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MTT045 - InternationalPhysical DistributionLecture 13:International Trade and Physical Distribution

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Contacts

Department for Global Business and TradeInstitute for Transport and Logistics ManagementNordbergstraße 15, 1090 Vienna, Austria

DR. HANS-JOACHIM SCHRAMMAssistant Professor

T +43-1-313 36-5981F +43-1-313 36-716Hans-joachim.schramm@wu.ac.atwww.wu.ac.at/itl

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Overall Framework

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Exporter,Shipper

Terminalat home

Importer,Consignee

Terminalabroad

Carrier on Pre-Carriage

Bank ofExporter

Bank ofImporter

Customs at home

Customsabroad

FreightForwarderat home

FreightForwarder

abroadTrans-

portationBroker

or Agent

Carrier on On-ward-Carriage

Carrier onMain Haul

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Some Recommended Readings

Grainger, A. (2011) ‘Trade Facilitation: A Conceptual Review’,Journal of World Trade Vol.45/1, pp. 39-62.Malfliet , J. (2011) ‘INCOTERMS 2010 and the mode of transport:how to choose the right term’, Universiteit Ghent.Tullverket / Swedish Customs (2012) ‘Keywords A-Z’, See:http://www.tullverket.se/en/startpage/keywordsaz.4.3238c5bc116a42faffb8000261.html

Wolffgang, H.-M. and T. Ovie (2007/2008) Emerging Issues inEuropean Customs Law, World Customs Journal Vol.1/1, 1/2and 2/1 (a series of 3 subsequent articles)David, P.A. and Stewart, R.D. (2010) International logistics - themanagement of international trade operations (3rd ed.), Thomson,Southbank (Victoria), (especially Chap. 5, 6, 7 and 9)Kummer, S., Schramm, H.-J. and I. Sudy (2009) InternationalesTransport- und Logistikmanagement (2nd ed.), UTB: Wien, Kap.6

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Trade EnvironmentLegal Framework of TradeInternational Trade AgreementsExport and Import ProceduresEuropean Community Customs

Trade ManagementSales Contract IssuesFunctions of PaperworkTrade Terms - esp. Incoterms® 2010Terms of Payment

Agenda of Lecture 13

What Facilitates Trade?

According to Granger (2011) four interdependentelements that define trade facilitation are:

(1) Simplification and harmonization of applicablerules and procedures,

(2) Modernization of trade compliance systems(esp. introducting eCustoms),

(3) Administration and management of trade andcustoms procedures,

(4) Institututional mechanisms to safeguard effectiveimplementation of trade facilitation.

For more about trade facilitation regarding Sweden see:http://www.kommers.se/In-English/Trade-Facilitation/

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• Norms and rules of international law and multinational treatiesor agreements, building up a supra-national legal framework:

• UNO, OECD, EEC/EC/EU, GATT/WTO,...

• Bilateral Commercial Treaties and Trade Agreements.

• National regulations, mainly following national interests:

• External Trade Law, Customs Law,....

• National and multinational regulations allowing valid cross-border legal transactions and their enforcement

• International private law and law of sales contracts

• Mediation and International arbitration

• Regulations about cross-border enforcement of sentences

Legal Framework of Trade

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European Unionand other Economic Trade Blocs

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GATT and WTO• The World Trade Organisation (WTO) was found 1995 to supervise e.g. the

• General Agreement on Tariffs and Trade (GATT)• General Agreement on Trade in Services (GATS)• Agreement on Trade Related Aspects of Intellectual Property (TRIPS)• Agreement on Trade Related Investment Measures (TRIMS)

European Union and European Community Law• Forming the European Community (EC) building up step by step a Single Euro-pean Market with almost free circulation of goods, capital, services and persons.

• Establishing the European Union (EU) after the Maastricht Treaty cameinto force with further co-ordination and harmonisation.

• Establishing the European Monetary Union (EMU).

Bilateral Trade Agreements• Commercial treaties for long lasting trade relations• Trade agreements to agree upon concrete trade measures

InternationalTrade Agreements

Supranational European Bodies

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Export and Import Procedures

=> Free movement of goods and services as a basic principle, but there aresome limitations as there is the right to stop goods with regard to the protectionof the environment, public health and security….

Sweden's trade policy is based on free trade. The Government's Statementon Trade Policy that was presented in the Riksdag on 14 April 2010 beginswith phrase, "Sweden's development - from poverty to a welfare society - isthe history of deregulation and free trade".

