1 st lecture. basics of imports and exports operation 1. outline of imports and exports...
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1st Lecture. Basics of Imports
and Exports Operation
1. Outline of Imports and Exports Operation(1)Concept of Imports and Exports(2)Characteristics of Imports and Exports Transaction(3)International Custom and Regulation related to Trading
2. Procedures of Imports and Exports Operation(1)Importation(2)Exportation
3. Settlement Methods of Imports and Exports(1)Terms of Payment(2)Preliminary Remittance Method(3)Simultaneous Remittance Method
(4)Non L/C method(5)L/C Method(6)Other Settlement Methods
4. Imports and Exports Contract(1)Terms of Contract in Imports and Exports
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1 회 . imports and exports 업무 기초1. imports and exports 업무의 개요
(1)Concept of Imports and Exports
What is Imports and Exports ?Transaction of goods between nations (International Trade)
Exportation Importation
Moving goods from domestic market to overseas market according to sales, exchange, or lease contract, and receiving equivalent
Moving goods from overseas market to domestic market according to sales contract between, and receiving equivalent
Recently, the concept of imports and exports includes transaction of ‘services’ such as management, legal counseling, accounting operation and ‘electrical immaterial things’ transferred through information communication network.
International Trade : Imports and exports of goods, services approved by presidential
decree, or electrical immaterial things
Electrical Immaterial Tings Indicate software, digitally recorded movies, games, animations, E-books and databases
(2) Characteristics of Imports and Exports Transaction
• Difference in legislation, custom, values between two countries • Stiff international custom caused by unified international regulation • Risk caused by volatile change in exchange rate • Difficulty in evaluating credibility of the partner • Difficulty in solving problems In case of troubles • Exporter: Possibility of not being able to recover money (credit risk)• Importer: Possibility of not being able to receive the goods within appointed date of delivery (mercantile risk)
(3) Regulations or Custom related to International Trading
Incoterms2000 (Abbreviation of International Commercial Terms)-Official Title : International Rules for the Interpretation of Trade Terms
UCP 600 - Uniform Customs and Practice for Documentary Credit ICC Pub.No.600, 2007
URC 522- Uniform Rules for Collection ICC Pub.no.522, 1995
URR 525 -Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credit ICC Pub.No.525,1995
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2. Procedures of Imports and Exports Operation
(1) Importation
Contract
Import Approval (if necessary)
Open L/C Transport Documents Delivered to Issuing
BankPay Import Bill Receive
Transport Document
Claim Goods and Customs
Inspection•Settlement of Import Bill : importer can transfers money in advance or transfers money after receiving transport documents or goods if L/C is not used
Procedures of Importation
Inquiry Offer Contract
Advice of L/C
Manufacture,
Purchase
Shipping
Contract
*Selling Transport Documents : Exporter can receive money before shipping goods or sending the transport document to directly to importer, and vice versa
Procedures of Exportation
Export Approval (If Necessary)
Insurance
Contract
Export Inspecti
on
Export Declaration and
Customs InspectionShipmen
tSell Transport Documents to Negotiating
Bank
(2) Exportation
3. Payment Methods of Imports and Exports (1)Variety of payment methods
Collection Method
D/P Method
D/A Method
L/C Method
Sight L/C
Usance L/C
Remittance Method
사전송금방식
동시송금방식
사후송금방식
Other Methods
Factoring
OAT(Open Account Transaction)
Current Account
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(2) Preliminary Remittance MethodImporter sends all the money before exporter ships the goods
※ On the contrary, post facto remittance method is very advantageous to importer because he transfers money after receiving transport documents.
3. Remittance
1. Sales Contract
6. Send Transport Document
4. Notification of Payment2. Request for Remittance
7. Claim Goods 5. Shipment
(3)Simultaneous Remittance Method
COD Method(Cash on Delivery)
In this method, importer send money after inspecting quality of goods by himself. ※Used mainly in transaction of high-priced good that need thorough inspection in order to confirm the product before making the deal such as jewelry and etc,.
Transport document is exchanged directly between importer and exporter, not through bank (Transportation document has to be transferred through bank in collection method and L/C method so banker in charge has to be careful on handling documents)
Importer’s Bank Exporter’s Bank
Importer Exporter
Importer Exporter
Exporter’s Agent
1. Contract
2. Shipment
3. Transport Document
4. Goods
5. Money6. Goods
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CAD Method(Cash against Documents)
Exporter ships the goods and submits the transport document to agent of importer in his own country or to importer himself, exchanging document with money. Usually, branch office or importer’s agent inspects the manufacturing process within exporter’s country, and double checks before the goods are shipped.
