Assignment

Introduction to and Ethics

Documents in International Trade

Dr. Ahmet Cemil YILDIRIM, LL.B., LL.M., Ph.D.

Outline

1. Defining contract terms

2. Concluding the Sales Contract

3. How does the L/C system work?

4. Main documents to be provided by the seller

5. Other documents

First step Marketing the Goods
· Traditional ways: trade fairs, chambers of commerce, diplomatic means (commercial attaches), publishing catalogues, etc.
· Modern ways: websites and trade portals.

1. Defining contract terms

· How to define the price?
· Simple questions: Type and quantity of the goods requested, in a definite currency.
· More complex questions: Where and to whom the goods are to be handed over? From/to which port? Who will bear the risk of damage during transportation? Who will bear the transportation costs? Who will arrange transportation? Will the goods be insured and who shall bear the cost? Who will clear the goods through customs?
· INCOTERMS (International Commercial Terms) such as CIF, FOB, DDP, Ex Works

· Proforma Invoice – Definition:
A price quote that a potential seller gives to a potential buyer that details the sale price. It is given in the form of an invoice. A proforma invoice exists in order to give a potential buyer a precise figure of the final cost of a transaction.

· Same as the commercial invoice, except for the word “proforma”
· includes all the elements requested by the potential buyer
· neither binding as a contract nor valid as an invoice
· Constitutes an “offer”
· usually bears a time limit for the validity thereof (e.g. 60 days from the date of issuance)

· Proforma Invoice

· With respect to the potential seller’s position, the most important element of a proforma invoice is
Terms of payment:

· Cash/advance payment / cash before delivery
· Cash Against Goods (CAG)
· Cash Against Documents (CAD)
· Letter of Credit (L/C) revocable/irrevocable, confirmed
· Bank Payment Obligation (BPO)

· Advice of opening of the letter of credit

2. Concluding the Sales Contract

· Order by the buyer, confirmation by the seller if requested.
· All the essential terms of a sales transaction are decided, therefore the contract is concluded.
· A written contract may be prepared by lawyers of the parties.
· Some sample/model contracts are frequently used, such as International Chamber of Commerce’s (ICC) model sales contract.
· Rules of particular trade associations may be referred to.

3. How does the L/C system work?

4. Main documents to be provided by the seller

· Invoice: A nonnegotiable commercial instrument issued by a seller to a buyer. It identifies both the trading parties and lists, describes, and quantifies the items sold, shows the date of shipment and mode of transport, prices and discounts (if any), and delivery and payment terms. It should be the same with the proforma invoice, except for the word « proforma »

· Bill of lading: A bill of lading is a document issued by a carrier to acknowledge receipt of a shipment of cargo.
· A bill of lading is a negotiable instrument and serves three main functions:
· it is an acknowledgment that the goods have been loaded;
· it contains or evidences the terms of the contract of carriage; and
· it serves as a document of title to the goods

· Bill of lading

·
Packing list: Itemized list of articles usually included in each shipping package, giving the quantity, description, and weight of the contents. Prepared by the shipper and sent to the consignee for accurate tallying of the delivered goods.

· Packing list

5. Other documents

· Insurance policy
· Certificate of origin
· Certificate of guarantee
· Certificate of quality

· Insurance policy

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