packing list carries no price information while the
specification list does. A copy of the packing list is often attached to each package in a
waterproof envelope and another sent to the consignee so the shipment can be checked on
arrival. The packing list is also required by the customs authorities to enable them to make
spot checks or more thorough checks on the contents of any particular package. Apart from the
detailed description of the merchandise, the packing list includes the names and addresses of
the buyer and seller, date of issue, invoice number, order or contract number, shipping details
and any other information as required by the sales contract.
Weight note
This certificate may be issued by the seller or by a third party and indicates the weight
of goods which should tally with that shown on all other documents. Banks will accept
superimposed declaration of weight on shipping documents unless the credit requires a
separate or an independent document be issued.
Certificate of analysis
This is a signed document issued by the manufacturer of the product stating the
specifications and test results for each parameter of the monograph.
Blacklist certificate
A blacklist certificate is a document which certifies that the goods being imported is not
from a country that is on the government’s black list and neither are the parties involved, i.e.
the manufacturer, bank, insurance company and shipping lines nor will the transport vessel call
at ports in such a country unless forced to do so.
39
Letter of insurance
It is normally issued by a broker to provide notice that an insurance has been placed
pending the production of a policy or a certificate. Sometimes this takes the form of a cover
note. The above documents do not contain details of the insurance being effected and
therefore are not considered satisfactory by banks which normally require evidence of an
insurance contract in documents required under a documentary credit. Broker's certificates,
and cover notes are issued by a third party and not the insurer so that in the event of any
claim, it would be made against the broker.
Insurance certificates
These are issued by insurance companies to embrace either open covers or floating
policies. The systems of open cover and floating policies are similar in that:
a) Once the system has been arranged, the insured party is covered for all his shipments on
the terms and for the risks agreed. The insured will declare to the insurance company the value
and details of each shipment and will receive a pre-printed insurance certificate made valid and
the document will show the risks covered and be presigned by the insurer.
b) Under English Law, no action will be obtained on a contract of insurance evidenced solely
by an insurance certificate. So, any action to be taken against insurers can only be on
production of a policy to be sued on.
http://www.proformainvoice.net/
References
Hinkleman, E.G. 2005 Dictionary of International trade: Handbook of the global trade community
http://en.reingex.com/
http://www.lectlaw.com/files/bul13.htm
http://www.laposte-export-solutions.co.uk/uk/tips/preparer-un-contrat-de-vente-international__uk
40
Discussion:
In groups discuss the following questions:
1. What is the importance of transportation to international trade?
2. What are the means of transport? What would be the most frequently used and why?
3. What types of containers do you know? How can this affect the type of merchandise to
be transported?
International transportation
Containers
International transport is one of the most important features related to international
trade. It implies the carrying of goods from one place to another and involves the handling of
consignments, loading and unloading, shipment expenses and other arrangements between the
importer and exporter.
International transport covers the whole world and moves all types of goods to the
farthest corners of the globe. It reaches beyond all borders and barriers including physical,
technical, customs-based, language, economic and all other kinds. It uses all types of modes
and means of transport such as: trucks, ships, planes, containers, roll-on - roll-off, rail, river
transport and some others.
A regularly used mode of transport is Intermodal transportation. This is the
Containerised movement of cargo, over land and sea, door to door, without the physical
handling associate with break- bulk transportation.
A containerised cargo shipment depends on four basic fundamentals:
1. Matching the cargo to the correct type of container that is best suited for the
forthcoming voyage - be it by land or water.
41
2. Ensuring that the container is in good condition prior to loading the cargo and that it is
carried and handled correctly throughout the voyage.
3. Ensuring that the cargo is loaded correctly into the container and is properly secured
against movement during the voyage.
4. Ensuring that all the relevant cargo information is communicated to all appropriate
parties to be sure that the container and its contents will arrive at the consignee in the
expected condition.
The most used and secure way to move cargo around the world is in containers as
well as the cheapest method of transportation. They have been designed to fulfil the function of
protecting the cargo from damage.
