International Transactions

Methods vs. Security of Payments

Factors to consider when choosing a bank: - Correspondent banks (correspondent accounts - nostro and vostro accounts) - SWIFT, IBAN - Bank reputation - Method of payment used

Types of International Transactions

From different forms of international business result various types of international transactions: - Export-Import transactions: # Licensing and Frenchsising # Leasing transactions # Countertrade transactions etc. Consider the subject of international transactions, exchanged or transferred are: - Goods (merchandise) - Services - Capital - Labor (people)

Institutions at the global level - World Trade Organization - history

From the International Trade Organization (ITO) through the GATT to the WTO. It started out in 1947 with a set of rules to ensure non-discrimination, transparent procedures, the settlement of disputes, and the participation of the lesser-developed countries in international trade. From the basic rule of GATT 1947, the Principle of non-discrimination are two other clauses derived: o The Most-Favored Nation (MFN) o The National Treatment (NT) The original GATT test has been incorporated into the revised version of GATT 1994. The GATT was supplanted by a new institution, the WTO, which officially commenced on January 1, 1995. The WTO's current work comes from the 1986-1994 called the Uruguay Round and earlier negotiations under the GATT. Since then, however, the WTO has greatly expanded its scope of coverage, including services (GATS), intellectual property (TRIPS) and investment rules (TRIMS).

Incoterms - Definition

IN + CO + TERMS = International Commercial Terms Incoterms have been formulated and published by the ICC since 1936. The rules are periodically revised; changes were made in 1953, 1967, 1976, 1980, 1990, 2000 and 2010..

Forms of international business - Equity-based and other forms of investments related to establishing business facilities abroad

A representative or branch office A subsidiary (a wholly-owned subsidiary) Joint-ventures Mergers and acquisitions Greenfield investments

Industrial design

a combination of applied art and applied science

Trade Secret

a confidential know-how or information, a secret formula, method or device that gives one an advantage over competitors

General Average

a legal requirement that all parties in voyage contributed proportinately to cover expenses incurred as a result of damage to a ship and/or its cargo, as well those expenses incurred in taking direct action to prevent damage or additional damage to a ship and/or its cargo. (all the parties involved, including the vessel owner, contribute to the loss)

Collective Mark

a trademark owned by an organization (e.g. an association) whose members use it to identify themselves with the level of quality or accuracy

Trademark

a word, name, symbol, device or combination thereof used by manufacturer or seller to identify its products and distinguish them from the products of competitors

The franchisor provides...

- Trademark-protected business concept - And everything needed for its implementation

The remaining types of documents concern:

- Transport - Customs - Payments (not covered) - Other Issues (not covered)

Incoterms 2010 and Insurance - General rule

(value of goods + cost of transport) x 1.10 = insurance value The uplift of 10% is to cover administrative expenses and increases in price if goods have to be reordered.

Direct Exporting - summary

- (International Business) In case of direct exporting, goods or services are sold either directly to foreign end-user buyers from the domestic market or through intermediaries located in overseas market. - There are two types of intermediaries who are located in a foreign market: agents and distributors - However, it is not the same as sporadic/passive exporting (orders received by the seller from abroad are basically indistinguishable from the domestic ones).

Definition of a transaction

- An agreement between a buyer and a seller to exchange an asset for payment

Definition of a transaction - economic theory

the economic process by means of which goods (tangible and/or intangible property), services, financial assets et. are exchanged or transferred between two or more parties, which results in establishing a legal obligation. The value of the goods, services, assets etc. exchanged or transferred are usually determined in terms of money prices.

Indirect Exporting - summary

- (International business) In case of indirect exporting, the producers do not sell their goods or services to foreign buyers. Instead, intermediaries located in a domestic country stel in and assume the role of exporter. This type of intermediaries may work either for producers, or buyers, or may themselves be principals to the transaction.

Definition of International Transaction

- (place of residence) the permanent addresses ("centers of economic interest") for parties involved in a transaction are in different countries. - (place of origin) the country where the goods, services, assets etc. exchanged or transferred in a transaction originate from

International vs. Global Business

- (theoretical) - different meanings of these terms - (practical) - both meanings refer to the same thing

Commercial Invoice

- A commercial invoice summarizes the transaction by identifying the parties and showing pertinent information such as: # details of goods # details of payment # delivery terms # a detailed breakdown of the amount due - It is usually prepared by the seller. - The export invoice is zero-rated for VAT. - However, for exports to other EU countries, the invoice must show the VAT identification number of the buyer. - In some countries a specific declaration is to be required and typed on the invoice, often in the language of the importing country. This declaration refers invariably to the origin of the goods and correctness of export prices. - The declaration sometimes requires a third party to validate them.

Formation of a contract in international sale - definition

- A contract is an agreement between two (or more) people/companies, which is intended to have the force of law. - A contract of international sale is the 'master' agreement ruling the export-import transaction, i.e. the other contractual arrangements which follow as regards transport, insurance and payment should always accord with its provisions.

Transport Documents

- A range of international conventions address, and solve, the problem of different nationalities involved in the contract of international carriage. - International carriage of goods may be accomplished by sea, by air, by rail, by road. - Each mode of international transport operates within the scope of a convention which standardizes the documentation involved and which technically means that the exporter can generally ignore the nationality of the carrier

Bill of Lading - three major functions

- A receipt for the goods (a clean vs. dirty or foul/claused Bill of Lading) - Evidence of the contract of carriage (but not the contract of carriage itself, the clause paramount or paramount clause) - A document of title (issued in sets, negotiable or not, stale bill of lading)

Packing list/weight specification

- A seperate Packing Specification attached to the invoice, treated as an extension of the invoice. - Also called: a packing list, packing note or weight specification; a document showing the number and kinds of iterms/the quantity of commodity being shipped. - Packing lists are a must whenever shipments consist of more than one shipping piece because they... # Act as a double-check that everything ordered has been shipped # determine the identity and the value of any missing cargo (expecially important for non-containerized shipments) # allow selective inspections by customs services # provide a map for buyers receiving incoming shipments # are obligatory for insurance claims

Types of Trade Intermediaries - Export Management companies (EMCs)

- A substitue for the company's export department or its international division - They are paid by the ecporter; they usually work on a retainer and/or commission basis. - Depending on the agreement, they perform a lot of different functions e.g. consulting services, advertising and promotion, agent services, financial and legal services, purchase for resale. In appointing EMCs three factors should be kept in mind: selection of the EMC, cost, and knowledge and control.

International Trade intermediaries and Facilitators - Definition

- Absence of a (legal) definition of a trade intermediary - An intermediary is usually understood as a conduit in IBT, a person or a company put in contact with/or in between two or more trading partners and assisting in selling and/or buying goods and/or services. - Trade intermediaries can offer assistance bcause: # they know foreign market competitive conditions # they have personal contacts with potential foreign buyers # they evaluate credit risk associated with foreign buyers # they have sales staff to call on current foreign customers in person # they assume responsibility for physical delivery to foreign buyers

(Documentary) Letter of Credit

- After the payment by DC had been agreed by the exporter and the importer (all details of the agreement are incorporaed in the contract of sale), the importer authorizes his bank to issue the DC. - The importer's bank passes on the details to a bank in the exporter's country which then advises the exporter of the existence of the credit. - The exporter ships goods, obtains the documents required under the credit, presents these documents via the banking system and is paid. - The banks operate under the UCP600 published by the ICC.