(4)Collection Method
D/P(Documents against Payment)
Settle as soon as receiving transport documentMoving directions of documents and money is opposite.
importer and exporter exchanges transport document and money through their main banks
Importer Exporter
Importer’s Agent
1. Contract
3. Submit Transport Document
2. Shipment6. Claim Goods
5. Deliver Transport Document
Collecting Bank Remitting Bank
Importer Exporter
Shipping Company Shipping Company
1. Sales Contract
9. Remit Import Bill
6. Send Bill of Exchange and Transport Document
4. Deliver Goods
11. Claim Goods10. Submit B/L
7. Notify and Present Transport
Document
8. Settle Import Bill and Receive Transport Document
2. Shipment3. Issue B/L
12. Pay Export Bill5. Remit Bill of Exchange and
Transport Document
4. Payment
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D/A(Documents against Acceptance)
Settle a while after receiving transport document
(5) L/C Method L/C Method (Reimbursement L/C)
Collecting Bank Remitting Bank
Importer Exporter
Shipping Company Shipping Company
1. Sales Contract
12. Remit Import Bill
6. Send Transport Document
4. Deliver Goods
10. Claim Goods9. Submit B/L
7. Notify and
Present Transport
Document
8. Receive Bill of Exchange and Transport Document 2. Shipment3. Issue B/L
13. Settle Export Bill5. Entrust a Collection of Bill of
Exchange and Transport
Document
11. Settle Import Bill on the due date
Negotiating Bank(Advising Bank) Issuing Bank
Exporter(Beneficiary)
Importer(Applicant)
Shipping Company Shipping Company
1. Sales Contract
10. Send Transport Document
Deliver Goods
7. Issue B/L6. Shipment
5.Advice L/C
8. Request Purchase of Transport Document
13. Notify Arrival of Transport Document9. Pay Purchase Bill
Settling Bank
3. Issue L/C
2.Request L/C Publication
14. Pay Bills / Receive Transport Document
17. Submit B/L16.Notify Arrival
of Goods
18. Deliver Goods
11. Reimburse
ment Claim12.Settle Payment
15. Send Settlement Fund
4.Issue R/A
(Exporting Country)
(Importing Country)
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* Characteristics, merits and demerits of each payment method
Classification Exporter ImporterDelivery of Transport Document
Bank’s Guarantee
Remittance
Preliminary
Advantageous
Disadvantageous
Directly Between
Importer and Exporter
N/A
Post-facto
Disadvantageous
Advantageous
CollectionD/P Disadvant
ageousAdvantage
ousThrough Banks N/A
D/A
L/CSight Advantage
ousAdvantage
ousThrough Banks Available
Usance
*Preference of Importer and Exporter for each method
Preliminary Remittance> L/C(Sight)
D/P,Simultaneous RemittaneD/APost-facto Remittance
L/C(Usance)
> > > >Exporter Importer
(6) Other Payment MethodsFactoring, OAT, Setoff and Current Account.
Factoring Factoring company provides services like inspecting credibility, undertaking credit risk, providing money, and collecting money
※Importer can import on credit and exporter can raise capital by selling credit sales bond to factoring company
Exporter Importer
Export Factor Import Factor
5. Export Contract and Shipment
6. Convey Export Bond and Settle Payment
2. Request Credit Approval
9. Settle Import Bill
1.Consult Factoring Method
4.Notify Credit Approval
3. Credit Inquiry and Set Approval Limit
8. Transfer Transport Document 2.Request Credit Approval 7. Deliver Transport Document and
Export Bond4. Notify Credit Approval
10. Send Export Bill
OAT(Open Account
Transaction)
※Exporter can raise capital by selling export bonds with copy of transport documents to bank
2.Shipment
1.Sales Contract
4.Deliver Goods
5.Send Transport Document 6.Submit B/L
8. Settlement (Designated Account)
Importer Exporter
Shipping Company Shipping Company
7.Claim Goods 3.Issue B/L
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Setoff and Current Account
Settling money directly between importer and exporter – Report to the governor of the Bank of Korea
Setoff
Settling money periodically after receiving confirmation from exchange bank where importer and exporter open current account
Current Account
4. Imports and Exports Contract (1) Terms of Contract in Imports and Exports
1Price Terms
2.Quality Terms
3.Quantity Terms
4.Shipping Terms
5.Packing Terms
6.Insurance Terms
7.Settlement Terms
8.Claim and
Arbitration Terms
According to how price terms is decided, the responsibility of transaction such as delivery of goods, shipping contract, duty to sign insurance contract, and taking risk is divided between importer and exporter.