See: http://www.sweden.gov.se/sb/d/3086/a/118563

Every good moving into an economic area or from one economic area to anotherhas to be presented to customs authorities, together with trade and customsdocuments necessary for export, import, and/or customs clearance.

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Several possibilities depending on origin, quality and nature of a good:

• No Importation (Exportation) restrictions, no permit or licence needed.

• Importation (Exportation) subject to a permit or licence,

• Simplified Importation (Exportation) Procedureslike Summary Declaration or Incomplete Declaration possible.

Classification of Goods according to Harmonized System (HS) which is included inthe Combined Nomenclature (CN), published annually in the Official Journal of the EC.

HS Nomenclature includes about 5,000 commodity groups which are identified by a 6-digit code and arranged according to a legal and logical structure based on fixed rules.The Combined Nomenclature of the European Community (EC) integrates it andincludes additional 8-digit subdivisions and legal notes specifically created to addressthe needs of the Community. For further information see:http://ec.europa.eu/taxation_customs/customs/customs_duties/tariff_aspects/index_en.htm

or Swedish TARIC Database: http://taric.tullverket.se/taric/bin/tagAvdelningar.cgi

The Importation Procedure

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Example: Importation Listfrom German AWV

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Two-Step Clearance on Exportation• Export Pre-Entry with Entry Outwards at an Inland Customs Office (Office of Loading).

• After presentation of goods, Pre-Shipment Declaration and Export Declaration (orcopy 1 and 2 of the Single Administrative Document (SAD)) remain at Inland CustomsOffice, copy 3 of the SAD is stamped or some other Accompanying AdministrativeDocument (AAD) is issued to accompany the goods to the external frontier.

• Outward Clearance at the external frontier (Office of Exit or Office of Departure), normallywithout a second presentation of goods: copy 3 the SAD or the AAD is stamped and givento the Exporter, together with a Commercial Evidence of Exportation (if needed).

Some Simplifications are possible• Oral Declaration for goods for commercial use up to an value of 1,000 EUR

• Low Value Goods Procedure for goods not subject to export restrictions and a valuebetween 1,000 and 3,000 EUR as an one-step exportation procedure at Office of Exit.

• Local Clearance Procedure (LCP) in order to handle goods at approved inland premises.

The Exportation Procedure(paper-based)

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A full-set SAD consists of 8 copies• Copy 1 for the Office of Departure• Copy 2 for Export Declaration and/or statisticalpurposes at the country of departure

• Copy 3 for principal, consignor and/or exporter• Copy 4 for the Office of Destination• Copy 5 as a Transit Return Copy• Copy 6 for Import Declaration• Copy 7 for statistical purposes

at the country of destination• Copy 8 for the consignee

Apart from this, several combinations ofcopies are also applicable:

• for Import copies 6, 7 and 8• for Export copies 1, 2 and 3• for Transit copies 1, 4, 5 (and a copy of 4)

Since 01.01.1993, the SAD is obligatory for import, export and transit of goods between thecontracting parties (EC, EFTA and the Visegrad Countries), regardless of their kind and origin.

The Single AdministrativeDocument (SAD)

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The present European Community Customs Law is• based on the basic principles of the Revised Kyoto Convention (InternationalConvention of the Simplification and Harmonisation of Customs Procedures)

• codified in the Council Regulation (EEC) No 2913/92 establishing the Com-munity Customs Code and Commission Regulation (EEC) No 2454/93 withimplementing provisions (actual revisions with EC No. 648/2005, 1875/2006and totally useless Modernized Customs Code with EC No. 450/2008)

• and adopted by all members of the EC forming a Customs Union with nocustoms barriers between them, a Common External Tariff and CommonTrade Measures.

Therefore, all goods entering the customs territory of the EC are subject to CustomsClearance Procedures.

According to Customs Status of Goods, we can distinguish between goods having aCommunity status (Community goods) and those without (Non-Community goods)

European CommunityCustoms Law

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The EC Customs Territory consists of:Austria; Belgium; Bulgaria; Cyprus; Czech Rep.; Denmark (except the Faeroe Islands andGreenland); Estonia, Finland; France (including Monaco); Germany (except Büsingen and theIsle of Helgoland); Greece; Hungary; The Republic of Ireland; Italy (including San Marinoexcept the communes of Livigno and Campione d’Italia and part of the Lake Lugano); Latvia;Lithuania; Luxembourg; Malta; Netherlands; Poland, Portugal (including the Azores andMadeira); Romania; Slovak Rep.; Slovenia; Spain (including the Balearic Islands but excludingCeuta and Melilla); Sweden; United Kingdom (including the Isle of Man, Akrotiri and Dhekelia).