Agents (Sales Representatives)

- Agents are companies (or individuals) who represent foreign exporters and take orders on the exporter's behalf. - They usually work on a commission basis and are paid when the exporter makes a direct sale to the customer. - They do not take title to, or possession of, the goods they represent. - Normally, they do not stock products, nor do they provide pre- and post-sales support to the customer.

Transport Documents - Potential problems

- Always at least two nationalities involved in the export-import transaction - even more complicated when the international carrier is of a third nationality - who imposes the conditions of carriage on the other side? - in case of transport documents, what's more important: the nationality of a shipper or a carrier?

Insurance Documents - Two main types

- An insurance policy incorporates all of the terms of the contract of insurance and shows full details of the risks covered. It details the period of which insurance cover has been undertaken, the extent of the insurance cover, the goods that are insured and the risks covered (an open policy). - An insurance certificate is issued for individual shipments and is based on an underlying insurance policy.

International Franchising - Rationale behind

- An opportunity to expand abroad rapidly with minimum capital investments - Building a network of franchisees in a particular territory. - Risk minimizing - low failure rate etc.

Incoterms do not...

- Apply to contracts for services. - Define contractual rights and obligations other than for delivery. - Specify details of the transfer, transport, and delivery of the goods, - Determine how title to the goods will be transfered - Protect a party from his/her risk of loss - Cover the goods before and after delivery. - Define the remedies for breach of contract

Shipping marks - 2 main purposes

- As identification marks for the carriers and all those engaged in the carriage and handling while in transit. - For the consignee to identify the coresponding order and activity to ensure correct delivery

Production of Intellectual Property Rights

- Basic requirements: the patentable invention isa new product or process which can be applied industrially - Process of applying for a patent - complicated, long and expensive (the role of patent attorneys) - Problem of effectiveness and economic espionage.

Insurance Documents - Why insure?

- Because the carrier liability is always limited! - Who should be most concerned? - Sellers providing goods under the CIF and CIP Incoterm and under the D-Incoterms.

Making the payment

- Cash - International transfer (MT, TT, SWIFT) - Buyer's cheque (name and "not to order", "to the order of", "pay the bearer"; it has to be returned to the buyer's country) - Promissory note - Bill of Exchange (draft) - the exporter (drawer) draws it on the buyer (drawee), the buyer accepts the draft and the exporter (payee) receives the money from the bank

Contract formation

- Certain elemts are essential for a contract to be concluded. - These are an offer and acceptance that need to match together - In other words: offer + acceptance --> contract

Types of Commercial Invoices

- Certified invoices: the most common requirement is for a Country's Chamber of Commerce to certify a set of invoices. - Legalized invoices: the most usual requirement for a further stage of third party verification is to legalize the certified invoices by the commercial section of the embassy of the importing country in the exporter's country.

Forms of Countertrade - Clearing

- Clearing arrangement refers to a number of goods, usually enumerated in a list attached to the clearing agreement. The cumulative value of trade in each direction is recorded in a clearing account kept by one of the transaction parties or a controlling authority in the clearing currency. - The agreement usually does not allow for a too big deviation from the ratio agreed upon. The consequences of imbalance should also be given. The account must be maintained more-or-less in balance year by year.

Domestic vs. International Transaction - Domestic transaction

- Common language and culture - The same laws and regulations - Absence of customs formalities - National currency - Usually cheaper - Relatively simple documentation - Relatively easy transport of goods - Lower level of risk

Disadvantages of Countertrade

- Companies usually prefer to be paid in money - Unusable or poor-quality goods difficult to sell may be involved - It is complicated, and thus may lead to loss of profits (e.g. penalty payments, obligations not honored or not all costs considered) - It usually required access to global information and trade partners, and hence it can be applied by multinational companies - It is criticized by many countries and international organizations such as the TWO, since it may lead to price distortions (the actual transaction value is usually difficult or impossible to evaluate)

Different types of Shipping

- Containerization -Roll-on/Roll-off (RO-RO) - FCL - full container load (shipment) - LCL - less than container load (shipment) - Groupage (unitization) grouping a number of different exporters consignments into one full (unitized) load. The most typical unit is the ISP container, carrying the LCLs, but road trainers and rail wagons are also units which require certain quantities of cargo to fill

Key-clauses in the contract of international sale - formal-legal data

- Contract no. - Date and place of contract conclusion - Name and addresses of companies, legal forms, signatures of the persons in charge - Preamble - Definitions

Rail Transport Conventions

- Convention concerning international carriage of goods by rail (COTIF) (1980/1985), and particular Appendix B the uniform rules concerning the contract for international carriage of goods by rail (CIM) (the latest verion - 2006). - International agreement 'SGMS' (1951) (the latest version - 2005)

There are two types of Documentary Collection

- D/P (Documents against Payment) - the amount is payable at sight - D/A (Documents against Acceptance) - the documents are released against acceptange of the Bill of Exchange (Termed Bill/Term Draft)

Insurance documents - you are not insured for...

- Delay - Wear and tear - Inherent vice - Ullage - Willful misconduct of the assured

Types of leasing

- Direct vs. indicrect - Sale-and-lease back - Export (import) leasing - Revolving leasing - Unit vs. Master leasing

Market entry barriers - six barriers of market entry identified by M. E. Porter

- Economies of scale - Product differentiation - Capital requirements - Switching costs - Access to distribution channels - Government policy

Types of licensing

- Exclusive or non-exclusive - Limited or not limited - Sole or cross-licensed - Others

Reasons for Countertrade - from the viewpoint of developed countries

- Expansion into foreign markets - Market diversification strategy - Obtaining cheap raw materials - Building goodwill and reputation - Strongly competitive environment

Export agents

- Export agents are sometimes called Manufacturer's Export Agents or Manufacturer's Representatives. - They may represent more than one manufacturer, but non-competing ones. - They do not become the owner of the goods. - They do not assume the risk of loss (but they may assume the credit risk!) - They usually receive a commission. - They promote and market the products abroad. - They look for foreign buyers, obtain orders and advise on questions like documentation, transportation and insurance. - If they do not receive payment directly from the foreign buyer, then their function may be considered as a similar one to the direct exporting.

3 basic levels of marine cargo insurance coverage

- FPA - the minimum level of coverage limited to general average and risks that affect the vessel and multiple shipments like fire, boiler bursting, defects in hull or machinery, explosion, stranding, sinking, and navigational errors. - With FPA/With Average (WA) - insurance adds partial losses for heavy weather, lightning, sea water and jettison (similar coverage is provided by London Institute Cargo Clauses B) - All risks - the equivalent of London Institute Clauses A, the broadest level of coverage, adding fresh water damage, ship's sweat, steam, condensation, damage by hook, improper carrier stowage, theft, pilferage, mud and grease, non-delivery, breakage and leakage

There are two primary types of leasing, depending upon the party taking the risk of the value of the vehicle (or other leased property) at lease end

- Finance leasing (in the US this is called closed-end leasing, in other jurisdictions, it is called lease purchase) - a lessee is obliged to purchase the leaset asset at the end of the agreement. - Operating leasing - the lessor leases the asset for a relatively short period of time compared to the useful life of the asset.

