ESP 311 – Inglés Técnico para Comercio Exterior ESP.

INTERNATIONAL TRADE Duoc UC Viña del Mar

UNIT 1 International Trade Concepts

In the case of dangerous and/or poisonous cargo (es). 13 Other Terms: Unless otherwise agreed and accepted by the Buyer. Any supplementary terms and conditions that may be attached to this Contract shall automatically prevail over the terms and conditions of this Contract if such supplementary terms and conditions come in conflict with terms and conditions herein and shall be binding upon both parties. A. Complete the contract with proper information: PURCHASE CONTRACT Contract No:_________________ Date: _____________ The Buyer: ____________ The Seller:______________ The Contract. the Buyer may require marking with fast and unfailing pigments on each package. the Terms of Delivery which must form an integral part of this Contract. of SECTION II. all other matters related to this contract shall be governed by Section II. package number.1. It is only the first section of the contract. both version being equally authentic. The Letter of Credit must remain in power till the 15th day after shipment. We will see the complete contract is at the end of this booklet. Contract of International Trade Below is a model sample of a real International Trade Contract – or Purchase Contract – between an American and a Chinese Company. . by and between the Seller and the Buyer whereby the Seller agrees to sell and the Buyer agrees to buy the undermentioned goods subject to terms and conditions set forth hereinafter as follows: SECTION 1 1 Name of Commodity and specification: _________________ 2 Country of Origin & Manufacturer: _________________ 3 Unit Price (packing charges included): ______________ 4 Quantity:_________________ 5 Total Value:______________ 6 Packing (seaworthy):______________ 7 Insurance (to be covered by the Buyer unless otherwise): _____________ 8 Time of Shipment:__________________ 9 Port of Loading:__________________ 10 Port of Destination:_________________ In addition to the port of destination. the Seller is obliged to ensure that the nature and the generally adopted symbol is marked on each package. made out. gross and net weights. in Chinese and English. measurements and other marks. 12 Terms of Payment: One month prior to the time of shipment the Buyer must open with the Bank of _______an irrevocable Letter of Credit in favor of the Seller. the Terms of Delivery of this Contract after departure of the carrying vessel. payable at the issuing bank against presentation of documents as stipulated under Clause 18.

and arranges delivery of goods to carrier. _____ Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the goods or the delivery order.2. Import – Export Procedure Below are 3 steps of the Import-Export procedure. Seller prepares goods and documentation. _____ If credit terms and conditions conform to sales contract. Assign a number for each based on the diagram above : _____ Seller and Buyer conclude a sales contract. . with method of payment usually by letter of credit (documentary credit).

usually in Seller's country. * Content for Unit 2 2. 7. forwards letter of credit to Seller informing about the terms and conditions of credit. Seller presents documents evidencing the shipment and draft (bill of exchange) to paying. sends the documents and draft to the issuing bank. GRAMMAR POINT We can state the steps in a procedure with the following words: First … Second … Then … After that … Finally … These are called SEQUENCE ADVERBS . If complied with. 5. 11. and usually to confirm. 3. usually a correspondent bank in Seller's country. Seller's draft is honored. If credit terms and conditions conform to sales contract. Seller prepares goods and documentation. Bank examines the documents and draft for compliance with credit terms. Advising bank. Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the goods or the delivery order. 6. or on other terms agreed between the bank and Buyer. for letter of credit in favor of Seller (beneficiary). Bank.The following is the complete procedure: 1. Seller and Buyer conclude a sales contract. to advise. If complied with. or any bank willing to negotiate under the terms of credit. if other than the issuing bank. accept or negotiate. 9. accepting or negotiating bank named in the credit (the advising bank usually). and arranges delivery of goods to carrier. Buyer applies to his issuing bank. the credit 4. usually in Buyer's country. Documents release to Buyer after payment. Bank examines the documents and draft for compliance with credit terms. bank will pay. 10. with method of payment usually by letter of credit * (documentary credit). 8. Issuing bank requests another bank.

3. developed by the International Chamber of Commerce (ICC) in Paris. as follows: GROUP E F TERM EXW FCA FAS FOB C CFR CIF CPT CIP D DAF DES DEQ DDU DDP Ex Works Free Carrier Free Alongside Ship Free On Board Cost and Freight Cost. C and D. It defines the trade contract responsibilities and liabilities between buyer and seller. F. and other costs and risks. designated by the first letter of the term (acronym). France. CFR and CIF. they can sell and buy at FOB without discussing who will be responsible for the freight. such as FOB. It is invaluable and a cost-saving tool. Under the INCOTERMS 2000. Incoterms The INCOTERMS (International Commercial Terms) is a universally recognised set of definitions of international trade terms. Once they have agreed on a commercial term like FOB. cargo insurance. Insurance and Freight Carriage Paid To Carriage and Insurance Paid To Delivered At Frontier Delivered Ex Ship Delivered Ex Quay Delivered Duty Unpaid Delivered Duty Paid Stands for INTERNATIONAL COMMERCIAL TERMS . The exporter and the importer need not undergo a lengthy negotiation about the conditions of each transaction. the international commercial terms are grouped into E.

