Import Process Assignment

8/6/2019 Import Process Assignment

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Supply Chain Management

Course

Assignment: 03

Submitted to:

Sir Rizwan Tanveer

By:

Maria Masood (11994)

Tahir Hameedi

Abdul Rehman

Faiza

Dated: 23.04.11

Class: Sat (9-12)

Iqra University


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Financing options - Trade finance, short/medium/long term financing,

government loan guarantee program, private lenders, angel financing.

International Commercial Terms (Inco terms 2000) - Identify the

responsibilities of buyer and seller.Countertrade - Barter, counter purchase, offset, and switch trading,

compensation or buybacks

Letter of Credit:

LETTER OF CREDIT (LOC) is a legal document issued by a

buyer's bank that upon presentation of required documents

payment would be made. Usually confirmed by the sellers bank,protection is given to the seller that payment will be made if the

goods are shipped correctly, and protection is given to the buyer

that the goods will be shipped before payment is made.

In the event that the buyer is unable to make payment on the purchase,

the bank will be required to cover the full or remaining amount of the

purchase.

.

Types of Letter of credit

y Revocable versus Irrevocable

x Once an irrevocable letter of credit is open it cannot be

changed without the written consent of all parties

including the beneficiary.

x A revocable letter of credit can be change or withdrawn

without notifying the beneficiary.

y Confirmed versus Advised


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Confirmed is preferred, as the Confirming Bank promises to

pay.

Advised does not guarantee the creditworthiness of the

Opening Bank.

y Straight versus Negotiation

A negotiation letter of credit can be presented to any bank.

A straight letter of credit can only be paid in the country of

the Paying Bank.

y Sight versus Usance

At sight means the Beneficiary is paid as soon as the Paying

Bank has determined that all necessary documents are in

order.

Usance time can be between 30 and 180 days after the bill of

lading date.

x This is a form of delayed payment, and should be

avoided.

Essentials of Letter of Credit:

The letter of credit application should contain the following information:

y Beneficiary indicate the company name and complete address

of the exporter.

y Amount State the actual amount of the credit, including any

freight or insurance costs as agreed to by both parties.

Approximate or 'about' amounts are used to indicate an acceptable

level of 10 percent plus or minus the stated amount.


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y Validity or Expiry Date Indicate the time required by theexporter to prepare the shipment and the necessary documents for

presentation to the bank.

y Advising Bank or Beneficiary's Bank It is optional to indicate

the exporter's bank. This may be left blank so that the issuing bankcan freely select an advising bank. If the exporter specified a

particular advising bank, it is customary that the buyer lists this

bank on the letter of credit application.

y Tenor or Payment Availability The tenor of the credit

determines when payment is available. Sight drafts call forpayment upon shipment and examination of compliant documents.

Time drafts or deferred payment may be used as agreed to in

advance between buyer and seller, which allow for a specifiedperiod of time to elapse from shipment to payment.

y Required Documents The documents required for the buyerspecifies presentation and payment to the exporter.

y Description of Goods This should be a short, concise

description of the goods being shipped including quantity. If thecredit allows for an approximate amount, it is acceptable that the

goods shipped be plus or minus 10 percent in quantity as well.

y Other Conditions to Fulfill State any additional conditionsrequired by the exporter. If the credit is transferable, it will beindicated in this section of the letter of credit application

INCOTERMS:

A set of rules, published by the International Chamber of Commerce in

1936 for the interpretation of the most commonly used trade terms in

foreign trade that parties can agree upon to avoid misunderstandings,

disputes and litigation


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FAS (Free alongside Ship):In these transactions, the buyer bears all the transportation costs and the

risk of loss of goods. FAS require the shipper/seller to clear goods for

export, which is a reversal from past practices. Companies selling on

these terms will ordinarily use their freight forwarder to clear the goodsfor export. "Delivery" is accomplished when the goods are turned over

to the Buyers Forwarder for insurance and transportation.

CFR(Cost and Freight)This term formerly known as CNF (C&F) defines two distinct and

separate responsibilities-one is dealing with the actual cost of

merchandise "C" and the other "F" refers to the freight charges to a

predetermined destination point. It is the shipper/seller's responsibility toget goods from their door to the port of destination. "Delivery" is

accomplished at this time. It is the buyer's responsibility to cover

insurance from the port of origin or port of shipment to buyer's door.Given that the shipper is responsible for transportation, the shipper also

chooses the forwarder.

CIF (Cost, Insurance and Freight)

This arrangement similar to CFR, but instead of the buyer insuring the

goods for the maritime phase of the voyage, the shipper/seller will insurethe merchandise. In this arrangement, the seller usually chooses the

forwarder. "Delivery" as above, is accomplished at the port of

destination.

CPT (Carriage Paid To)

In CPT transactions the shipper/seller has the same obligations found

with CIF, with the addition that the seller has to buy cargo insurance,naming the buyer as the insured while the goods are in transit.

CIP (Carriage and Insurance Paid To)This term is primarily used for multimodal transport. Because it relies on

the carrier's insurance, the shipper/seller is only required to purchase

minimum coverage. When this particular agreement is in force, Freight


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Forwarders often act in effect, as carriers. The buyer's insurance is

effective when the goods are turned over to the Forwarder.

DAF (Delivered At Frontier)

Here the seller's responsibility is to hire a forwarder to take goods to anamed frontier, which usually a border crossing point, and clear them for

export. "Delivery" occurs at this time. The buyer's responsibility is toarrange with their forwarder for the pick up of the goods after they are

cleared for export, carry them across the border, clear them for

importation and effect delivery. In most cases, the buyer's forwarder

handles the task of accepting the goods at the border across the foreign

soil.

DES (Delivered Ex Ship)In this type of transaction, it is the seller's responsibility to get the goodsto the port of destination or to engage the forwarder to the move cargo to

the port of destination unclear. "Delivery" occurs at this time. Any

destination charges that occur after the ship is docked are the buyer'sresponsibility.

DEQ (Delivered Ex Quay)*

In this arrangement, the buyer/consignee is responsible for duties andcharges and the seller is responsible for delivering the goods to the quay,

wharf or port of destination. In a reversal of previous practice, the buyer

must also arrange for customs clearance.

DDP (Delivered Duty Paid)

DDP terms tend to be used in intermodal or courier-type shipments.Whereby, the shipper/seller is responsible for dealing with all the tasks

involved in moving goods from the manufacturing plant to the

buyer/consignee's door. It is the shipper/seller's responsibility to insurethe goods and absorb all costs and risks including the payment of duty

and fees.


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DDU (Delivered Duty Unpaid)This arrangement is basically the same as with DDP, except for the fact

that the buyer is responsible for the duty, fees and taxes

Documents: Bill of Lading (title document, since possession of an original bill

of lading is equivalent to having the title of the goods in possession

of the holder)

Commercial Invoice: A document that details the transaction

between a seller and a buyer. It generally contains the name and

address of the seller and buyer, date of the sale, a description of thegoods, quantity, unit price, terms of sale, amount due under the

Letter of Credit and type of currency.

Consular Invoice

Certificate of Origin: A document that certifies a specific country

as the origin of specific goods. Certain countries for tariff

purposes require this certificate.

Draft: A written order from one person (the drawer) to another (the

drawee) specifying the terms (time and amount) of when payment

for the shipment is due (also referred to as bill of exchange).

Other documents may include an Inspection Certificate and advice

from the shipper regarding shipment information.

Import Process Assignment

Documents

Transcript of Import Process Assignment