Containers are composed of a rigid frame, usually of steel or
aluminium, with panels between the frame members. The frame is the
principal structural load-bearing part of the container.
The container’s sidewalls are usually constructed of corrugated
steel with corrugations of three or four inches wide except at the two flat areas that run the full
vertical height of the panels near each end. These areas are called marking areas, located
approximately 12 to 15 inches from and rear walls of the container. They are reserved for
markings required and they often contain ventilation holes to allow an exchange of air in the
container while preventing the entry of solids or liquids.
There are various types of containers according to their size and height, 20, 40, 45, 48
refrigerated and conventional. Their main function is to protect the cargo from damage or any
other risks. Containers can be classified and defined as follows:
The International Standards Organisation (ISO) has recommended a series of internal
and external dimensions for containers together with gross maximum weights, which the
container may carry. All operating containers fleets, whether owned or leased, should follow
the ISO code.
Every container must have a Container Safety Certificate (CSC) issued by the
manufacturer and this must be renewed every 30 months after inspection by a competent
inspector. The advantages in utilising this method of shipping are:
Once a container is loaded and sealed at the suppliers’ warehouse, it is not opened until
its arrival at the consignees’ facility at destination;
It alleviates the need for expensive export packing;
42
It reduces the ocean carriers’ charges for terminal handling at the Port of Exit,
It creates a reduction in the cost of Marine Insurance and reduces the overall transit
time of the shipment.
Container classification
Containers are available in configurations to take almost every kind of cargo and mode
of transportation (ocean, air, road, and rail). In terms of the type of cargo for which the
containers are mainly intended, they are classified as general cargo container and specific cargo
container.
The general cargo container is used for most general cargo commodities. The
containers are 20 ft or 40 ft in length with a limited stock of 45 ft. The standard external
height of GP containers is 8 ft 6 inches although high cube containers at 9 ft 6 inches in height
are becoming common. Specific cargo containers are provided for specific carriage
requirements.
43
General Cargo Container
General purpose (dry cargo) container
It is suitable for the widest varieties of cargo. It is fully enclosed and weatherproof,
having rigid walls, roof and floor, with at least one of its walls, either end wall (end loading) or
side-wall (side loading), equipped with doors.
Specific purpose container
It is used to facilitate the packing (loading) and emptying (unloading) of container other
than by means of doors at one side of the container, and for other specific purposes like
ventilation.
Closed ventilated container
It is used for the carriage of cargo, such as seeds, that cannot stand excessive moisture.
It is similar to the dry cargo container with specially designed natural or mechanical (forced)
ventilation.
Open top container
It is similar to the dry cargo container except that it has no rigid roof, but has a movable
or removable cover (e.g. a cover made of canvas, plastic or reinforced plastic material)
supported on movable or removable roof bows. The open top container is used for machinery,
sheet glass, and other heavy, bulky or long objects.
44
Platform (flat rack)
It does not have a superstructure, that is, rigid sidewalls and load-carrying structures. It
is equipped with top and bottom corner fittings which provide means of supporting,
stacking, handling and securing the container. The flat rack is used for machinery, lumber,
and other heavy or large objects.
Specific Cargo Container
Reefer container
It has insulated walls, doors, roof, and floor, which limit the range of temperature loss
or gain. It is used for perishable goods like meat, fruits and vegetables.
Mechanically refrigerated container
It uses a refrigerating appliance, that is, the mechanical compressor or absorption unit.
Refrigerated container (with expendable refrigerant)
It uses dry ice or liquefied gases. It does not require external power supply or fuel supply.
45
Tank container
It is used for the carriage of bulk gases and liquids like chemicals.
Dry bulk container
It is used for the carriage of dry solids in bulk without packaging, such as grains and dry
chemicals. It consists of a cargo-carrying structure firmly secured within the intercontinental
container framework.
Named cargo types
It consists of various types of containers, such as automobile (car) containers and
livestock (cattle and poultry) containers.