Domestic vs. International Transaction - International transaction

- Foreign language and culture - Foreign laws and regulations - Customs formalities - Foreign currency - Usually more costly - More complex documentation - More complex transport of goods - Higher level of risk

Key-clauses in the contract of international sale - elements of sale contract

- Formal-legal data - Contract clauses being subject to negotiation. There are two kinds of the latter clauses: # principle clauses (the most essential ones) # supplementary clauses (the non-obligatory, optional ones)

Advance Payment

- Full Advance Payment - the most secure method of payment for the exporter and consequently the least attractive for the importer - It is especially common in high risk countries - Partial payments - usual practice - In case of large projects, a certain percentage of payment can be paid in advance (before shipment or even before manufacturing), the balance is often paid in installments.

Law governing a contract

- General principle: parties of international commercial contracts may freely chose a governing law! - (EU) From Dec. 2009 onwards, private international law has been harmonized on the european level and the rome I regulation must be applied: # in situations involving a conflict of laws, to contractual obligations in civil and commercial matters; # freedom of choice of the law governing the contract (without Denmark) - The choice of the governing law: own domestic law, law of a third party, international law - In the absence of the choice of law, the law of the country most closely connected to a contract will be applied. - Lex mercatoria (lat. merchant law) is a general principle of international trade law that has been used for centuries. - Despite its longevity, the lex mercatoria remains a shadowy principle of international law, the definition of which varies, and is often contested by both scholars and practitioners. - Examples of lex mercatoria: pacta sunt servanda (agreements must be kept) and rebus sic stantibus (things thus standing)

Forms of Countertrade - Switch

- Imbalances in long-term bilateral trading agreements may sometimes lead to the accumulation of uncleared credit surpluses in one or the other country. These surpluses can be reduced by third parties e.g. another countries and a switch buyer (switcher, switch house) - There are basically two kinds of switch transaction: Finance/financial switch and merchandise/commodity switch

Sea Waybill

- In addition, particularly on short-haul routes, for the convenience of both the carrier and shipper, non-negotiable documents such as Sea Waybills are used. - Functions of SWB: # receipt for the goods # evidence of the contract of carriage # not a document of title # goods released to named consignee - SWBs are now being used for deep-sea transits to low risk customers and markets. - They are sometimes referred to as express bills in that the goods are subject to express release without the presentation of a bill of lading.

Agents - Distributors

- In case of direct exporting, there are basically two types of trade intermediaries, agents (sales representatives) and distributors (dealers). - They have many characteristics in common, and that's why the terms "agency" and "distributorship" are sometimes used interchangeably. However, there are many important differences between agents and distributors - the ICC prepared separate model contracts for an agent and a distributor.

Exporting Trading companies (ETCs)

- In many ways similar to EMCs, except they tend to be larger, and provide a wider range of services. - The major difference: ETCs usually take title to the goods and services, while the EMCs normally work as a commissioned agent. - ETCs are usually formed by: large companies, trade associations and/or bank holding companies. - Some of them are engaged in importing, countertrading, manufacturing and investing. - The attempts to develop ETCs in the US have met with limited success. But Japan has used the trading companies with great success.

Forms of Countertrade - Counter-purchase

- In the counter purchase transaction, the exporter agrees, as a condition of obtaining the order, to arrange for purchase of goods or services from the importer's country. - There are two parallel, but separate contracts, one for the principal order - which is paid in for on normal cash or credit terms - and another for the counter purchase. These contracts are usually combined with the so called protocol. - The value of the counter purchase may vary from 10 to 100% of the original export order. - Counter purchase is very similar to indirect offset. - It is sometimes called parallel barter or link purchase.

Forms of Countertrade - Barter

- In the simplest case, barter means direct exchange of a good for the other good. - A single contract covers both flows (two parties), no cash is involved and no currency is mentioned. - Both goods are delivered simultaneously. - In a more complicated version there are four combinations of barter transactions: good - good; good - service; service - good; service - services

Ways of a contract conclusion

- In writing - In an oral form - By conduct - By any combination of the above

2 general types of cargo insurance

- Inland Marine Insurance (ground and air shipments) - Marine Cargo Insurance (shipments by ocean)

Generally, the following requirements have to be met for the CISG to be applicable

- contract of sale of goods - international character of the contract - a specified connection to a contracting state - application of the CISG must not be excluded

Key-clauses in the contract of international sale - clauses being subject to negotiation (supplementary clauses)

- Inspection - Retention of title - Claim - Warranty/Guarantee and limitation of liability - Penalty for delay in delivery - Non-conformity of the goods/services - Remedial action - Force majeure - Confidentiality - Documentary requirements - Miscellaneous

Insurance Documents

- Insurance documents indicate the risks that have been covered during the journey from the exporter to the importer. - Specific (voyage) policy - an insurance policy drawn up for a particular consignment. - The insurance should be in the same currency as the invoice. The amount of insurance cover should be in line with international standards (i.e. 110% of the invoice value) or in line with the amount agreed in the sales contract. - Although only two Incoterms CIF and CIP make insurance a seller obligation, it does not mean that under the remaining 9 Incoterms none of the transaction parties should insure the goods. It means only that the seller has no insurance obligation to the buyer, and the buyer has no insurance obligation to the seller. - Even CIF and CIP do not do an adequate job of covering insurance. While both task the seller with insurance, they accept minimum cover (London Underwriter Institute Clauses C or American "Free of Particular Average - FPA") as seller compliance. - This coverage is inadequate for most shipments. That's why sellers and buyers should enhance these two Incoterms by agreeing on a more acceptable level of coverage. - In the event of loss or damage it may be that action is possible against the carriers in charge of the goods at the time. However, the carriers have limitations on their liability and it requires some expertise to sustain successful claims. - In practice, the vast majority of exporters arrange for insurance cover against the physical risk of loss or damage to the goods in transit. - The type of insurance that exporters most commonly use - cargo insurance - covers shipped goods. Casualty insurance covers the risk of property loss or damage or liability. - The term all risks used throughout casualty insurance may lead to confusion, particularly in marine cargo insurance. Generally speaking, all risks means that a casualty policy covers every cause that is not specifically excluded. - Rule #1: each policy is different! - Rule #2: it is better to cooperate with experienced insurance suppliers, whether insurers or forwarders, to make certain the coverage you get meets your needs!

Sea Transport Conventions

- International convention for the unification of certain rules and law relating to bills of lading (1924) - the "Hague Rules" - The Hague Rules have been since updated by the "Visby (Brussels) Protocol" (1968) producing the so called "Hague-Visby Rules" and the "SDR Protocol" (1979) - The Hamburg Rules and Rotterdam Rules (1992) - In Poland: the Maritime Code (2001)

Types of Letters of Credit

- Irrevocable vs. Revocable - Onconfirmed vs. Confirmed - Standby (e.g. open account + security of payment)

Advantages of Countertrade

- Is a method of financing a deal when money is scarce. - Is a method of selling unmarketable goods. - Is a method of gaining additional funds for economy restructuring. - Is a method of competing - Is a marketing tool - Is an alternative to traditional trade techniques - May give both parties mutual advantage.

Questions to be answered before making a decision of entering a foreign market

- Is the country a member of the WTO? - Is the country a member of the EU? - Is the country a party to any other form of economic integration group e.g. regional free trade agreement? - Are there any trade barriers applicable? - Are there any restrictions on exports/imports? - Are there any export/import licenses needed?

Air Waybill

- It is a key element in the Warsaw regime. - The AWB will be made out by the consignor of the goods who has the right to require the carrier to accept it. - Its role is that of the other waybills.