There are some "special territories" which are within the EC Customs Territory butoutside the EC Fiscal (VAT) Territory:The Åland Islands; The Channel Islands; The Canary Islands; The Overseas Departments ofFrance (Guadeloupe, Martinique, Reunion and French Guyana) and Mount Athos.

Further there are Customs Unions between Italy and San Marino, France, Spainand Andorra and a Free Trade Agreement with Turkey.

The Vatican City is not part of the EC and Gibraltar or other overseas territories ofEC member states not explicitly mentioned above are not regarded as part of the ECfor VAT or customs purposes - the same holds true for the Turkish part of Cyprus.

Definition of Fiscaland Customs Territory

For more about see i.e.: http://en.wikipedia.org/wiki/Special_Member_State_territories_and_the_European_Union

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Goods Declaration / Customs Declaration• Normally lodged using the SAD together with document showing value and origin of goods i.e.for preferential treatment in the case of Preferential Origin and decision about assignment ofthe goods presented to a Customs-Approved Treatment or Use

• Proof of admissibility and of responsibilities.Customs Examination of Goods• Physical inspection of goods presented and/or taking samples by customs authorities toverify that nature, origin, condition, quality and value of the goods are in accordance with theparticulars mentioned in the goods declaration.

• Customs authorities have a right to but not the obligation to examine goods presented- nevertheless, goods have to be presented !

Assessment of Duties and Taxes• Determination of the amount of duties and taxes payable and giving authorisation to acustoms-approved treatment on the goods declaration or some additional copy serving asa document of evidence about Customs of Entry or Customs Relief.

Notice of Assessment• Addressed to the debtor (importer, buyer, owner of the good), payable at once, but deferredpayment possible (credit period of 30 days), if securities or guaranteed payments are indicated

Customs Clearance- Normal Procedure

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Preferential Origin –Preference and Cumulation Rules

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Contractual customspreferences for both ex-and imports i.e. EFTA,Turkey, CARIFORUM,Chile, Mexico, South Africa

Autonomous customspreferences only forimportation of goods,i.e. ACP, MAR, Syria,Kosovo

Further a multilateralcumulation is possiblewithin the same preferencezone and within e.g. CEFTA,EU27 or PAN EURO MED

For further details see:http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/index_en.htm

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Forms of Customs ApprovedTreatment or Use

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Customs Transit Procedures

Other TransitProceduresfor goods flowsthrough theterritoriesof contractingcountries

Common Transit (EU)for goods flows betweenEC and EFTA or Vise-grad countries or insideEC with transit throughEFTA/Visegrad Countries

Community Transit(COM)for goods flows insideEC or between EC andAndorra or San Marino

external Transit Procedure (T1) for Non-Community Goods

internal Transit Procedure (T2)for Community Goods

Carnet T.I.R.(Transport

International deMarchandises parVéhicules Routier)

Forms of CustomsTransit Procedures

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Carnet T.I.R. (Transport International de Marchandises par Véhicules Routier)

• Customs Transit Document only for transitmovements which begin and end outside theEC or are effected between two points in theEC through territory of a third country and anauthorised guaranteeing association exists(approx. 60 contracting parties).

• Transit Movement starts at the customs officeof departure and is terminated at the customsoffice of destination and controlled by Vouchers(Volets/Souches) attached.

• The T.I.R.-carnet is valid for 60 days and onejourney of one vehicle or container.

• Requirements:• At least some part of the journey is made by road,• Goods travel in approved vehicles or containers under customs seal,• Vehicle or container used display T.I.R.-plates during transit operations,• Duties and taxes are are covered by a internationally valid guarantee.

.Carnet T.I.R. and Carnet A.T.A

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Carnet T.I.R. and Carnet A.T.A.