The use of containers in export shipments makes the transport and handling easier and
faster. The crane and gantry are commonly used in handling
containers.
The ports worldwide handle over 100 million TEUs annually.
The unit TEU (twenty-foot equivalent unit) is used to express the relative number of
46
containers based on the equivalent length of a 20' container. For example, 100 containers of 20'
is 100 TEUs, while 100 containers of 40' is 200 TEUs.
Container vessels are used in international traffic to facilitate the carriage of goods
permitting their ready handling, particularly in the Multimodal transport and transhipment.
After reading
1. In groups, choose one of the following questions and report your answer to the class.
Make notes of the other groups’ presentation.
a. What is a container? Include description and use
b. What is their importance in trade? Give examples
c. What are the main types of containers? What kind of merchandise are they
suitable for?
Vocabulary
1. Find the words in bold print in the text and guess the meaning from the context in
which it is used.
1. cargo __________________________________________________
2. load __________________________________________________
3. container __________________________________________________
4. frame __________________________________________________
5. sidewalls __________________________________________________
6. markings __________________________________________________
7. fleets __________________________________________________
8. bows __________________________________________________
9. lifestock __________________________________________________
10. lumber __________________________________________________
47
Discussion:
1. What are the documents required in international transport?
2. What is their importance?
Documents in International Transport
International transport applies international trade rules and regulations: Incoterms,
uniform rules and uses of documentary credits. On the other hand, it has its own regulations
and conventions and uses its own documents and forms such as: Bills of Lading, Airway
bills, FIATA documents as well as other documents specifically created to meet transport
needs.
International transport involves operations such as packaging, handing,
consolidation/break-bulk, loading/unloading, labelling, storage, reconsignment, distribution,
quality checks, weighing and some others.
International transport requires guarantees such as Insurance covering damage to
goods as well as civil or professional legal responsibility worldwide, official acknowledgement
and accreditation; technical know-how and specific qualifications and customs ratings to ensure
all operations. Further more it requires co-ordination, this is, everything must be provided for
and co-ordinated through local specialists and correspondents throughout the world.
When transporting goods, the importer and the exporter must agree upon how the
consignment must travel and in which conditions. There are various forms of transportation by
air, sea, rail and road.
Documentation used in international trade performs a number of separate functions and
these can be divided into the following categories: instruction; financial; identification;
authorisation.
To transport consignments by sea, there is an essential document in international trade,
which must accompany the cargo called the Bill of Lading.
48
BILL OF LADING
The Bill of Lading is a contract of carriage between an exporter and a service provider
(i.e. airline, steamship line, freight forwarder or shipping company, etc.) that identifies the
parties to the transaction and their responsibility for payment of transportation and other
accessorial fees, such as transfers and delivery. These responsibilities and liabilities of each
party are set out in Conventions (Hague-Visby Rules and Carriage of Goods by Sea Act 1971).
It is important to consider the commercial use of the bill of lading in relation to the
transfer of title to goods and in relation to the payment for goods. In international trade, the
origin and the destination on the bill of lading are usually for the "main carriage" transportation
between the port of departure and the port of importation.
Function of the bill of lading
There are three essential elements to an ocean bill of lading issued by a shipping line and
covering the carriage of goods by sea:
1. It is evidence that a contract of carriage exists between shipper (exporter) and ship
owner.
2. It is a receipt for goods, showing prima facie that they have been received into the
charge of a carrier.
3. It is a document of title, which allows title to the goods to be transferred by
endorsement and delivery of the bill of lading.
These three elements explain the importance of the bill of lading to commerce over the
years. With the bill of lading showing that a contract of carriage exists and that the goods have
been received by the carrier, a buyer and his bank are assured that the despatch of goods
according to the contract of sale is under way.
A number of different types of bills of lading are available to exporters, according to the
type of service being used. Different clausings are applicable to bills of lading and these are
considered under "Clean bills and claused bills", following the details which must be shown in
the bill of lading.