Works means factory. In the export quotation. The term EXW is commonly used between the manufacturer (seller) and export-trader (buyer). for example FAS New York and FAS Bremen. at seller's expense. technically speaking. In the export quotation. The term FCA is also used in the (roll on/roll off) services. mill or warehouse. rail car or container at the specified point (depot) of departure. In the air shipment. In the quotation. main carriage/freight. many importers and exporters still use the term FOB in the air shipment. indicate the point of departure (loading) after the acronym FCA. FOB {+ the named port of origin} Free On Board The delivery of goods on board the vessel at the named port of origin (loading).EXW {+ the named place} Ex Works Ex means from. which is the seller's premises. and other costs and risks. In the export quotation. FCA {+ the named point of departure} Free Carrier The delivery of goods on truck. Buyer is responsible for loading the goods on truck or container at the seller's premises. Some manufacturers may use the term Ex Factory. In practice. indicate the port of origin (loading) after the acronym FOB. In practice. which means the same as Ex Works. on the dock or lighter. indicate the named place (seller's premises) after the acronym EXW. The point (depot) at origin may or may not be a customs clearance center. Buyer is responsible for the loading fee. indicate the port of origin (loading) after the acronym FAS. for . Buyer is responsible for the main carriage/freight. EXW applies to goods available only at the seller's premises. which is usually the seller's premises. and the export-trader resells on other trade terms to the foreign buyers. FAS {+ the named port of origin} Free Alongside Ship Goods are placed in the dock shed or at the side of the ship. for example FCA Hong Kong and FCA Seattle. Buyer is responsible for the main carriage/freight. for example EXW Kobe and EXW San Antonio. or a named railroad station or a named cargo terminal or into the custody of the carrier. and for the subsequent costs and risks. cargo insurance. cargo insurance and other costs and risks. The FAS term is popular in the break-bulk shipments and with the importing countries using their own vessels. cargo insurance and other costs and risks. within reach of its loading equipment so that they can be loaded aboard the ship. at seller's expense. it is not uncommon that the seller loads the goods on truck or container at the seller's premises without charging loading fee. at seller's expense.goods placed in the custody of an air carrier is considered as delivery on board the plane. Some manufacturers may use the former terms FOT (Free On Truck) and FOR (Free On Rail) in selling to export-traders.

Buyer assumes the import customs clearance. In the export quotation. the term CIF is used for ocean freight only. for example CIF Pusan and CIF Singapore. depending on the agreement between the buyer and seller. Under the rules of the INCOTERMS 1990. CIP {+ the named place of destination} Carriage and Insurance Paid To The delivery of goods and the cargo insurance to the named place of destination (discharge) at seller's expense. Insurance and Freight The cargo insurance and delivery of goods to the named port of destination (discharge) at the seller's expense. for example CIP Paris and CIP Athens. The term CFR was formerly written as C&F. the term FOB has other applications. Buyer is responsible for the cargo insurance and other costs and risks. the term Cost and Freight is used for ocean freight only. In the export quotation. Buyer is responsible for the import customs clearance and other costs and risks. in practice. FOB Origin means the buyer is responsible for the freight and other costs and risks. Many buyers and sellers in Canada and the U. dealing on the open account and consignment basis are accustomed to using the shipping terms FOB Origin and FOB Destination. CFR (The former acronym of Cost and Freight was C&F) CFR {+ the named port of destination} Cost and Freight The delivery of goods to the named port of destination (discharge) at the seller's expense. Many importers and exporters worldwide still use the term C&F. In North America. CIF {+ the named port of destination} Cost.example FOB Vancouver and FOB Shanghai. However. In the export quotation. which are not part of the INCOTERMS (International Commercial Terms). indicate the port of destination (discharge) after the acronym CFR.A. avoid using the shipping terms FOB Origin and FOB Destination. in practice. the term Cost and Freight (C&F) is still commonly used in the air freight. indicate the port of destination (discharge) after the acronym CIF. in practice.S. FOB Destination means the seller is responsible for the freight and other costs and risks until the goods are delivered to the buyer's premises. payment of customs duties and taxes. many importers and exporters still use the term CIF in the air freight. indicate the place of destination (discharge) after the acronym CIP. which may include the import customs clearance and payment of import customs duties and taxes at the buyer's country. and other costs and risks. In international trade. CPT {+ the named place of destination} . many importers and exporters still use the term FOB in the air freight. However. Under the rules of the INCOTERMS 1990. Under the rules of the INCOTERMS 1990. the term FOB is used for ocean freight only. However. for example CFR Karachi and CFR Alexandria.