Price Terms of Imports and Exports Goods▷ Manufacturing Cost + Profit + Factor Cost (Incidental Expenses)▷ Factor Cost : Packing Cost, Inspection Fee, Transportation Fee, Quayage, Customs Duties, Shipping Fee, Goods Rate, Insurance Fee, and various Foreign Exchange Expenses, etc,
Sale by inspection Inspection Certificate Necessary
Sale by Samples Usually used in Industrial Products Transaction
Sale by Standard) FAQ(Fair Average Quality)
GMQ(Good Merchantable Quality)
Sale by Brand World Renown Brands
Sale by Specification Machinery, Vessel, etc (Difficult to Produce Sample)
FAQ : Average quality of all products produced in the yearGMQ : Used in transaction of material wood, frozen fish, ore, etc,
1Price Terms
2.Quality Terms
◆ Quality Agreement Terms
3.Quantity Terms
Quantity Terms Volume
Unit PCS, DOZENS, SET
Weight
Gross Weight Term: Include Package Weight
*L/T(Long Ton : English : 2,240 lbs) - Gross Ton*S/T(Short Ton : American Ton : 2,000 lbs) - Net Ton*M/T(Metric Ton : French Ton : 2,204 lbs) - Kilo Ton :1,000kgsNet Weight Term
Measurement* Lumber: Cubic Meter (CBM), Cubic feet (CFT) *Liquid : barrel
OthersLength (meter, feet, yard), Package (Case, Bag)
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• Shipping Date• Shipping Methods : Partial shipment, installment shipment, transshipment
• Choosing packing materials and packing units• SHIPPING MARK: Mark put on boxes or packing units in order to identify the contents easily • Essential Shipping Marks : Main mark, port mark, box mark and origin mark • If shipping mark is mentioned in L/C, it also has to be precisely described on transport documents • NM, No Mark Cargo : High possibility of mishap in shipping
Main Mark : Use specific symbol and put abbreviated words of importer within itCounter Mark : Put abbreviated words of manufacturer under main markCase Number : Number put on outside of boxPort Mark Weight MarkOrigin MarkCaution Mark : Fragile, keep Dry, etc,
4.Shipping Terms
5.Packing Terms
6.Insurance Terms
7.Payment Terms
8.Claim and
Mediation Terms
Cover All Risks : ICC(A/R) = ICC(A)Free From Particular Average : ICC(WA) = ICC(B)Free From Single Average : ICC(FPA) = ICC(C)Total Loss Only (TLO) : ICC(TLO) – Total Loss
• Terms of insurance to compensate the loss caused during shipment • Terms of payment in INCOTERMS 2000 - FOB, FAS: Insurability falls to importer - CIF CIP: Insurability falls to exorter
Marine Transport • In order to compensate the loss caused during marine transport, ICC (institute cargo clause) enacted by Institute of London Underwriters is used - Old Stipulation : Transcribed as ICC(A/R), ICC(WA), ICC(FPA) - New Stipulation : Transcribed as ICC(A), ICC(B), ICC(C)
• ICC(A/R = All Risk) Covers the widest range of risks excluding only a few exception clauses
* Air Transport : ICC(AIR) => Apply ICC(A) to air transport
Cover small range of loss
• Remittance Method (Preliminary, Post-facto)• Collection Method (D/P, D/A)• L/C Method
• Claim clauses, Mediation clauses, and other statutes are cited
(2)Price Terms
Price Terms of Imports and Exports Contract
What is INCOTERMS 2000?
Unified rule about translation of terms and conditions of international commerce has been established in 1936 at International Chamber of Commerce (ICC) and after several amendments, ‘INCOTERMS 2000’ revised at year 2000, is currently being used
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E Group Departure EXW Ex Works
F GroupMain Carriage Unpaid
FCAFOBFAS
Free CarrierFree on BoardFree Alongside Ship
C Group Main Carriage Paid
CFRCPTCIFCIP
Cost and FreightCarriage Paid toCost, Insurance and FreightCarriage and Insurance Paid to
D Group Arrival
DAFDESDEQDDUDDP
Delivered at FrontierDelivered Ex Ship Delivered Ex QuayDelivered Duty UnpaidDelivered Duty paid
* Constitution of INCOTERMS 2000 *
Methods of Price Indication Terms of Price + the last point of seller’s cost defrayment (port)
e.g.) Price indication in case the goods are transported from Pusan to Hong Kong under FOB condition → FOB Pusan
O – Exporter DefraymentX – Importer Defrayment
Manufacturin
g Cost
Package Inspectio
n
Carriage (carr
y-out)
Export
Approval
Export
Customs
Shipping
Charge
Insurance
Premium
Import Approva
l
Import Custom
s
Carriage (Carry-in)
E Group - EWX O O X X X X X X X X
F Group – FCA FAS FOB
OOO
OOO
OOO
OOO
OOO
XXX
XXX
XXX
XXX
XXX
C Group – CFR CIF CPT CIP
OOOO
OOOO
OOOO
OOOO
OOOO
[O][O][O][O]
X[O]X
[O]
XXXX
XXXX
XXXX
D Group – DAF DES DEQ DDU DDP
OOOOO
OOOOO
OOOOO
OOOOO
OOOOO
OOOOO
OOOOO
XXXXO
XXXXO
XXXOO
Diverging Point of Risk and Cost Defrayment
※ Summary of Cost Defrayment (Exporter Basis)
Price Terms
E F C D * △: As for C group, only when insurance premium is included in price terms (CIF, CIP), exporter pays insurance premium.Carriage X X O O
Insurance
Premium
X X △ O
E F C D