49
The shipper (exporter) or his agent should furnish the above details to the shipping line
in writing (e.g. by fax or e-mail) or on blank bills. It is essential that the details are correct in
relation to:
1. The actual goods being shipped;
2. The contract of sale; and
3. Any letter of credit or payment requirements
Clean bills and claused bills
A "clean" bill of lading is one in which no notation is shown on the document relating to
cargo having been received by the line or shipped in any other than good condition and correct
quantity.
In the case where the cargo is noted to be wet, damaged or otherwise in doubtful
condition or quantity, bills of lading will be issued "claused" (or "dirty"), showing the defect in
the cargo.
Clean shipped on board bills of lading
A contract of sale may stipulate, and a confirmed irrevocable letter of credit is almost
certain to instruct, that an exporter must produce "clean shipped on board" bills of lading.
Whether or not there is this stipulation, this type of bill of lading is clearly the most useful as it
is prima facie evidence that: the goods are actually en route to the port of destination and at
the time of shipment the goods were in good condition.
Under a documentary letter of credit, a bank (which deals only with documents, not
goods) presumes that the goods are en route to the consignee in good order and that the
exporter can be paid for them provided that all other conditions in the credit are satisfied.
Through bills of lading
Bills of lading issued by shipping lines originally covered only port-to-port shipments of
conventional cargo. The "through" bill of lading concept allows door-to-door shipments to be
covered by a bill of lading. This became necessary following the development of
containerisation. Thus, this type of bill may cover ocean shipment, plus inland transport by
other modes, with the ocean carrier subcontracting these other elements.
50
Combined transport bills of lading
Similar to a through bill of lading, the combined transport bill of lading allows for
the contract of carriage to be covered by a single document and a clearly defined single set of
conditions of carriage to include the use of road and/or rail shipment at either end of the sea.
Freight forwarders operating as non-vessel owning carriers (NVOCS) will most usually issue this
type of document.
Consolidation/groupage and house bills of lading
The concept of groupage - combining a number of individual consignments into a
complete container load for shipment - has been developed over many years by freight
forwarders operating services between two inland points in different countries working in
conjunction with an overseas office or partner. The forwarder then issues his own house bills to
individual exporters. These house bills become the controlling document for the release of the
cargo at destination and enable the exporter, if required, to negotiate these with his customer
in return for payment of the goods.
Negotiable FIATA multimodal transport bill
The FIATA bill of lading is a document designed to be used as a multimodal or combined
transport document with negotiable status which has been developed by the International
Federation of Forwarding Agents' Associations (FIATA) accepted a marine ocean B/L. The
document operates as a forwarder house bill with a suitable endorsement or as a multimodal
transport document.
Negotiation of bills of lading
The bill of lading is a negotiable document, which allows title to goods to be transferred
by endorsement and delivery. Two basic types of endorsement are possible:
"To order" bills of lading ("To order blank endorsed"), the shipper must stamp and
sign the bill of lading in order for title to the goods to be transferred to the consignee.
To order of (bank), the bank is the party, which carries out the endorsement in this
instance and which, therefore, exercises control over the goods.
51
Bill of Lading
A RELIABLE SHIPPING LINE
( NON-NEGOTIABLE UNLESS CONSIGNED TO ORDER )
52
After reading:
1. Based on the text, answer the following questions. Check your answers with other
members of your class.
1. What is a bill of Lading?
2. Why is its importance to shipping?
3. What are the different kinds of bills of Lading? In which situations are they
used?
2. In small groups, create your own company and the merchandise you will be exporting. Give
details with regard to description including weight. Fill in the bill of lading on page 48-49.
Writing
Create a table showing the different kinds of bills of lading. Include their use.
53
Discussion:
1. What is an airway bill?
2. Why is it used?
3. What kind of information does it contain?
Check your answers as you read the text.
Airway bill
When transportation is carried out by air, there is a document of carriage, which is
issued by airlines to shippers of cargo, called the air waybill. It is issued under conditions
stated by the Warsaw Convention.
The air waybill has several purposes:
1. It is evidence of a contract of carriage.
2. It proves receipt of goods for shipment.
3. It is a freight bill.
The Warsaw Convention requires that the air waybill is completed in at least three parts:
1. for the carrier (signed by the consignor);
2. for the consignee (signed by the consignor and carrier);
3. for the consignor (signed by the carrier).
The basic information to be shown on the air waybill is as follows: shipper's name and
address; consignee's name and address; customs reference/status; agent's IATA code; airport
of departure and destination; first carrier; value of goods and currency; description of goods,
dimensions, commodity code, rate class, chargeable weight and freight rate; freight charges
(prepaid or payable at destination); additional charges payable.
All IATA carriers use IATA Standard Air Waybill (those belonging to the International
Air Transport Association) and it embodies standard conditions associated to those set out in
the Warsaw Convention. When issued by an airline, the air waybill carries a unique reference
number, which commences with a carrier prefix. The air waybill number is the key to tracing
54
the flight details of the consignment in question and must be quoted at all times when
information is being requested.
Air Waybill is a bill, which covers both domestic and international flights transporting
goods to a specified destination, establishing the terms between a shipper and an air
transportation company for the transport of goods. Included in the document are the
conditions, limitations of liability, shipping instructions, description of commodity, and applicable
transportation charges.
In addition, the air waybill is a non-negotiable document, which serves as a receipt for
the shipper, indicating that the carrier has accepted the goods listed and obligates it to carry
the consignment to the airport of destination according to specified conditions.
Master and House Air Waybills
The freight forwarder may consolidate the consignments of several independent shippers
that are intended for the same airport of destination and dispatch them together under one air
waybill (AWB) issued by the carrier, known as master air waybill (MAWB).
The freight forwarder in turn issues to each shipper its own AWB, known as a house air
waybill (HAWB) or freight forwarder's waybill.
International House Air Waybill
A non-negotiable bill, produced in conformance with the International Air Transport
Association’s specifications, the International House Air Waybill serves as a contract between
the exporter and the air carrier or his agent.
Air Way Bill
55
ROAD WAYBILLS AND RAIL WAYBILLS
The road waybill is an international consignment note which is specified
under the Convention for the Contract of the International Carriage of Goods
by Road 1956 (the CMR Convention) which is embodied into UK law by the
Carriage of Goods by Road Act 1965 (as amended by the Carriage by Air and
Road Act 1979). Conventions deal with the substance of this law which governs the
responsibilities and liabilities of the parties to a contract for the carriage of goods by road
internationally.
The road waybill (road consignment note) or rail waybill (rail
consignment note) serves as a receipt for goods and an evidence of
the contract of carriage, but it is not a document of title to the goods.
The consignee can obtain the goods from the carrier at the
destination point without presentation of the road waybill or the rail
waybill, as the case may be.
The road waybill or rail waybill must be signed or authenticated and/or bear a reception
stamp or other indication of receipt by the carrier other named agent for or on behalf of the
carrier.
After reading:
1. Discuss the different types of air, road and railway bills in the text.
References
Platt, G. (1999). Guide to the Finance of International Trade. Trade Services Marine Midland Bank. The Journal of
Commerce.
Documents from http://www.export911.com
The Percy Pallet InfoBase http://www.pslgroup.net/paper2.html
56
APPENDIX
57
Sample International Contract for Sale of Goods, pursuant to the United Nations
Convention on Contracts for the International Sale of Goods
TERAMATE, Ltd.
with its principal office West Road Drive27, Hopson Chart, Briston, AN4 4FL, UK
represented by Matt Wattson, on the basis of Power of Attorney from 23 June 2008
(hereinafter referred to as the „Seller“ on the first side)
and
AGFH, a. s.
ID: 783 33 998
having its principal office at: Palachova 152, Prague 2, Zip Code: 120 00
registered in the Commercial Register, Section B, Entry No. 4127 maintained by the Municipal
Court, Prague
acting by: Ing. Karel Nekola, Chairman of the Board of Directors
(hereinafter referred to as the „Buyer“ on the second side)
(Seller and Buyer referred to also as the “Contracting Parties” or separately each the
“Contracting Party”)
have entered on the day, month and year as bellow, pursuant to the United Nations Convention
on Contracts for the International Sale of Goods (hereinafter referred to as “Convention”),
into the following
CONTRACT FOR SALE OF GOODS
I.
Subject-matter of the Contract
The Subject-matter of this Contract is particularly the obligation of the Seller to deliver goods
specified in the Exhibit No. 1 hereto to the Buyer and to transfer the property in goods to the
Buyer under the terms and conditions herein and the obligation of the Buyer to accept the
delivered goods from the Seller and to pay the agreed purchase price.
58
II.
Sale of Goods
1. The Seller hereby agrees to deliver the Buyer goods (movables) specified in Exhibit No. 1
hereto (hereinafter referred to as the „Goods“) and in the time, quality and quantity specified in
Exhibit No. 1 hereto. The Buyer shall collect the Goods and pay Seller for Goods the purchase
price specified in the Article III. hereof.
2. The Seller fulfils his obligation to deliver the Goods when the Goods have been made
available to the Buyer at the place of business of the Seller. The Parties have agreed that the
Buyer shall arrange for carriage of the Goods from the place of business of the Seller through a
carrier the name of which Buyer shall notify Seller. The Seller shall arrange the loading of
Goods, and the Goods shall be packed in the manner set forth in Exhibit No. 2. Unless
otherwise expressly provided herein, the Goods shall be packed in manner adequate to protect
the Goods.
3. The Seller shall deliver the Goods to Buyer’s carrier on 15 December 2008 during regular
working hours (08.00 to 16.00 hours). Seller shall notify Buyer regarding the delivery of Goods
to carrier by fax message sent to phone No. ………….
4. The title in the Goods shall pass to Buyer immediately upon delivery of Goods to the Buyer’s
carrier. Risk of damage to or loss of the Goods shall pass to the Buyer at the time of delivery.
5. The Buyer hereby declares he received all information regarding the Goods necessary to
arrange insurance coverage.
6. Seller shall send the Buyer documents related to the Goods within 10 days after delivery of
Goods and at the Buyer‘s address set out in herein.
III.
Purchase Price
1. The Buyer shall pay the Seller the purchase price of the goods amounting EUR ………………..
(hereinafter referred to as the „Purchase Price“).
2. The Purchase Price shall be due upon the invoice issued and sent by the Seller not later than
10 days from delivery and collection of Goods by the Buyer. The invoice shall be payable not
later than 21 days from the issue of the invoice by Seller.
3. If the Buyer fails to pay the purchase price, the Seller shall have the right to default interest
59
at the rate of 0,1 % of outstanding amount for each day of default without prejudice to any
claims for damage pursuant to the Article 74 of the Convention.
IV.
Product Liability
1. The Seller shall be liable for any lack of conformity in Goods which exists at the time when
the risk passes to the Buyer and which occurs within 24 months from the date of delivery of
Goods by the Buyer’s carrier. The Seller declares that the Goods during a period of 24 months
from the date of collection by the Buyer’s carrier will remain fit for the purposes for which the
Goods would ordinarily be used or during this period will retain specified qualities (hereinafter
referred to as the „Warranty Period“).
2. The Seller shall not be responsible for the defects arising out of the failure to follow
operation instructions, for the defects caused by improper storage after the Goods were
delivered or for the defects caused by circumstances that were beyond the reasonable control.
3. The Buyer shall, immediately upon delivery of the Goods by the carrier, duly examine the
Goods and if the defects of Goods were apparent upon the collection of Goods, the Buyer shall
promptly give notice on this to the Seller.