Forms of Countertrade - Buyback/Compensation/BOT

- It is usually associated with a turnkey project in that it involves the provision of the means to deliver goods or a service in exchange for raw materials or some other product, usually to be supplied at a later in the contractual agreement. - BOT (Build-Operate-Transfer) is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating, and maintenance expenses in the project.

The type and nature of the packaging is influenced by factors such as:

- Kind of product - Mode of transportation - Route and final destination - Climatic conditions - Customs duties and freight rates - Cost of packing materials

Leasing Transactions

- Leasing means obtaining the use of machinery, vehicles or other equipment on rntal basis for a fixed period of time. From a private law point of view, leasing transaction refers to signing a property agreement. - The lease agreement is a contract under which an owner of property, the lessor, conveys to the lessee the exclusive right to possess property for a period of time. Thus, leasing transaction means separation of the property right from the right of use (exploitatuin) of something.

International Licensing

- Licensing is a contractual arrangement in which a licensor grants access to some intellectual property (such as trademarks, patents, copyrights, etc.) to a foreign licensee to be used for a specific period of time and in specific markets in exchange for a fee or other considerations. - The licensor provides the licensee the intellectual propoerty which takes forms of patents, trademarks, etc. in combination with supporting products or services (parts, components, raw materials, technical assistance, etc.)

The franchisee conpensates the franchisor through a combination of...

- Lump-sum payment - Down-payment plus royalty - Other charges and contributions (e.g. an advertising fee)

The licensee compensates the licensor through a combination of...

- Lump-sum payment or down-payment - Royalty - Products and services - Know-how - Cross-licensing - Other benefits (e.g. access to resources and/or facilities)

Methods vs. Terms of Payment

- Methods of Payment: the way and means by which the money will be paid - Terms of Payment: conditions of payment e.g. the time allowed for payment to be made - The choice of the appropriate terms and method of payments can be affected by a number of factors, such as: the buyer, the market and the competition

Direct Trade - characteristics

- More complex and more capital-intensive - Higher risk and higher profit - Easier access to information - Total control over production, marketing, sales, etc.

Forms of Countertrade - Offsets

- Offsets require the seller to purchase goods and services from the buyer's country in return for a large supply contract. This is usually a requirement of the buyer's government. - There are two principal types of offset agreements: direct and indirect.

Value of the goods

- Once customs have decided on the description and the correct origin of the goods, then usually ad valorem charges are applicable. - In such a case the invoice value (transaction value) serves as the base for the calculation of customs charges. -Just as with description and origin, the customs procedures are designed to avoid any manipulation of the value of consignments such as under- or over-valuation of the goods.

Origin of the goods

- Once the import customs have accepted the tariff classification (or re-classified the goods themselves), then the tariff will indicate the range of controls, such as duty, tax, license, and quota, which apply to each particular commodity. - If a declaration of origin on the invoice is insufficient, the export invoice is sometimes accompanied by a supporting document indicating the country of origin. - Documents: EU CoO, Certificates of Value & Origin, Status and Movement Certificates

Insurance Documents - Documents needed to make a claim

- Original policy or certificate - Invoice and packing specification - Orginal transport document - Survey report or other evidence of loss or damage - Landing account/weight notes at destination - Any correspondence with the carrier/other parties

Export Support Measures - three types

- Political - Institutional - Economic or financial

Market entry barriers - what kind of factors can be treated as entry barriers and why?

- Political factors - Business environment - Legal aspects - Corporationism - Cultural differences etc. - Because of transaction costs (which include information costs, contracting costs, delivery and payment costs, and control and enforcement costs) - "International transaction costs tend to be much higher than domestic transaction costs due to language, cultural and legal differences."

Intellectual Property Rights - rationale behind

- Prohibitive costs of transport or establishing foreign-based manufacturing facilities - A means for testing and developing a new product in a foreign market - The licensor is a small company with limited resources. - The licensee will have to purchase input components or materials from the licensor. - Others

International Transaction Chain - exporter country

- Receipt of order and commodity production (credit check of buyer) - Export intermediaries, customs, brokers, freight forwarders - Inland shipping (truck, rail, air, water) - Seaport/airport (export) - warehouse, insurance, customs, loading, port authority, control - Shipping

Bill of Lading - types

- Received for shipment vs. shipped on board - Received combined transport bill of lading (through bill of lading) - FIATA bill of lading - Common bill of lading (SITPRO) - Groupage vs. House bill of lading/freight forwarder's receipt - short form vs. long form bill of lading

Indirect Trade - characteristics

- Relatively simple and less capital-intensive - Lower risk and lower profit - Limited access to information - Little or no control over production. marketing, sales, etc.

Insurance documents - 2 basic problems with the minimum insurance coverage

- Reliability of an insurance company - Goods are sometimes sold in transit

Direct Exporting - examples

- Repeated sales of goods in large quantities e.g. coal, tires, ball bearings etc. - Single transaction of sale concerning investment goods e.g. an assembly line, production equipment etc. - Retail trade made via the internet, through mail-order, catalogues etc. - Exporting of services e.g. selling transport services to a foreign company

International Transaction Chain - importer country

- Request for goods ... - Seaport/airport (import) - unloading, port authority, control - Financial transaction (buyer's bank receives shipping invoice, money is credited to seller's bank) - Import intermediary, customs broker, customs release - Inland shipping (truck, rail, air, water) - Receipt for goods by buyer (immediate sale, warehousing, further refinement/incorporation)

Indirect Exporting - examples

- Sale of goods and services to domestic-located intermediaries - Manufacturing a product or a part of it under a contract to another company's specifications. - Strategic alliance with a domestic company exporting complementary goods.

The CISG does not apply to

- Sales of consumer goods - Sales by auction - Sales on execution or otherwise by authority of law - Sales of stocks, shares, investment securities, negotiable instruments or money - Sales of ships, hover- or aircrafts - Sales of electricity

Export-import documentation - Categories of documents

- Sales/purchase - Insurance - Transport - Customs - Payment - Other issues

Reasons for Countertrade - from the viewpoint of developing countries

- Shortage or lack of hard currency, cash or credit facilities - Cleaning-up bad debt situation - Getting rid of umarketable, or poor quality goods - Building-up their manufacturing exports etc.

Cultural differences as a challenge

- Stereotypes - Ethnocentrism - Communication barriers (language problems, communication patterns) - Culture shock

Forms of Countertrade - Swaps

- Swaps usually involve trading of fungible (commercially identical) or nearly identical products to save transportation charges.

A more sophisticated approach to trade barriers

- Tariff barriers (customs and duties - tariffs) - Para-tariff barriers (taxes, tariff quotas, tariff ceilings, tariff suspensions, countervailing charges, import deposits, subsidies etc.) - Non-tariff barriers (quotas, embargoes, voluntary export restraints (VER), required countertrade or co-production, local content requirements, technical barriers, sanitary and phytosanitary requirements, rules of origin, certification, testing, etc.)

Trade restrictions are usually divided as follows:

- Tariffs - usually taxes on imports - Quotas - restrictions on the amount of a certain type of good, or the number of products that can be imported/exported - Nontariff barriers - a variety of measures that have the effect of restricting imports

International law - contract formation under...

