The Organization and Equipment preparation and implementation in International Business Transactions

Husniddin R. & Farangis D.

Objectives• i. Definitions:i. Transactionii. International Transactioniii. Business Transaction

• Important Elements in IBTi. Irrevocable decisionii. Documents to be presentediii. Contracts of Sale iv. The concept of “order” and “request”v. Import Transactionvi. Export Transactionvii. Typical types of documents in contracts

• The Transaction’s Dilemma• International Transaction Risks

Transaction• An agreement between a buyer and a seller to exchange an asset for payment.

• Agreement, contract, exchange, understanding or transfer of cash or property, occurs between two or more parties and establishes a legal obligation

• International Transaction• - is the selling and buying of items produced in a different country

•  

Business Transaction• -is an activity

which can be measured in term of money, and which must be recorded in business book ( or system) of account

International transaction

Important Elements in IBT

• Irrevocable decision• Documents to be presented• Contracts of Sale (why do we need COS?)• The concept of “order” and “request”• Import Transaction• Export Transaction

Docs To be Presented• Letters of credit are used primarily in int. trade for transactions between a supplier in one country & a purchaser in another. Most letters of credit are governed by rules promote by the Int. Chamber of Commerce known as Uniform Customs & Practice for Documentary Credits.

Why do we need COS?• A contract of sale is a legal contract an exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value in money paid or the promise to pay same. It is a specific type of legal contract.

The concept of “order” and “request”

Import or Export Transaction• An import or export transaction is

by definition a contractual exchange between parties in two countries that may have different legal systems, currencies, languages, religions or units of measure• All contracts should include

definitions and specifications for the quality, grade, quantity, and price of the goods in question

Typical types of documents in such contracts include:

• Financial Documents — Bill of Exchange, co-accepted draft

• Commercial Documents — Invoice, packing list• Shipping Documents — Transport document,

insurance certificate, commercial, official or legal documents

• Official Documents — License, embassy legalization, origin certificate, inspection certificate.

• Transport Documents — Bill of lading (ocean or multi-modal or charter party), airway bill, lorry/truck receipt, railway receipt.

• Insurance documents — Insurance policy, or certificate but not a cover note.

The Transaction’s Dilemma• International trade (i.e. between and importer and

exporter) must work around a fundamental dilemma:• They live far apart• They speak different languages• They operate in different political environments• They have different religions• They have different standards for honoring obligations

International Transaction Risks

• The following exhibit illustrates the sequence of events in a single export transaction.

• From a financial management perspective, the two primary risks associated with an international trade transaction are currency risk (currency denomination of payment) and risk of non-completion (timely and complete payment).

• The risk of default on the part of the importer is present as soon as the financing period begins.

Thank you for attention!!