4. Should the Buyer discover any defects during the Warranty Period, the Buyer shall give
written notice of the defect to the Seller and not later than within 15 days after such defect had
been detected. In a written notice specifying the defects he shall have the following options:
replace of defective Goods by delivery of non-defective Goods;
demand to repair the defective Goods if the defects are repairable;
demand appropriate Purchase Price reduction; or
to withdraw from the Contract.
5. The Seller, upon receipt a notice from the Buyer stating the defect, promptly shall give a
written statement and reply whether he accepts the claim for defects or not.
60
VI.
Exclusion of Liability
1. A party is not liable for a failure to perform any of his obligations if he proves that the failure
was due to an impediment beyond his control and that he could reasonably be expected to
have taken the impediment into account at the time of the conclusion of the Contract or to
have avoided or overcome it or its consequences. The exemption provided by this Article has
effect for the period during which the impediment exists.
2. The non-performing party shall give prompt written notice to the other party of the reason
for its failure to perform and the extent and duration of its inability to perform.
VII.
Arbitration Clause
All the disputes resulting from this agreement or in conjunction with it, will be decided finally in
the arbitration procedure before one arbitrator or the Board composed of three arbitrators by
the course of Proceeding Rules, registered in the list of arbitrators of Czech Arbitration Centre
s.r.o., ID 281 63 427, and appointed in accordance with Act No. 216/1994 coll. of Laws, on
Arbitration Procedure and Execution of Arbitration Awards, and with the Proceeding Rules of
Czech Arbitration Centre announced at it´s websites www.arbitrators.cz. The parties hereby
vest power in Czech Arbitration Centre to appoint arbitrator in accordance of Proceeding Rules,
what the parties declare as a known and concider to be a part of this arbitration clause. The
parties authorize the arbitrator or the Board to settle the dispute based on the principles of
natural equity. Compensation for arbitration costs (including the expenses of the contractual
parties) will be awarded by the arbitrator based on the principle of success in the dispute.
jurisdiction of Court
VIII.
Final Provisions
1. This Contract shall enter into force and shall take effect on the day when it is executed.
2. The Contracting Parties hereby agree that entering into this Contract and performing duties
61
under this Contract have been duly approved by the relevant company bodies of the
Contracting Parties in a compliance with legal regulations, by-laws and other internal
regulations of the Contracting Parties; and no other approval or consent shall be required.
3. The Contracting Parties agrees to respect the legitimate interests of the other Party, shall
conduct in accordance with the purpose of this Contract and shall not counteract such purpose
and they shall perform all legal and other actions that may prove necessary to reach the
purpose of this Contract.
4. All documents in writing shall be mailed at the address of the Contracting Parties set forth in
the heading of this Contract unless either of the Contracting Parties shall give a written notice
to the other Party on changing its address. Whatever papers the delivery of which is required,
assumed or is made available by this Contract and regardless of any other available way
allowed by the legal regulations to prove such a delivery, shall be deemed to have been served
if such had been delivered to the other Contracting Party at the address set forth in the heading
of this Contract or at the address noticed in written form by either Contracting Party to the
other Party.
5. Any changes and amendments to this Contract shall require a written form.
6. If any provision of this Contract is determined to be invalid or unenforceable, the validity or
enforceability of the other provisions either of this Contract as neither a whole nor other
provisions will be affected unless such an invalid or unenforceable provision is severable.
Contracting Parties herby agrees to supersede such an invalid or unenforceable provision by a
new valid and forceable provision that most closely matches the intent and the purpose of the
original provision.
7. This Contract and the relations arising from shall be governed by the Law of the Czech
Republic, particularly by the United Nations Convention on Contracts for the International Sale
of Goods.
8. This Contract had been made in two duplicates whereby each Contracting Party shall retain
one copy each.
Done n Prague on 13 June 2009 Done in Prague on 13 June 2009
……………………………………….. ………………………………………..
TERAMATE, Ltd. AGFH, a.s.
Matt Wattson Ing. Karel Nekol