- The CISG (convention on contracts for the international sale of goods, 1980) - UNCITRAL - The PICC (Principles of international commercial contracts, 1994 and 2004) - UNIDROIT - The PECL (Principles of European contract law, 1995, 1999 and 2002)

The CISG

- The CISG, commonly referred to as 'the Vienna Convention' provides a uniform legal infrastructure for international commerce. - It was developed by the UNCITRAL and was signed in Vienna in 1980, but it came into force on 1st January 1988. - Till September 2016, it has been ratified by 85 countries. (Poland - 1995) - Attention! Hong Kong, India, South Africa, Taiwan and the UK have NOT ratified the CISG yet. - The text of the CISG is equally authentic in six languages (Arabic, Chinese, English, French, Russian, Spanish). - Transaction parties may exclude the application of the Vienna Convention or, derogate from or vary the effect of any of its provisions: # "This contract is governed by English/Italian law" # Without the CISG" or "German law excluding the CISG" or "French Civil Code" - The CISG consists of 101 articles which are divided into four parts: # Part I - Application and General Provisions (Art. 1-13) # Part II - Formation of the Contract (Art. 14-24) # Part III - Sale of Goods (Art. 25-88) # Part IV - Final Provisions (Art. 89-101) - No requirement of writing, or any other form of contract is imposed by the Convention (Art. 11). - In general, a contract is formed when an offer meets with acceptance (Part II).

Road Transport Convention and the Road Waybill

- The Convention for the contract for the international carriage of goods by road (CMR) agreed upon in 1956. - The Road Waybill (CMR) provides a standard, non-negotiable consignment note used by most nationalities of international road hauler.

The PICC

- The UNIDROIT Principles (PICC - 1994/2004) are soft law and hence not a legally binding instrument like the CISG. - Used in practice because of their sound solutions for international commercial contracts. - They address issues not regulated by the CISG e.g. international trade in services, leasing, licensing agreements as well as finance, banking, insurance and other transactions. - The purpose of introducing the PIC was to establish a balanced set of rules for worldwide use "irrespective of the legal traditions and the economic and political conditions of the countries in which they are to be applied". - There are 120 articles of the UNIDROIT Principles divided into 10 chapters which sometimes consist of some sections. o Preamble o Chapter 1, General Provisions o Chapter 2, Formation and Authority of Agents o Chapter 3, Validity o Chapter 4, Interpretation o Chapter 5, Content and Third Party Rights o Chapter 6, Performance o Chapter 7, Non-Performance o Chapter 8, Set-off o Chapter 9, Assignment of rights, transfer of obligations, assignment of contracts o Chapter 10, Limitation periods

The PECL

- The commission on European contract law (CECL) was founded to establish common principles of contract law for the countries of the EU. The CECL commenced work on the elaboration of the PECL in 1982. - The PECL consists of three parts: # Part I (1995) covers fundamental principles of contract law (rules governing performance, non-performance and remedies) # Part II (1999) covers aspects of formation, interpretation, content and validity # Part III (2002) deals with plurality of parties, assignment of claims and debts, set-offs and prescription. - The PECL is 'soft law'.

Documentary Collection

- The exporter draws up a Bill of Exchange which is a part of the document set delivered to the exporter's bank. - The bank sends the documents along with a completed letter of instruction to the importer's bank that negotiated the payment. - The exporter is the drawer, the importer the drawee (also the payer or acceptor of the Bill). The money will be paid at a specified time to the payee (usually the exporter, but could be also another party). - The Bill of Exchange may be paid on demand (at sight) or at a fixed time (at a number of days after the sight) or another determinable future time (e.g. at 3 weeks after date or on May 5th 2011) - When the bank handles the set of shipping documents as well as the Bill of Exchange, the procedure is called Documentary Collection. - It is also possible to arrange for the so called Clean Collection in which the documents are sent directly to the buyer, and the Bill of Exchange is only being handled by the banks in the usual way. - If the importer's bank is to release documents against payment without inclluding a Bill of Exchange, this method is called Cash against Documents. - However, only Documentary Collection and Clean Collection operate under the URC522 published by the ICC.

Air Transport Conventions

- The heart of international regime regulating the transportation of goods by air as the Warsaw Convention (1929) amended by The Hague Protocol (1955). - Also other treaties have an impact, such as the Guadalajara Convention (1961) and the Montreal Additional Protocol No. 4 (1975). - The Montreal Convention (1999/2003) will repleace the Warsaw Convention in the future.

Open Account

- The least secure method of payment for the exporter and the most attractive one for the importer. - It is usually used in low risk markets. - It is important to make absolutely clar: # When the payment is due (typically 30, 60 or 90 days after the date of invoice - deferred payment) # Where the payment is going (company name, business address, name of bank, name of account golder, account number, SWIFT, IBAN) # How the payment will be made (cash, buyer's cheque, banker's draft)

Customs Documents

- The majority of customs declarations are made by agents on behalf of traders, but the exporter and importer always bears the ultimate responsibility for the accuracy of the information provided. - For intra-EU trade we use the INTRASTAT, for trade with EFTA/EEA countries the SAD. - Import controls related to tariff barriers: duty, tax, excise, licensing, quota, and non-tariff barriers: standards (technical, health & safety requirements etc.) - In general, three pieces of information such as: description, origin and value of the goods are needed by customs authorities to decide which controls and at what level are to be applied to each consignment. If applicable, an import declaration will be accompanied by respective documents.

International Franchising

- The most typical arrangement is business format franchising, in which the franchisor transfers to the franchisee a total business sstem, including production and marketing methods, sales systems, procedures, training, and the use of its name. - Franchise management is mainly concerned with two issues: controlling foreign franchisees and coping with local problems.

Institutions at the global level

- The present institutional framework has been created in the aftermath of WW2. - The greatest impact on the structure of contemporary trade relationships has had the World Trade Organization (WTO), and its predecessor, the General Agreement on Tariffs and Trade (GATT). OTher institutions of influence: UNCITRAL, UNIDROIT, ICC, OECD, IMF, IBRD, BIS etc.

Rail Waybill

- The rail waybill acts as a standard consignment note for international carriers. - The consignment note performs a similar role sto that of other waybills. - Depending on the convention/agreement ratified by a certain country two different documents are used: # the CIM (COTIF/CIM) # the SMGS (SMGS) - The contract of carriage comes into existence when the railway has accepted the goods for carriage along with a note. Acceptance is established by the stamping of the note.

Customs controls

- The range of customs procedures can be rationalized into three categories: export (departure), transit and import (destination) - Export: the majority of export goods are of interest of customs control for statistical reasons. However, trade in certain types of goods require a license and is thus subject to export licensing control. - Transit: In fact, it is common for international road and rail movements. TIR and ATA Carnets. - Import: Import goods are not only of statistical interest, but also are subject of many other controls related to tariff and non-tariff barriers.

Incoterms 2010 and Insurance - CIF and CIP

- The sellers must obtain at their own expense cargo insurance as agreed in the contract, such that the buyer, or any other person having an insurable interest in the goods, shall be entitled to claim directly from the insurer and provide the buyer with the insurance policy or other evidence of insurance cover. - The insurance is to be with an insurer of good reputation, and (unless agreed otherwise) it is to be in accordance at least with the minimum cover as provided by Clauses C of the Institute Cargo Clauses or any similar set of clauses.