Carnet T.I.R. Issued 1998-2010

Group 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EU15 314.100 194.650 225.250 218.400 219.150 203.650 203.600 158.150 147.800 109.200 104.800 57.100 76.250

EU12 1.526.450 1.271.200 1.476.800 1.448.750 1.626.700 1.753.700 1.494.550 1.436.350 1.519.200 727.750 912.450 595.250 808.200

EFTA 5.800 2.500 2.700 3.700 2.900 2.600 1.600 1.550 1.700 600 750 1.300 750

YUG 27.200 32.750 24.750 30.700 40.500 37.900 42.450 42.200 49.650 38.700 44.650 33.650 48.400

CIS 519.850 532.550 685.400 662.600 772.400 845.750 890.250 967.700 1.142.700 1.356.350 1.374.650 991.550 1.126.900

TUR 307.000 279.000 336.000 327.000 412.000 419.000 544.000 589.000 689.000 788.500 765.000 490.000 701.500

others 32.500 31.350 31.700 16.800 21.550 35.400 34.600 35.700 49.800 55.150 51.500 61.550 60.200

TOTAL 2.732.900 2.344.000 2.782.600 2.707.950 3.095.200 3.298.000 3.211.050 3.230.650 3.599.850 3.076.250 3.253.800 2.230.400 2.822.200

Group 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EU15 11,49 8,30 8,09 8,07 7,08 6,17 6,34 4,90 4,11 3,55 3,22 2,56 2,70

EU12 55,85 54,23 53,07 53,50 52,56 53,17 46,54 44,46 42,20 23,66 28,04 26,69 28,64

EFTA 0,21 0,11 0,10 0,14 0,09 0,08 0,05 0,05 0,05 0,02 0,02 0,06 0,03

YUG 1,00 1,40 0,89 1,13 1,31 1,15 1,32 1,31 1,38 1,26 1,37 1,51 1,71

CIS 19,02 22,72 24,63 24,47 24,95 25,64 27,72 29,95 31,74 44,09 42,25 44,46 39,93

TUR 11,23 11,90 12,08 12,08 13,31 12,70 16,94 18,23 19,14 25,63 23,51 21,97 24,86

others 1,19 1,34 1,14 0,62 0,70 1,07 1,08 1,11 1,38 1,79 1,58 2,76 2,13

TOTAL 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00

Source: http://www.unece.org/ar/tir/tircarnets.html(1) Serbia and Montenegro was one country until 2006. As from 2006 figures for Montenegro and Serbia are separated.The IRU started issuing TIR Carnets to Serbia in 2006, to Montenegro in 2008, to Bosnia Herzegovina since 2010.

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Source: http://www.iru.org/index/cms-filesystem-action?file=tir/TIR_operation_800.gif

For further details see: http://www.iru.org/index/en_iru_about_tir

Carnet T.I.R. and Carnet A.T.A.

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Carnet A.T.A. (Admission Temporaire - Temporary Admission)

• International Customs Documentused for temporary admission of goodsfor displays, exhibitions and fairs asprocessional equipment or commercialsamples

• Issued by the ICC to national guaranteeingassociations (normally national Chambersof Commerce) and covered to by an inter-national guaranteeing chain.

• Can be used within one year for all journeysfrom/to all member countries of the ICC.

• In case of the Republic of China (Taiwan) aspecial Carnet C.P.D. needed.

For further details see:http://www.iccwbo.org/ata/id2965/index.html

Carnet T.I.R. and Carnet A.T.A.

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The Technological Revolutionin Customs Clearance

More about? See: http://ec.europa.eu/ecip/model_transactions/index_en.htmhttp://ec.europa.eu/taxation_customs/common/databases/index_en.htm

Typical eCustoms Implemen-tation for an EU-Member State

28Source: IBM (2008)

See Tullverkets internetdeklaration (TID):http://www.tullverket.se/innehallao/t/tid/tullverketsinternetdeklarationtid.4.4ab1598c11632f3ba9280002734.html

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Further Developments:EC e-Customs Initiative

EOSREX

COPIS

31/12/2011 31/12/2011

22/05/2013 22/05/2013

Additions accordingto MASP Rev 10 !

