Octroi and Incoterms and EXIM quiz Flashcards
What is Octroi Tax
Octroi is a kind of charge or tax, which is collected by the state government on those goods that have been bought into the city/state for the purpose of personal use and sale.
The charges on the items are generally levied after on the weight, value and total number of goods. The percentage of tax usually varies from state to state and city to city.
States Where Octroi Tax is Charged
Currently, there are two states in India, Maharashtra and Gujarat which levy this kind of tax.
current condition of it?
abolished after gst
Letter of Credit (LC)
a legal document that is issued by the bank that acts as an irrevocable guarantee in making payment to a beneficiary. When an individual fails to perform the required obligations, the bank pays.
Types of Letters of Credit
A revocable letter of credit
An irrevocable letter of credit
A standby letter of credit: (SBLC / SLOC) is a guarantee that is made by a bank on behalf of a client, which ensures payment will be made even if their client cannot fulfill the payment. It is a payment of last resort from the bank, and ideally, is never meant to be used.
Revolving letter of credit: implemented when there are regular shipments of the same commodity between the supplier and the customer, implemented when there are regular shipments of the same commodity between the supplier and the customer
Letters of Credit Options
Sight: The payment will immediately be made effective by presenting the Bill of Exchange.
Usance: The payment will be effected on the Pre-designated day from the date of acceptance of Bill of Exchange.
Deferred Payment: The payment will be effected in instalments according to the contract/ letter of credit at predetermined intervals.
Acceptance Credit/ Time Credit: This is made available by the acceptance of the draft that is drawn by the exporter nominated bank.
Invoice types of invoices
Commercial Invoice: Invoices that are issued in terms of the contract/ Letter of Credit.
Customs Invoice: This is issued in a specific format for exports to the USA and Canada.
Consular Invoice/ Legalised Invoice: This is issued which is certified by the Consulate of the Importing Country.
who oversees letters of credit
The International Chamber of Commerce (ICC) Uniform Customs and Practice (UCP) for Documentary Credits oversees letters of credit used in international transactions
(UCP) is a set of rules on the issuance and use of letters of credit
Incoterms
the short and snappy way of saying International Commercial Terms. First published way back in 1936, they’re a set of 11 rules defining who’s responsible for what during international transactions.
Why are Incoterms so important?
A requirement on every single commercial invoice, they greatly reduce the risk of potentially costly misunderstandings.
Incoterms spell out all the tasks, risks and costs involved during the transaction of goods from seller to buyer..
Incoterms
EXW – Ex-Works
Buyer assumes almost all costs and risk throughout the shipping process
Seller’s only job is making sure the buyer can access the goods
Once the buyer has access, it’s all down to them (including loading the goods)
Risk transfers from seller to buyer:
At the seller’s warehouse, offices or wherever the goods are being collected from.
Incoterms
DAP – Delivered At Place
Seller covers the costs and risk of transporting goods to an agreed address
Goods are classed as delivered when they’re at the address and ready to be unloaded
Export and import responsibilities are the same as DAT
Risk transfers from seller to buyer:
When goods are ready for unloading at the agreed address
Incoterms
DDP – Delivered Duty Paid
Seller takes almost all responsibility throughout the shipping process
They cover all costs and risk of transporting goods to the agreed address
Seller also makes sure goods are ready for unloading, fulfils export and import responsibilities and pays any duties
Incoterms
CIP – Carriage And Insurance Paid To
Same seller responsibilities as CPT with one difference: the seller also pays for the carriage and insurance to the named destination.
Seller is obliged to purchase the maximum level of insurance cover under Clause A (Institute Cargo Clauses), for the buyer’s risk.
Incoterms
DPU – Delivered At Place Unloaded (previously DAT)
Seller is responsible for the costs and risk of delivering the goods to an agreed place of unloading.
The place of unloading could be any place, whether covered or not.
Seller organises customs clearance and unloads the goods at the place of unloading.
Buyer sorts import clearance and any related duties.
Incoterms
FCA – Free Carrier
It’s the seller’s job to get the goods to the buyer’s carrier at an agreed location
Seller is also required to clear goods for export
Incoterms
CPT – Carriage Paid To
Same seller responsibilities as FCA with one difference: the seller covers delivery costs
As with FCA, it’s the seller’s responsibility to clear goods for export
Incoterms
FAS – Free Alongside Ship
Seller assumes all costs and risk until goods have been delivered next to the ship
Buyer then takes over risk and takes care of export and import clearance
Incoterms
FOB – Free On Board
Seller assumes all costs and risk until goods have been delivered on board the ship
They also sort out export clearance
Buyer assumes all responsibilities as soon as the goods are on board
Incoterms
CFR – Cost And Freight
Seller has the same responsibilities as FOB but must also pay the cost of bringing the goods to the port
As with FIB, the buyer assumes all responsibilities as soon as the goods are on board
Incoterms
CIF – Cost, Insurance And Freight
Seller has the same obligations as CFR but must also cover insurance costs
Seller is obliged to purchase the minimum insurance cover which is 110% of the invoice value, in the currency of that invoice and contract.
If the buyer requires more comprehensive insurance, the seller must arrange the additional cover at the buyer’s cost.
The 3 most common Incoterms
EXW – Ex-Works
DAP – Delivered At Place
DDP – Delivered Duty Paid
IEC
Import Export Code’,
10 digit number issued by the Director General of Foreign Trade
‘Import Export Code
mandatory requirement for all the persons who are engaged in either importing and/ or exporting goods or services from India.
in order to avail the export scheme benefits from DGFT, customs and export promotion council