Distributors (Dealers)

- They are independent companies that purchase products (take title) from the exporters for resale to their customers who may be either end-users of the products or other intermediaries who then sell to end-users. - They assume the risk of buying and stocking the products in the local market. - They usually provide product support and after-market services. - They establish and maintain contacts with the customers. - They set the prices (they work on a margin basis). - They are responsible for local advertising and promotion.

Customs invoice

- They are not very common nowadays. - Where they still apply (usually ex-Commonwealth countries) they are required by the country's customs regulations. So the exporter must complete the appropriate invoice form for the country of destination. - They are often in the form of Certificates of Values & Origin (CV/O) and may bear reference to Current Domestic Values (CDV) to control dumping goods. - Apart from a customs invoice the exporter often produces also a commerical invoice as a bill to the buyer.

Buying agents

- They are sometimes called (Export) Commissioned Agents, Ecport Commission Houses or Confirming Houses. - Agents residing in exporter's home country who act as purchasing agents for foreign companies (employed by the buyer). - They receive the product requirements from their principals, search for the products, negotiate the prices, and arrange for shipment, all on behalf of their principals. - They earn a commission on the goods purchased.

Resident buyer

- They are usually employees of a particular foreign company stationed in the local manufacturer's country or region. - Their purpose is to avoid middlemen and to establish direct relationships with suppliers. - They work on their employer's behalf, seeking to buy goods (usually on F.O.B. home country basis). They take care of all export activities. - They usually draw a salary.

Export broker

- They bring buyers and sellers together - They are paid by a commission from either the buyer or seller and assume no financial responsibility for the transaction- They usually specialize in certain bulk commodities. Normally, export brokers work in no more than two staples (e.g. cotton broker and wheat broker)

Export merchants

- They purchase the exporter's products solely for resale on their own account. - They assume all the risk of being able to resell the products profitably abroad. - They usually specialize in a particular line of products and/or in a geographical market area. - They usually buy and sell staple commodities, raw materials or perishable products. - They often resell the products under their own name. - Hence, they usually purchase the products directly from the manufacturer. - Export merchant who sells odss and ends, or products that are past their prime or are being discontinued is also called Export Vendor.

Consular invoice

- This is a unique invoice form that can be obtained in the Consulate of the importer's country. It has to be completed by the exporter and returned to the Consulate for casualization. - Consular invoices are especially common in Central and Latin American countries. - The format of such invoices vary enormously and they are often in the language of the country of destination. - The best practice is to show Consular fees as a separate item on the original proforma invoice quotation, along with the freight and insurance charges.

Cooperative exporters (Piggybackers)

- This method of co-marketing consists in selling the products of other companies along with their own. - Piggybacking is common in the computer, industrial machinery, and electrical product industries. - Co-marketers use their direct sales forces, agents and/or distributors to offer other company's products that are usually complementary to their own products. - Piggyback exporters can work as an agent for the exporter or they can purchase products for resale.

Packaging of the goods is used for 3 different purposes

- To comply with any requirements under the contract of sale (export order) - In the way that they are fit for transportation - The stowage of the packaged goods within a container or other means of transport (Incoterms 2010 do not deal with this obligation)

Description of the goods

- To identify goods, the customs authorities use the number classification systems, or nomenclatures, which mean the same throughout the world. - Currently, we operate the EC combined nomenclature based on the GS (Harmonized commodity description and coding system). It came into force on 1 January 1988 as the EU integrated tariff (TARIC) and provides for 8-digit harmonization within the EU and EFTA.

Packaging of the goods - 3 functions:

- To protect the goods during storage and transit and to prevent the goods from damaging the environment (protection) - To keep the consignment together (preservation) - To identify the cargo (presentation)

Barriers to international trade can be devided into two groups

- Trade restrictions - related to trade policy applied by a country - Market access barriers - any kind of factors that obstruct or restrict entry of a domestic company into a foreign market

Proforma invoice

- form of quotation to demonstrate what the final invoice will look like should the order be placed. - It is laid out in invoice format, and it contains a breakdown of the additional charges, such as freight and insurance premiums (commonly a CIF and CIP quotation) - It is common when dealing with developing countries and it is particularly related to the requirement for a specific import license and/or to comply with Exchange Control regulations. - The information on the proforma invoice is essential to the buyer's licensing authorities and the license will be issued for the exact amount. - The other function: to obtain advance payment, sometimes referred to as cash with order or proforma payment - This is quite common when dealing with African, Near and Far Eastern and sometimes Latin American markets. - When the eventual shipment is made, the exporter must still produce a final invoice which should be identified as being for "Customs Valuation Purposes Only".

Incoterms 2010 and Insurance - why insure?

- protection against financial losses resulting from damage, pilferage, theft or non-receipt of the entire or part of a consignment - protection against financial claims that can be made against the owner of goods on board a vessel in case of a "declared general average" (the goods themselves being undamaged)

International Leasing

- refers to the situation that the lessor and the lessee are located in two different countries. - However, according to Prof. Simon S. Gao, the crucial factor in deciding whether a leasing transaction is the international one is belonging of the transaction parties to two different legal systems (and thus to two different system of taxation) - Then, the location of the lessor and lessee has a secondary meaning. - If the location of both transaction parties does matter, there are two principal types: cross-border (cross-national) leasing and overseas subsidiary leasing. - Leasing is usually perceived as a medium or long-term method of export financing. - A cross-border leasing transaction in which the different rules of the lessor's and the lessee's countries let both parties be treated as the owner of the leased equipment for tax purposes is called a double-dip leasing. - In most European countries, the holder of a legal title (the lessor) is considered the owner of an asset for tax purposes, while in the Anglo-Saxon system (e.g. USA), legal title is only one of several factors considered.

Licensing vs. Franchising

-Franchising - an arrangement in which the firm allows another the right to use an entire business system in exchange for a fee, royalty, or other type of compensation. - Major difference: While licensees have discretion in some aspects of the production and marketing activities, franchisors exert considerable control over the franchisees' production process and marketing strategy.

A Documentary Credit

A conditional guarantee of payment made by the importer's bank to a named beneficiary (exporter), provided that the terms of the credit are met (i.e. the exporter presents specified documents within a stipulated period and conforms to the terms of the L/C)

Incoterms 2010 Variants

-The Incoterms 2010 do not prohibit alterations of the original Incoterms version. However, in order to avoid any unwelcome surprises, the parties would need to make the intended effect of such alterations extremely clear in their contract of sale. Expamples of possible alterations: - Loaded (EXW loaded) - Cleared (for export/EXW cleared) - Discharged (DAP discharged) - Stowed/trimmed (and secured) (FOB stowed) - Landed (CFR/CIF landed) - Duty paid (DAP duty paid) - VAT unpaid (DDP VAT unpaid)

Export-import documentation - Intro

2 things to remember: - It takes more than one piece of document to organize the delivery of international cargo. - The set of documents needed will differ from one cargo to another

Advantages & Disadvantages

Advantages: - Efficient method of selling (warehousing) the products abroad without additional costs and commitments (distributor) - Opportunity of testing the market before making serious commitments to the international marketplace (indirect exporting) - Avoiding the risk of failure in the unexplored market (indirect exporting) Disadvantages: - No direct contact with the customers (customer feedback filtered through the intermediaries) (indirect exporting) - No product identification (if the intermediaries relabel the products) (export merchant) No (or limited) control over pricing, marketing, distribution etc. (distributor)

The CISG vs. PICC and PECL

CISG: - Traditional approach to contract formation (not all forms of reaching agreement fit into the pattern of offer and acceptance) - A stronger emphasis on the principle of favor contractus in its rules on contract conclusion. PICC/PECL: - More modern approach with a wider variety of contract formation, not limiting this process to instruments such as offer and acceptance, but allowing also any conduct that is sufficient to show agreement. - A less rigid approach to contract formation allowing contract conclusions despite the lack of some formalities.