Abbreviations Resolved

AEO: Authorized Economic OperatorAES: Automated Export SystemAIS: Automated Import SystemCOPIS: Customer, Output, Process, Input, SupplierECS: Export Control SystemECICS: European Customs Inventory of Chemical SubstancesEMCS: Excise Movement and Control SystemEORI: Economic Operator Registration and IdentificationEOS: Economic OperatorsEBTI: Binding Tariff InformationICS: Import Control SystemITE: Integrated Tariff EnvironmentMASP: Multi-Annual Strategic PlanNCTS: New Computerized Transit SystemREX: Registered Exporters SystemsSEED: System for the Exchange of Excise DataTARIC: Tarif Intégré de la Communauté

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CarrierExporter Importer

Bank ofExporter

Bank ofImporter

Sales Contract

B/L againstConsignment

Consigmentagainst B/L

Issuing of the B/L

Sending the B/L

B/L againstDocumen-tary Collec-tion or L/C

DirectPaymentor Issuing

a L/C

Sending the L/C or Clean Payment

Credit orhandingover the

L/C

Goods Flow Flow of Property Rights Financial Flow

Trade Management:Goods Flow, Flow of PropertyRights and Financial Flow

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International Procedural Law• Each country regulates for himself autonomously in their international procedurallaw, which is the proper law of a contract and which court have jurisdiction to heara case concerning parties from different countries.

• The overall principle is that the proper law of a contract is the system of law byreference to which the contract was made or that with which the transaction hadis closest and most real connection (e.g. Rome Convention of 1980).

Uniform Law of Sales Contracts• International Sales Contracts can be subject to the Vienna Convention(UNCITRAL Convention on Contracts for the International Sale of Goods (CISG))of 1980, forming a uniform law of sales contract (apart from some exclusions forspecial cases). Since 01/01/1989, the CISG is proper law for Sweden.

• The CISG can only applied if the parties have their place of business in differentcountries and both are contracting states of the CISG and/or the rules of theirprivate international law lead to the application of the law of a contracting state.

• The application of the CISG can be excluded by an explicit arrangement.

Sales Contract Issues

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Possible Functionsof Paperwork:• Document of Title• Evidence of Contract• Fixing Obligations• Giving Right of Disposal• Identification of Consignment• Negotiability• (Re-)Financing

Documents of Title

Obligation of honour ifdocument is presented

Papers of Identification

Obligation of honourif document or some otherproof of title is presented

Documents of Evidence

No obligation of honourand therefore no need forpresentation of document

Bearer Documents

Order Bills / Mercantile Papers

Registered Documents of Title

Transfer by Simple Delivery, bearer/holderof the document is the authorised person

Transfer from endorser to endorsee byan endorsement (‘in dossa’), authorisedperson is the last mentioned endorsee

Transfer from transferor to transferee by anassignment, the named person is authorised

Functions of Paperwork

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Examples:Bill of Lading (B/L)Air Waybill (AWB)Sea Waybill (SWB)CIM Waybillfor International Transpor-tation by Rail under CIMCMR Waybillfor International Transpor-tation by Road under CMRFIATA Forwarders Certificateof Receipt (FCR)FIATA Forwarders Certificateof Transport (FCT)FIATA Multimodal TransportBill of Lading (FBL)Parcel Receipt

Consignment Notes are issued, whena consignment is given to a Freight For-warder or an Carrier and act as a receiptfor the goods tendered for dispatch and asan evidence of the contract of carriage

They are subject to different legal regulationsaccording to the mode choice and countriespassed through during transportation

In addition to this, functions of thesedocuments are very different, i.e.

• A Bill of Lading (B/L) is a mercantilepaper, therefore a document of title,paper of identification and full negotiable

• A Waybill is a non-negotiable document ofevidence, giving at least a right of disposal

Example: Paperwork forTransport Documentation

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Commercial Documents• Document of Evidence about a sales

contract and basis for customs clearance

Certificates of Origin and Value• Receipt upon origin and/or value ofmerchandises needed for exportationand/or importation procedures andassessment of duties and taxes

Other Documents• Inspection Certificates to certify quantity,quality or origin of merchandises

• Move Orders, Packing Lists and CargoManifests for a better control of consignmentsin transit.

Examples:Commercial InvoiceCertified InvoiceConsular InvoiceCustoms InvoiceCertificate of OriginInvoice DeclarationMovement CertificateExport- or Import PermitExport- or Import LicenseCarnet T.I.R.Carnet A.T.A.Inspection CertificatesMove OrdersPacking Listsand Cargo Manifests

Example: Paperwork for Tradeand Customs Documentation

Trade Terms- but not Terms of Trade ;-)

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Trade Terms• Industry-specific contract terms or regional usances, which aredifferent interpreted from place to place or from country to country.

