Test 2 Flashcards
Cash In advance
The exporter requests that the customer gives payment in advance before shipment of the goods can take place.
Risk is entirely on the importer. Very risk free for exporter
Open Account
The exporter sends an invoice to the importer along with the shipment and expects a payment within 30 - 90 days. It is very risky for the exporter. If the payment is not made they have to go through an expensive and time consuming process in importing country.
Factoring
Used in an open account. The exporter is paid by the factor and the factor then needs to get the money from the importer. Usually happens when importer requests a longer amount of time to pay than the exporter can afford
Used most frequently domestically
Letter of Credit
A document where the importers bank essentially promises to pay the exporter if the importer does not pay.
Stand by Letters of Credit
Is similar to letter of credit expect it usually has much longer validity period. It also usually applies more than one shipment
URC 522
Describes rules that banks and importers/exporters have when dealing with each other . Explains that presenting bank has to notify the importer to come in and sign the draft
Documentary collection
process by which an exporter asks a bank located in the importers country to safeguard the exporters interests. (hold the products until the payment is made.) This way if the importer doesn’t pay they only lose the cost of shipping rather than everything
Sight draft
Time draft
Date draft
Sight draft - A draft in which the importer promises to pay the exporter immediately
Time draft - A draft in which the importer promises to pay exporter a certain amount of time after draft is signed
date draft - Same as time draft but they have the amount of time from shipment date, not when importer has signed draft
Instruction letter
In a documentary collection, a document prepared by the exporter that instructs the presenting bank on the steps to take before releasing the documents to the importer
Trade acceptance
Takes place in documentary collection when importer signs the draft
Forfaiting
Financing an international sale in which the exporter can collect drafts from the importer and resell them to the forfaiting company without recourse. Can be used for terms as long as 7 years
TradeCard
A propretary process that combines payment and documents and facilitates international transactions
charges only $150 for transactions up to 100k. Letters of credit and Procurement cards usually have 2-3 percent interest. Not widely accepted among the trade world
Bank guarantees
A contract from a bank in which the bank guarantees the exporter will perform as required by the importer
What are the 4 invoices
Commerical invoice, Consular Invoice, Specialized Commerical Invoice, pro forma invoice
Commerical Invoice
Document that the seller sends to buyer that lists what goods were purchased
pro forma invoice
A quote provided by exporter to the importer for the purpose of obtaining a letter of credit or an import license (pretty much a request to actually send an invoice)
Consular Invoice
An invoice printed on stationery paper provided by the importing country’s Consulate. becoming less necessary. Needed when shipping to a few Latin American countries. It is considered a trade barrier
Specialized commerical invoices
Must be printed on standard form. The purpose is to simplify the work of Customs employees
Export Licenses
an express authorization by a country’s government to export a specific product before it is shipped.
Needed for 2 reasons:
- Gov is controlling export of raw materials to conserve natural resources
- gov is controlling the export of national treasures
US export controls (3 elements)
US export control polices focus on 3 elements:
- the product considered for export
- the entity abroad that is buying the product
- the final destination for the product
Certificate of origin
The most common type of required document. The exporter must have it signed by its Chamber of Commerce. It attests that the good originated in the country that the exporter is in
Certificate of Manufacture
Attests that the goods were manufactured where the exporter is located
Certificate of Inspection
A document signed by an independent company (third party) that attests the accuracy and authentic y of the shipment
Phyto-Sanitary certificate
Provided by agricultural authorites of exporting countries. Attests that agricultural products do not have disease or pests
Certificate of free sale
issued by exporter that attests the goods can be legally sold in exporting country
Uniform Bill of Lading
A bill of lading used for transportation by truck or train. Domestically or Internationally
Intermodal bill of lading
A bill of lading used for transportation that uses more than one mode of transportation - domestic or international
Air waybill
bill of lading used for transportation by air, domestically or internationally
Charter Party
A type of contract of carriage that happens when the shipper uses all or most of the ships space to transport goods
Packing list
A detailed document provided by the exporter that spells out how many containers there are in the shipment and which merchandise is packaged in each container
Shippers letter of instruction
A document that the shipper say how it wants the carrier to handle the good while they are in transit (for example, when dealing with livestock)
Manifest
A document that the shipping company creates that lists the exact makeup of the cargo, ownership, and its port of destination
Risk Retention
The shipper decides that it will assume the risks of loss for a specific shipment
Risk Transfer
Shippers who use this risk manangement stratagy have insurance. And in exchange pay a premium
Shippers that use this:
- they have a lot of exposure
- lack experience
- a loss would hurt their business a lot
Mixed approach
Shipper decides it will take some of the loss, and transfer others
What are the three methods for managing risks for shippers
Risk Retention, Risk transfer, Mixed approach
3 types of marine insurance policies
Marine Cargo Insurance, Hull insurance, Protection and Indemnity
Marine Cargo Insurance
Covers all shipments of insured as long as they are reported
Hull Insurance
covers ship owners risk of damage or loss of ship
Protection and Indemnity
Offers protection against liability to other parties when ship sinks or is damaged.
What are the three steps to filing an insurance claim?
- Notification of loss
- Protection of cargo
- actual filing of the claim
Notification of loss when filing a claim
must be in writing always. This is the most important step. A surveyor should be hired immediately. (surveyor is someone who is a seperate party not affiliated with insurance, shipper or carrier)
Protection of cargo
The insured must protect the property as “if it were not insured” as the insured has an “onus of good faith” and must protect the interests of the insurance company.
Types of service?
Liner ships and tramp ships
Liner ships vs Tramp ships
Liner ships have scheduled routes that they take and they don’t deviate from it. Tramp ships go wherever there is a market for them. (Taxi cab is a tramp ship while public bus is a liner ship)
Dead weight tonage
The maximum weight that a ship can carry
gross registered tonnage
The volume capacity of a ship, calculated in a way that meets the requirements of specific authority
box ship
Another name for containership
RORO
a ship where the cargo is rolled on and off rather than taken off by a train
Trot-on/trot-off
A type of ship designed to carry livestock
Combination ship
A type of ship that is versatile and can carry different types of cargo
Product carrier
A liquid bulk ship that carries refined oil products
flag
The ship carries a flag of the country where the ship is registered
Hague limit, Hague-Visby limit, Hamburg limit
The original Hague limit for ocean cargo restricted the carrier to $500 per customary freight unit. Hague-Visby raised it to $666.67 and Hamburg raised it to $833
NVOCC (Non-Vessel-Operating Common Carriers)
A shipping company that does not own or operate a ship. They purchase ship space and then resell it to companies that need to ship cargo
Two main securites measures in international cargo
Cargo Inspections - A percentage of all shipments entering the US are inspected upon arrival (ranges from 1 to 5 percent)
Advanced Shipping Notifications - shippers have to notify the importing country’s customs authorities 24 hours in advance
Combi Aircrafts
carry freight on main deck
Freighters
aircrafts equippted to carry cargo
Quick-Change Aircraft
A type of airplane that can be coverted from a passenger plane to cargo plane in a matter of hours
Charter airfreight
type of cargo that can only be shipper on charter aircraft because it is too heavy or too bulky
Factoring with recourse
After the exporter is paid, the factor is responsible for getting their money from the importer
Factoring without recourse
After the exporter is paid, if the factor does not recieve their money from the importer, then they can turn back to the exporter
What three roles does the Bill of Lading play in an international transaction
- It is a contract
- It is a receipt for the goods
- certificate of the title