Formal definition of Countertrade

Countertrade refers to international contractual arrangements under which one party supplies goods or other economic value, such as services or technology, to the second party, and in return the first party purchases or procures the purchase of an agreed amount of goods and other economic value from the second party, or from a party designated by the second party.

Direct and Indirect trade

Direct - operating from the home country or taking your business abroad Indirect - being present in foreign markets through other companies

Direct and Indirect Exporting

Direct - sale of goods or services directly to customers abroad or through intermediaries located in a foreign country Indirect - sale of goods or services through domestic-based intermediaries

Institutions at the country level

Example of Poland: - Ministry of Economic Development - Ministry of Finance - Polish Information and Foreign Investment Agency - Polish Agency for Enterprise Development - Polish Chamber of Commerce

Location

Exporting from your home country: - Indirect exporting (trade intermediaries) - Direct exporting (through catalogues, via the internet or company's own sales force e.g. export department) Taking your business abroad: - Direct exporting (trade intermediaries) - Direct exporting (establishing your own company abroad, a representative/branch office or a subsidiary) - Licensing/Franchising - Strategic alliances and joint-ventures In case of direct exporting, trade intermediaries are various types of organizations serving (or willing to serve) as the international arm of companies that have not yet developed export or international functions. This method of trade is usually undertaken by smaller companies that are not yet capable or ready to establish an overseas presence. However, it may also be used as a part of international strategy by larger companies to test new territories or to consolidate orders from smaller markets.

Forms of international business - Trade and other forms of movement of goods

Exporting/importing (direct and indirect) Re-exportation and -importation Transit trade Temporary movements of goods (sending goods for repair or other processing)

Sea Transport Conventions - rule of thumb

In general, the carrier sets the rules and conditions of carriage and the carrier will often contractually exclude liability for loss or damage to the cargo in any situation where the conventions or any other type of law do not have compulsory application.

How to use Incoterms correctly?

In general, the following factors should be considered while choosing one of the Incoterms: - Goods supposed to be delivered - Means of transport - Additional obligations put on the seller/buyer related to carriage, insurance or requirements of the country - Standard practices - Access to information - Customer service

Incoterms do...

Incoterms hay be included in a contract of sale of the parties desire the following: - To complete a transaction of sale of goods - To indicate each contracting party's costs, risks, and obligations with regard to delivery of the goods - To establish basic terms of transport and delivery in a short format

Forms of international business - Non-equity cooperative arrangements

Informal cooperation Cross-licensing R&D partnerships Co-production agreement Piggy-backing Strategic alliance Consortium

Definition of an institution

Institutions are not only those making allocation decision, but also rules, standards, customs etc. according to which the allocation process (production and distribution of goods and services in the business environment) has been organized.

Maritime Documents: two methods of carriage of goods by sea

LINERS: - general cargo and passengers - regular sailing schedules - regular routes - firm freight rates - bill of lading (document) TRAMPS: - mostly bulk cargo - no schedule (react to demand) - no fixed routes - rates subject to negotiation - charter party (document)

Forms of international business - Contractual agreements

Licensing Franchising Management contracts Turnkey Contract manufacturing

International Law - other contributions

Other contributions to harmonize international private law concerning specific types of contract or certain contract elements: - The ICC model sales contract - The on-line model sales contract offered by Paction - The ICC model contract for the turnkey supply of the industrial plant - The ICC force majeure clause

Key-clauses in the contract of international sale - clauses being subject to negotiation (principle clauses)

Subject of the contract - goods/services sold - quantity - price Clauses concerning the essential elements of the contract - quality - packaging, labelling and marking - total value - licenses and permits - commissions, additional charges etc. - valorization/revision The remainen clauses: - terms of delivery - date and place of delivery - terms of payment -insurance - applicable law - arbitrage

Institutions at the global level - The International Chamber of Commerce

The International Chamber of Commerce (ICC) is a world business organization based in Paris. It was founded in 1919 to serve world business by promoting liberalization of trade and investment. ICC membership groups thousands of companies of every size in over 120 countries worldwide. The ICC covers a broad spectrum of activities, from arbitration and dispute resolution to making the case for open trade and the market economy system, business self-regulation, fighting corruption or combating commercial crime. One of the most important role of the ICC is setting rules and standards in doing business internationally. The best known ICC's publications are: Incoterms, the UCP and the URC.

Institutions at the global level - The International Institute for the Unification of Pricate Law

The International Institute for the Unification of Private Law (UNIDROIT) was set up in 1926 as an auxiliary organ of the former League of Nations. Following the demise of the League, the Institute was re-established in 1940 on the basis of a multilateral agreement, the Unidroit Statute. It is an independent intergovernmental organization with its seat in Rome. Unidroit has 63 member states representing a variety of legal, economic and political systems. Membership of Unidroit is restricted to states acceding to the Unidroit Statute. Its main objective: modernization, harmonization and coordination of private international law and commercial law between states and groups of states. The uniform rules drawn up by Unidroit traditionally take the form of International Conventions, model laws, general principles and legal guides.

Institutions at the global level - The Organization for Economic Co-opration and Development

The Organization for Economic Co-operation and Development (OECD) is a forum in which the governments of the most developed countries work on common standard e.g. on combating bribery, on arrangements for export credits, or on the treatment of capital movements. The OECD was officially born in 1961. It is located in Paris and has 35 members.

Institutions at the regional level - the Regional Trade Agreements

The Regional Trade Agreements (RTAs) are trade agreements between two or more countries, usually located in the same region of the world, in which each country offers preferential market access to the other. According to the B. Balassa's model of economic integration regional groupings of countries can be classified into five categories and namely: o Free trade area (e.g. NAFTA) o Customs union (e.g. ANCOM) o Common market (e.g. MERCOSUR) o Economic union (e.g. EU - moving towards political union) o Political union The idea of the Single European Market is at the EU's core (it is based on four freedoms which mean that within the European Single Market, people, goods, services and money can move around as freely as they do within one country). The EU has a common external tariff - the Integrated Tariff of the European Communities (TARIC) designed to show the various rules applying to specific products when imported into the EU. (in trade with third countries, the 10-digit Taric code must be used in customs and statistical declarations, and within the EU: intra-community supply of goods and acquisition of goods, directive on services etc.) The EU's trade policy is closely linked to its development policy (agricultural policy, competition policy, regional policy, industrial policy, etc.)

Institutions at the global level - United Nations Commission on International Trade Law

The United Nations Commission on International Trade Law (UNCITRAL) was established in 1966 by the Resolution 2205 of the United Nations' General Assembly. The UNCITRAL's membership was expanded from 29 in 1966 to 60 states in 2002. The structure of the Commission membership reflects the world's various geographical regions and the different economic and legal systems. The Commission carries out its work at annual sessions, which are held in alternate years in New York and Vienna. Its main objective: modernization and harmonization, of rules on international business. The UNCITRAL identifies hindering factors to international commerce (such as the lack of a predictable governing law or out-of-date laws unsuited to commercial practice) and works on solutions which are acceptable to all interested parties. Texts resulting from the work of UNCITRAL include conventions, model laws, legal guides, legislative guides etc.

