Professional Documents
Culture Documents
2. In detail, please discuss why the purchase price; time, place, and method of payment; the
origin of goods; and specified trade terms are especially important elements of an export
sales agreement.
Purchase price; time, place, and method of payment; the origin of goods; and specified trade
terms bring a clear understanding to both the parties involved and hence are important elements
of an export sales agreement. It is also a direct way of mitigating risks for each party involved as
both the parties have a mutual agreement and have included certain clauses that will help in
mitigating risks.
Name and addresses of the parties involved
Purchase Place, Time, Price – Country or territory where goods/ products are sold, when
they will be sold and price at which the goods will be sold. Price according to the incoterms
decided in the agreement and currency mutually agreed between buyer and seller
Product specifications – What products are sold and the standard of product, other required
specification
Product Quality inspection certificate
Packaging requirements – How the products need to be packed, labelling requirements and if
any markings need to be done
Insurance – Marine / air / any other insurance as required
Rights and Obligations – Duties and responsibilities of each party involved in the agreement
such as freight cost, insurance, freight responsibility etc.
Nature and time period – Period of agreement and renewal clause, exclusivity of parties
involved, authority given to the sales agent
Compensation and payment provisions – Terms of payment, when will the payment be
made, mode of payment and compensation to the agents involved
Termination – Terms for clause and how and when the contract will end, compensation /
settlement clause prior to termination
General Clauses – Confidentiality, non-disclosure, governing law, dispute resolutions,
arbitration clause.
Both the parties must acknowledge the agreement after it is thoroughly scrutinised by each party
involved.
3. What are the differences between a domestic commercial invoice and a commercial invoice
that accompanies an export transaction? Please give one example to support your answer.
An invoice plays an important part in an export process. An invoice is a document that describes
the entire export transaction from the beginning to the end. It provides important information to
all the parties to a transaction like the buyer, freight forwarder, the bank, etc. If the export
invoice is not made properly then it can cause a lot of confusion and delays.
Difference between domestic commercial invoice and commercial invoice in an export
transaction:
A domestic commercial invoice has just enough information that covers the requirements of a
domestic sales transaction. A domestic commercial invoice only contains basic information with
respect to the transaction. An export commercial invoice needs to comply with the requirements
under different country’s custom laws. All such information needs to be included in the invoice
so that there is no problem with the customs clearance process in the country of import. A
domestic invoice doesn’t need to comply with additional requirement. It’s a very concise and
basic document with limited details.
An export commercial invoice includes additional information as follows:
Incoterm- Incoterms are the selling and buying terms which are used in global trade and are
internationally recognized. It pertains to the risks and costs associated with the import-export
transaction. Incoterms are a part of an export commercial invoice. These are not required in a
domestic commercial invoice.
Commercial value of goods- Sometimes the actual value of the goods exported can be higher
than what is charged to the buyer. For example, sometimes goods are shipped as replacement
or as samples and are not charged at the actual value. But the customs department need to
know the actual value of the goods.
International payment details- An export commercial invoice also sometimes include details of
the company’s bank account like SWIFT code, bank account number, etc.
Product classification codes- HS codes are used by the customs department to easily identify the
products in an international transaction.
Port of Loading, Port of Unloading and Final Destination- These information are included only
in an export commercial invoice and not in a domestic commercial invoice as in a domestic
transaction there are not many countries involved. In an export transaction these are important
details which are necessary to be included in the document. Example, Port of Loading, Port of
Unloading and Final Destination will be included in an export commercial invoice but not
in a domestic commercial invoice.
4. What is the connection between the commercial invoice and tariffs? Please give one
example to support your answer.
Commercial invoice is the document that is used by many countries to determine the true value
of goods sold and accordingly the customs and duties are calculated or implemented based on
law. Bill of lading is another proof that is required by customs. When a business has completed a
commercial invoice in a legal and thorough manner it gets through the process of customs
smoothly without any further hassles. Many clients/buyers request sellers to alter or misrepresent
the true value of goods or they ask sellers to not show down payment made by buyers in advance
as it creates additional processes or takes longer to be cleared by customs or the parties involved
may have to pay more custom duty/tariff. Sometimes buyers even ask sellers to provide them
with 2 copies of the invoice, 1 copy with actual price and 1 copy with a reduced price for the
custom clearance, and to save a few dollars on duties and tariffs.
Businesses who do not complete invoice thoroughly may face few problems mentioned below: