Intercoms 2020&Documents in International Trade Flashcards
Bill of exchange(drafts)
A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to bearer
Unconditional means no condition allowed
Normally drawer is the seller seeking payment by the buyer who is the drawee( or sometimes a bank, on behalf of the buyer)
Determinable due date, 90days after the date of the draft is a determinable date but 90days after the arrival of a ship is not. As exact date or arrival cant be certain
Could be seen as you owe me
Legal status of bills of draft
They are negotiable instruments unless specifically stated not to be, recognised by most international jurisdictions
Draft stands alone from any contract that might have caused it to be written. For example bank that holds a draft and expects to collect money from the acceptor when due can sue the acceptor, or anyone else whose signature is on the draft, for non payment irrespective of any contractual dispute there may be relating to the underlying goods or services
Promissory note
Also a negotiable instrument that is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand at a fixed or determinable future date a sum certain in money to, or to the order of a specified person or bearer
Could be seen as I owe you
Transport documents
Two types of documents
Quasi negotiable that give title to the goods and can confer upon the holder of an original transport document a right to possession of goods
However unlike bill of exchange bill of lading is subject to any defect of title(meaning full legal title cannot be transferred to any other party. Also canot exercise full legal rights over the bill of lading or the goods covered by that bill)its because bill of lading is not a fully negotiable document but quasi negotiable
Non negotiable
Air waybill and sea waybill
Air waybill is a non-negotiable document and shouldnt be issued ‘to order’ or ‘to order of’ a named entity. It evidences that the goods are consigned to a named entity
Non-negotiable sea waybill serves primarily as a transport document for use when there is a short sea journey and the delivery of the goods is not conditional upon the surrender of an original negotiable transport document such as bill of lading
Commercial invoice
Must be produced in accordance with the contract, purchase order or pro forma invoice, incorporating any agreed changes
Unique number, quote the contract number, seller, buyer, describe the merchandise, terms of payment, sales terms, Incoterms
Insurance documents
Banks may receive insurance documents as a policy or more frequently an insurance certificate. Policies of insurance set out the full terms of the insurance contract between the insurance company and the insured.
Insurance certificates are used when there is a open policy of insurance in place for a regular seller or buyer.
Types of insurance
Level A
1/Collision, explosion, fire, sinking, capsizing, running aground, washing overboard, loss on loading or unloading and derailment
2/Events such as lighting, volcanic activity and earthquakes
3/theft and non delivery
Level B
This level includes all of the risks in 1/ and 2/
Level C
This level includes risks listed under 1/ only
General average loss
Level A also protects against general average, for example if it was necessary to jettison some cargo to save ship, the normal rule is that all those with goods on board share the loss, even if their own cargo is not thrown overboard. But the general average clause protects the insured against this loss.
The insured also be covered in the event of a dispute as to which ship was to blame for a collision
Particular average
Failure of the insured to insure the goods for their proper value, may not be covered. Where goods are underinsured the insured will have to bear a partial loss in proportion to the insurance
11 Incoterms 2020
Incoterms that are applicable to all modes of transport
EXW, FCA, CPT, CIP, DAP, DPU, DDP
Incoterms that are only applicable for transport of sea or inland waterway
FAS, FOB, CFR, CIF
EXW EX Works
Seller delivers the goods to buyer
When it places the goods at the DISPOSAL of the buyer at a named place(like a factory or warehouse)
Names place may or may not be sellers premises
Names point of delivery when the goods are placed not loaded is where the delivery and risk transfers to the buyer
Seller is under no obligation to clear the goods for export it is buyers responsibility to organize
FCA Free Carrier
Free carrier(named place) means that the seller delivers the goods to buyer in one or other two ways
When named place is SELLERS PREMISES the goods are delivered and risk is transferred to buyer when they are LOADED on the means of transport arranged by the buyer
When the named place is ANOTHER PLACE, the goods are delivered and risk is transferred to buyer when the goods are READY FOR UNLOADING from sellers means of transport at the disposal of the carrier or another person nominated by buyer
Seller clears goods for export where applicable
FAS Free Alongside Ship
Only for sea and inland waterway
Seller delivers the goods to buyer when the goods are PLACES ALONGSIDE THE SHIP( on a quay or a barge)
Ship that is nominated by the buyer at the named port of shipment
Risk or loss or damage is transferred to buyer when the goods are alongside the ship
Seller clears the goods for export
FOB Free On Board
Only for sea and inland waterway
Seller delivers goods to the buyer when goods are on board the vessel that is nominated by the buyer at the named port of shipment.
Risk or loss of damage is transferred to the buyer when the goods are on board the vessel
Seller clears the goods for export