Institutions at the global level - World Trade Organization - now

The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. In 2001, a new negotiation round under the Doha Development Agenda (DDA) was launched. Three points are on the agenda: o Additional tariff reductions with a specific focus on developing countries' exports, o Incorporating existing negotiations in services into the Doha Round, o Meaningful liberalization of trade in agricultural products. At present, the WTO has 164 member states. In addition, some 23 countries are negotiating membership of the WTO (observer governments). The WTO is located in Genève (Switzerland). What the WTO does: o Trade negotiations o Implementation and monitoring o Dispute settlement o Building trade capacity o Outreach.

Definition of International Business

The field of study directly related to international transactions. International Business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations.

Incoterms 2010 (vs. 2000)

The following Incoterms 2000 rules have been replaced by the new Incoterms 2010 rules: - DAF, DES and DDU - DAP - DEQ - DAT - Thus, the number of Incoterms has been reduced from 13 to 11. The number of Incoterms classes has changed, It has been reduced from 4 to 2. Incoterms 2000 used to be divided into 4 classes: E, F, C (shipment contracts) and D (arrival contracts). The moment of risk transfer from the seller to the buyer has changed in case of FOB, CFR and CIF. Previously, it was the moment that the goods have passed the ship's rail at the named port of shipment.

EXW (ex works)

The goods are delivered at the named place, when they are placed at the seller's premises or another named place (factory, workshop, warehouse, etc.)

Shipping - FAS/CFR/CIF

The only problem is whether the vessel has to be berthed (stay in port) in deep water or not. If the water is to shallow, the lighters are needed to move the goods alongside. Who bears the cost of using a lighter?

Dangerous (hazardous) goods

The published regulations related to the major modes of international transport: - SEA - IMDG code - AIR - Technical instructions - RAIL - RID - ROAD - ADR Fundamental requirements for all dangerous goods procedures are: - identification of goods - packing & marking requirements - documentary declarations

The Role of the EU

The result of creating the Single European Market (1 January 1993) was removal the internal frontiers allowing the "Four Freedoms": free movement of goods, people, services and capital. The common external frontier, however, remains intact: - 28 EU member states - 4 EFTA member states = 3 EEA member states + Switzerland - Trade statistics (Dispatches/Arrivals), in terms of VAT (Supplies/Acquisitions)

Incoterms 2010 and Risk Transfer - General Rule

The risk of loss or damage to the goods passes from the seller to the buyer when the seller has fulfilled the obligation to deliver the goods. Delivery = Risk Transfer

FOB (free on board)

The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The buyer bears all the risks and costs from the moment onwards that the goods are on board the vessel.

CIF (cost, insurance and freight)

The seller delivers the goods on board the vessel or procures the goods already so delivered. Although the buyer bears the risk from the moment onwards that the goods are onboard the vessel to the named port of destination, it is the seller who contracts and pays for the insurance during the carriage.

CFR (cost and freight)

The seller delivers the goods onboard the vessel or procures the goods already so delivered. Although the seller needs to pay all the pransportation costs to take the goods to the named port of destination, it is the buyer who bears the risk from the moment onwards that the goods are onboard the vessel to the named port of destination.

FCA (free carrier)

The seller delivers the goods to the carrier or another person nominated by the buyer at the seller's premises or another named place.

CIP (carriage and insurance paid to)

The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place and that the seller needs to pay all the transportation costs to take the goods to the named place of destination. Although, the buyer bears the risk from the agreed place to the named place of destination, it is the seller who contracts and pays for the insurance during the carriage.

CPT (carriage paid to)

The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place and that the seller needs to pay all the transportation costs to take the goods to the named place of destination. However, it is the buyer who bears the risk from the agreed place to the named place of destination.

FAS (free alongside ship)

The seller delivers the goods when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment. The buyer bears all the risks and costs from that moment onwards.

DAP (delivered at place)

The seller delivers the goods when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the risks to bring the goods to that place.

DDP (delivered duty paid)

The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the risks to bring the goods to that place.

DAT (delivered at terminal)

The seller delivers the goods, once unloaded from the arriving means of transport, they are placed at the disposal of the buyer at a named terminat at the named port or place of destination. The seller bears all the risks to bring the goods to that place.

Main characteristics of Incoterms 2010

There are 11 Incoterms divided into two separate groups: - Rules for any mode or modes of transport: EXW, FCA, CPT, CIP, DAT, DAP, DDP - Rules for sea and inland waterway transport: FAS, FOB, CFR, CIF Attention! Since the use of Incoterms is not obligatory, it needs to be clearly specified in the contract. The interpretation of the contract may well be influenced by customs/commercial practice particular to the port or place being used.

Institutions at the local level

They are the nearest environment of each company. The local environment of export-import companies constitutes: - Banks and Leasing companies - Insurance companies - Local chambers of commerce - Trade intermediaries - Commercial (information) agencies (e.g. Creditreform, Dun & Bradstreet) - Customs houses - Tax offices - Freight forwarders, carriers, logistic operators and customs agencies.

Definition of a transaction - business practice

all the business activities involved in the process of exchange or transfer of those goods, services, assets, etc.

Patent

an agreement between an inventor and a state (national) government under which the inventor obtains the exclusive right to make, use or sell his/her invention for a limited period of time. It can cover a new product, process, machine or an improvement

Copyright

an exclusive right given to creators of original works of authorship that prevent others from using (i.e. reproducing, displaying, or performing publicly) their work

Incoterms 2010 and Risk Transfer - CPT and CIP

delivering the goods to the carrier contracted (by the seller) for transport to the agreed point at the named place on the date or within the period agreed.

Incoterms 2010 and Risk Transfer - FCA

loading the goods (at the seller's premises) on the means of the transport nominated by the buyer or placing the goods at the disposal on the seller's means of transport ready for unloading at another named place.

Particular Average

partial or total loss or damage to a single shipment, caused by a peril that does not cause a loss to other cargo in general or to the vessel. It is not subject to contribution by others, and is therefore the responsibility of the cargo owner.

Incoterms 2010 and Risk Transfer - FAS

placing the goods alongside the vessel nominated by the buyer at the loading place at the named port of shipment on the date or within the period agreed and in the manner customary at the port

Incoterms 2010 and Risk Transfer - EXW

placing the goods at the disposal of the buyer at the agreed point, if any, at the named place of delivery, not loaded on any collecting vehicle.

Incoterms 2010 and Risk Transfer - DAT

placing the goods at the disposal of the buyer at the named terminal at the port or place of destination on the date or within the period agreed

Incoterms 2010 and Risk Transfer - DDP

placing the goods at the disposal of the buyer on any arriving means of transport reay for unloading at the named place of destination on the date or within the period agreed

Incoterms 2010 and Risk Transfer - DAP

placing the goods at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination on the date or within the period agreed

Incoterms 2010 and Risk Transfer - FOB

placing the goods on board the vessel nominated by the buyer at the named port of shipment on the date or within the period agreed and in the manner customary at the port

Incoterms 2010 and Risk Transfer - CFR and CIF

placing the goods on board the vessel nominated by the seller at the named port of shipment on the date or within the period agreed and in the manner customary at the port