International Commercial Terms (Incoterms®)• Common and widely accepted set of standardised Trade Terms.• 1928 worked first out by the International Chamber of Commerce (ICC)

in Paris, several times revised, last revision with Incoterms® 2010• The Incoterms® deal with delivery conditions between buyer and seller

of a sales contract and the apportion of costs and risks of transportmovement. They can be divided in four Groups:

• Group E: Ex-Works• Group F: Movement of Goods arranged by Buyer• Group C: Movement of Goods arranged by Seller• Group D: Goods Delivered

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Definition of Seller'sand Buyer's obligations

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A Seller’s obligationsA1 General obligations of the sellerA2 Licences, authorizations, security

clearances and other formalitiesA3 Contract of carriage and insuranceA4 DeliveryA5 Transfer of risksA6 Allocation of costsA7 Notices to the BuyerA8 Delivery of documentsA9 Checking – packaging – markingA10 Assistance with information

and related costs

B1 General obligations of the buyerB2 Licences, authorizations, security

clearances and other formalitiesB3 Contract of carriage and insuranceB4 Taking deliveryB5 Transfer of risksB6 Allocation of costsB7 Notices to the sellerB8 Proof of DeliveryB9 Inspection of GoodsB10 Assistance with infor-

mation and related costs

But Incoterms® say nothing about price to be paid, method of payment,and transfer of title as well as consequences of a breach of contract…For more details see: http://www.iccwbo.org/incoterms/id3038/index.html

B Buyer’s obligations

Incoterms ® 2000 Overview

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Inco-term

Meaning in full words Place of Delivery Exportation

ProcedureContract of

CarriagePlace of Risk

TransferPlace of Cost

TransferImportationProcedure

CargoInsurance

EXW Ex Works Seller's ownPremises Buyer Buyer Place of

DestinationPlace of

Destination Buyer -

FCA Free Carrier Named Placeof Delivery to Carrier Seller Buyer Place of

DestinationPlace of

Destination Buyer -

FAS Free AlongsideShip

Alongside Ship atPort of Departure Seller Buyer Place of

DestinationPlace of

Destination Buyer -

FOB Free On Board Ship at Port of Departure Seller Buyer Ship’s Rail Ship's Rail Buyer -