. payment of customs duties and taxes. indicate the place of destination (discharge) after the acronym CPT. Buyer is responsible for the import customs clearance. DDP {+ the named point of destination} Delivered Duty Paid The seller is responsible for most of the expenses. which is often the project site or buyer's premises. In the export quotation. Seller is responsible for the import customs clearance and payment of customs duties and taxes at the buyer's end. indicate the port of destination (discharge) after the acronym DEQ. In the export quotation. for example DEQ Libreville and DEQ Maputo. The seller may opt not to insure the goods at his/her own risks. DAF {+ the named point at frontier} Delivered At Frontier The delivery of goods to the specified point at the frontier at seller's expense. In the export quotation. Buyer assumes the cargo insurance and other costs and risks. at seller's expense. In the export quotation. cargo insurance. and the delivery of goods to the final point at destination. at seller's expense. payment of customs duties and taxes. DEQ {+ the named port of destination} Delivered Ex Quay The delivery of goods to the quay (the port) at destination at seller's expense. indicate the point at frontier (discharge) after the acronym DAF. which is often the project site or buyer's premises. import customs clearance.Carriage Paid To The delivery of goods to the named place of destination (discharge) at seller's expense. Buyer assumes the cargo insurance. and other costs and risks. indicate the port of destination (discharge) after the acronym DES. In the export quotation. Buyer assumes the import customs clearance and payment of customs duties and taxes. DDU {+ the named point of destination} Delivered Duty Unpaid The delivery of goods and the cargo insurance to the final point at destination. for example CPT Los Angeles and CPT Osaka. indicate the point of destination (discharge) after the acronym DDU. In the export quotation. payment of customs duties and taxes. and payment of customs duties and taxes at the buyer's end. and other costs and risks. indicate the point of destination (discharge) after the acronym DDP. which include the cargo insurance. DES {+ the named port of destination} Delivered Ex Ship The delivery of goods on board the vessel at the named port of destination (discharge). import customs clearance. and other costs and risks. Buyer assumes the unloading fee. import customs clearance. for example DAF Buffalo and DAF Welland. The seller may opt not to insure the goods at his/her own risks. for example DDP Bujumbura and DDP Mbabane. for example DDU La Paz and DDU Ndjamena.

for example DES Helsinki and DES Stockholm. What are the two acceptable ACRONYMS for Cost and Freight ? The Following is a diagram showing the Incoterms: . Which of these terms is not applicable to OCEAN transportation a) FCA b) FAS c) FOB a) YES b) NO 2. ocean and air) 4. CPT and CIP are applicable to all modes of transportation (land. Comprehension Check: According to what you read answer the following questions 1. Is EXW applicable to a mode of transportation a) TRUE b) FALSE 3.

Applicable Trade Terms in Different Modes of Transportation GROUP TERM Stands for Mode of Transportation Land Ocean Air Multimodal E EXW Ex Works Land Ocean Air Multimodal F FCA FAS FOB Free Carrier Free Alongside Ship Free On Board .4.

Land Ocean Air Multimodal C CFR CIF CPT CIP Cost and Freight Cost. Insurance and Freight Carriage Paid To Carriage and Insurance Paid To Land Ocean Air Multimodal D DAF DES DEQ DDU DDP Delivered At Frontier Delivered Ex Ship Delivered Ex Quay Delivered Duty Unpaid Delivered Duty Paid Outline of Trade Contract Responsibilities of the Seller (Exporter) and Buyer (Importer) Seller is responsible Buyer is responsible 1 2 3 4 5 6 7 8 9 10 11 Inland freight in Seller's country. Delivery to the carrier or frontier Customs clearance in Seller's country Payment of customs charges and taxes in Seller's country Loading to the main carrier or means of conveyance Main carriage/freight Cargo (marine) insurance Unloading from the main carrier or means of conveyance Customs clearance in Buyer's country Payment of customs duties and taxes in Buyer's country Inland freight in Buyer's country Other costs and risks in Buyer's country .

GROUP TERM Trade Contract Responsibility 1 2 3 4 5 6 7 8 9 10 11 E EXW 1 2 3 4 5 6 7 8 9 10 11 F FCA FAS FOB 1 2 3 4 5 6 7 8 9 10 11 C CFR CIF CPT CIP 1 2 3 4 5 6 7 8 9 10 11 D DAF DES DEQ DDU DDP .

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