CFR Cost and Freight Ship at Port of Departure Seller Seller Ship's Rail Port of

Destination Buyer -

CIF Cost, Insuranceand Freight

Ship at Port of Departure Seller Seller Ship's Rail Port of

Destination Buyer Buyer withMinimum Cover

CPT Carraige Paid to Named Place of Deli-very to 1st Carrier Seller Seller Place

of DestinationPlace of

Destination Buyer -

CIP Carriage andInsurance Paid to

Named Place of Deli-very to 1st Carrier Seller Seller Place of

DestinationPlace of

Destination Buyer Buyer withMinimum Cover

DAF Delivered atFrontier

Place of Deliveryis at Named Frontier Seller Seller Place of Destina-

tion at FrontierPlace of Destina-tion at Frontier Buyer -

DES Delivered ex Ship Ship at Port of Destination Seller Seller Ship at Port

of DestinationShip at Port

of Destination Buyer -

DEQ Deliviered exQuay Duty Paid

Quay at Port of Destination Seller Seller Quay at Port

of DestinationQuay at Port

of Destination Buyer -

DDU DeliveredDuty Unpaid

Named Placeof Destination Seller Seller Place of

DestinationPlace of

Destination Buyer -

DDP Delivered DutyPaid

Named Placeof Destination Seller Seller Place of

DestinationPlace of

Destination Seller -

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Incoterms ® 2010 Overview

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Inco-term

Meaningin full words Place of Delivery Exportation

ProcedureContract of

CarriagePlace of Risk

TransferPlace of Cost

TransferImportationProcedure

CargoInsurance

EXW Ex Works Seller's ownPremises Buyer Buyer Place of

DestinationPlace of

Destination Buyer -

FCA Free Carrier Named Placeof Delivery to Carrier Seller Buyer Place of

DestinationPlace of

Destination Buyer -

FAS Free AlongsideShip

Alongside Ship atPort of Departure Seller Buyer Place of

DestinationPlace of

Destination Buyer -

FOB Free On Board Ship at Portof Departure Seller Buyer Delivered

on boardDeliveredon board Buyer -

CFR Cost and Freight Ship at Portof Departure Seller Seller Delivered

on boardPort of

Destination Buyer -

CIF Cost, Insuranceand Freight

Ship at Portof Departure Seller Seller Delivered

on boardPort of

Destination Buyer Buyer withMinimum Cover

CPT Carraige Paid to Named Place of Deli-very to 1st Carrier Seller Seller Place

of DestinationPlace

of Destination Buyer -

CIP Carriage andInsurance Paid to

Named Place of Deli-very to 1st Carrier Seller Seller Place of

DestinationPlace of

Destination Buyer Buyer withMinimum Cover

DAP Delivered atPlace

Named Placeof Delivery Seller Seller Named Place

of DeliveryNamed Place

of Delivery Buyer -

DAT Delivered atTerminal

Place of Terminal/Port of Destination Seller Seller Named Place

of DeliveryNamed Place

of Delivery Buyer -

DDP Delivered DutyPaid

Named Placeof Destination Seller Seller Place of

DestinationPlace of

Destination Seller -

In principle, DAF, DES, DDU was replaced by DAP and DEQ by DAT

Further Characteristics

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One Point Clauses (Transfer of risks and costs at same place):EXW, FCA, FAS, FOB, DAP, DAT, DDP

Two Point Clauses (Different place of transfer of risk and costs):CPT, CIP, CFR, CIF

Principally for any mode(s) of transports applicable:EXW, FCA, CPT, CIP, DAP, DAT, DDP

Only for maritime shipping / inland waterway:FAS, FOB, CFR, CIF

Can be also used for international as well as domestic shipmentsHave to be explicitly incorporated into a sales contract, like“[…] according to Incoterms® 2010”“Named Place” has to be specified as precisely as possible, e.g. bypostal address / UNLOCODE (http://www.unece.org/cefact/locode/)

21

41

Short-Run Terms of Payment• Cash in Advance (CIA) and Down Payment• Cash on Delivery (COD) and Consignment Sale• Payment against Invoice of Open Account• Documents against Payment (d/p collection)• Documents against Acceptance (d/a collection)• Documents against Payment of Letter of Credit (d/p credit)• Documents against Acceptance of Letter of Credit (d/a credit)

Long-Run Terms of Payment• Supplier Credit for exports with re-financing from OeKB• Buyer Credit for imports from OeKB or other commercial banks• Leasing• Forfaiting

Terms of Payment

42

CollectionOrder and

Deliveryof Docu-

ments

Exporter(Seller,

Creditor,Shipper)

Importer(Buyer,Debtor,

Consignee)

Bank ofExporter

(RemittingBank)

Bank ofImporter

(CollectingBank)

Delivery of Consignment

Sales Contract with d/p Collection

Credit toExporter'sAccount

withAmount

Due

Forwarding of Documents for Collection(according to Collection Order)

Reimbursement on Account of Correspondence Bank

Documentsagainst

Payment(according

to CollectionOrder)

Documentsagainst

Consignment

Consignmentagainst

Documents1

2

3

4

5

6

7

8

Documentary Collection

Sou

rce:

Kum

mer

et a

l. (2

010)

22

43

Payment Orderin EUR or Foreign Currency

Cheque PaymentOpen Cheque,

Crossed Cheque,Cheque to Bearer,

Cheque not to Order,Cheque to Order,...

Documentary DraftBill of ExchangePromissory Note

Sight Draft,Time Draft,Date Draft

Documentary (Letter of) Creditd/p Credit, d/a Credit,

Commercial Letter of Credit,Sight or Deferred Payment,(Non-)Transferable Credit,

(Ir-)Revocable Credit,(Non-)Revolving Credit,(Un-)Confirmed CreditBack-to-Back Credit ,...

Counter Trade MeasuresBarter,

Counter Purchase,Buy-Back,Clearing,

Offset

Means of Payment

44 Sour

ce: B

ank

for I

nter

natio

nal S

ettle

men

ts (2

009)

Use of various cashless payment instruments by volume of transactions(Figures for 2008 in %):

Use of various cashless payment instruments by value of transactions(Figures for 2008 in %):

B F D I NL S CH GB USA CDN SGP

Credit transfers 42.2 17.1 35.2 30.6 31.1 32.3 55.4 20.9 6.7 11.6 1.4

Direct debits 11.3 19.2 50.0 16.0 25.8 8.3 3.6 20.2 10.7 7.9 2.3

Cheque payment 0.4 22.1 0.4 11.1 nap 0.0 0.1 9.2 26.0 13.0 3.8

E-money payment 3.7 0.2 0.3 2.1 3.7 nap 1.4 nav nav nav 84.3

Credit or debit cards 42.4 41.5 14.1 40.2 39.4 59.3 39.6 49.8 56.7 67.4 8.2

B F D I NL S CH GB USA CDN SGP

Credit transfers 96.4 84.9 83.9 82.3 93.7 90.0 96.6 96.6 26.0 59.4 17.1

Direct debits 1.4 4.6 15.4 3.9 4.9 3.7 1.5 1.1 18.2 4.9 6.7

Cheque payment 1.1 9.0 0.6 12.2 nap 0.6 0.1 1.8 51.4 31.9 70.7

E-money payments 0.0 0.0 0.0 0.1 0.0 nap 0.0 nav nav nav 0.3

Credit or debit cards 1.1 1.4 0.2 1.5 1.4 5.8 1.9 0.5 4.4 3.8 5.2

Clean Payments /Cashless Payment Instruments

23

45

Sending Bill of Exchange (Draft)for Signature and Acceptance

9

Exporter(Creditor,Drawer,

Indorser A)

Importer(Debtor,Drawee,

Acceptor)

Indorsee A, Indorser B

Delivery of Consignment

Sales Contract with Payment based on Bill of Exchange

PresentationBill of Exchange

on Due Date

1

2

3

4

5

6

7

8

CreditMarket

CommercialBank

(CollectingBank)

Return Bill of Exchange (Acceptance)after Signature and Acceptance

Indorsee B, Indorser C

CommercialBank,

Indorsee C

Bill of ExchangeEndorsement and Delivery

DiscountingBill of Exchange

Selling Billof Exchange

DocumentaryCollection

Several timesBill of Exchange

Endorsement and Delivery

Alternatively: Keeping Bill of Exchangeuntil Maturity and then Presentation

4

Documentary Draft(Bill of Exchange)

Sou

rce:

Kum

mer

et a

l. (2

010)

46

9

2

3

4

5

6

7

8Appli-

cation fora Documen-tary Credit

Exporter(Shipper,Creditor,

Beneficiary)

Importer(Consignee,

Debtor,Applicant)

CorrespondenceBank

(Confirming Bank,Advising Bank,Paying Bank)

Bank of Importer(Issuing Bank,Reimbursing

Bank)

Delivery of Goods

Sales Contract with Payment based on d/p credit

Abstract Claim with Bona-Fide-Clause (without only a Drawing Authorisation)

Forwarding Documentary Credit and Request for Confirmation

Reimbursement on Account of Correspon-dence Bank after Forwarding Documents

Documentsagainst

Consignment

Consignmentagainst

Documents1

Documentsagainst Debitfrom

Account

Tender ofDocuments,

CreditDrawnafter

Acceptanceof Documents

Noti-ficationabout

Openingthe Docu-mentaryCredit

Documentary Credit

Sou

rce:

Kum

mer

et a

l. (2

010)

24

47

The term Counter Trade refers to any transaction, in which payments aremade partially of fully with goods and/or services instead of moneyForms of Counter Trade Measures:

• Barter: exchange of goods without any money involved• Counter Purchase: exchange of unrelated goods instead of cross-border payments by means of two separate but linked contracts

• Buy-Back: acceptance of partial or full payment from products pro-duced by machinery or capital equipment delivered

• Clearing: Accounting of purchases with Clearing between countries• Offset: some percentage of sales volume has to offset by own pur-chases or facilitation of purchases by others in the buying country

Reasons for Counter Trade Measures:• Avoiding exchange controls• Selling to countries with inconvertible currencies• Marketing in less-developed, cash-trapped countries• Reduction of currency risk in case of high volatility• Protection of business and jobs at home

Counter Trade Measures

48

S.W.I.F.T.(Society for Worldwide Interbank Financial Telecommunications)

Paperless FEDI-Transmission System used i.e. for Payment Orders,Notifications or other Messages between corresponding banks

TradecardInternet-based Trade Transaction System of a banking consortia (i.e. ABN

Amro, Huntington International, Bank of America) for Financial Transfersbased on eL/Cs (L/Cs in electronic form) and Documentary Collection

Bolero.netJointVenture of S.W.I.F.T. and Through Transport Club to build up an

internet-based infrastructure for Paperless Trade Transactions i.e. bymeans of a Bolero-B/L (B/L in electronic form)

Electronic TradeTransaction Systems