Incoterms

Procedure to start an import export business in Bill of Landing

The Incoterms rules or International India A document issued by a carrier, or its agent, to
Commercial terms are a series of pre- Getting started. the shipper as a contract of carriage of goods. It
defined commercial terms published by the Set up. – service tax regist. is also a receipt for cargo accepted for
International Chamber of Commerce (ICC) Obtain a PAN card for the business. transportation, and must be presented for
widely used in international commercial Open a current account. taking delivery at the destination.
transactions. A series of three-letter trade Get the Import Export Code (IEC) issued. Among other items of information, a bill of
terms related to common sales practices, Documents Required for Import Export lading contains (1) consignor's and consignee's
the Incoterms rules are intended primarily to Code (IEC): name, (2) names of the ports of departure and
clearly communicate the tasks, costs and Obtaining the Registration cum Membership destination, (3) name of the vessel, (4) dates of
risks associated with the transportation and Certificate (RCMC) departure and arrival, (5) itemized list of goods
delivery of goods. Opportunities available with exporters. being transported with number of packages and
Methods of Payment kind of packaging, (6) marks and numbers on the
INCOTERMS AND THE Cash-in-Advance packages, (7) weight and/or volume of the
EXPORTER:International Commercial With cash-in-advance payment terms, an cargo, (8) freight rate and amount.
Terms, known as “Incoterms”, are exporter can avoid credit risk because payment It serves as a proof of ownership (title) of the
internationally accepted terms defining the is received before the ownership of the goods is cargo, and may be issued either in a negotiable
responsibilities of exporters and importers in transferred. For international sales, wire or non-negotiable form. In negotiable form, it is
the arrangement of shipments and the transfers and credit cards are the most commonly used in letter of credit transactions,
transfer of liability involved at various stages commonly used cash-in-advance options and may be bought, sold, or traded; or used as
of the transaction. Incoterms do not cover available to exporters. With the advancement of security for borrowing money. A bill of lading is
ownership or the transfer of title of goods. the Internet, escrow services are becoming required in all claims for compensation for any
tariffs.Rules for Sea and Inland Waterway another cash-in-advance option for small export damage, delay, or loss; and for the resolution of
Transport:FAS - Free Alongside Ship: Risk passes transactions. disputes regarding ownership of the cargo. The
to buyer, including payment of all transportation Letters of Credit rights, responsibilities, and liabilities of the
and insurance costs, once delivered alongside Letters of credit (LCs) are one of the most secure carrier and the shipper under a bill of lading
the ship (realistically at named port terminal) by instruments available to international traders. (often printed on its back) are governed
the seller. The export clearance obligation rests An LC is a commitment by a bank on behalf of generally either by the older Hague rules, or by
with the seller.FOB - Free On Board: Risk passes the buyer that payment will be made to the the more recent Hague-Visby rules.
to buyer, including payment of all transportation exporter, provided that the terms and Pre Shipment credit (PSC)
and insurance costs, once delivered on board conditions stated in the LC have been met, as Pre Shipment Finance is issued by a financial
the ship by the seller. A step further than verified through the presentation of all required institution when the seller want the payment of
FAS.CFR - Cost and Freight: Seller delivers goods documents. the goods before shipment. The main objectives
and risk passes to buyer when on board the Documentary Collections behind preshipment finance or pre export
vessel. Seller arranges and pays cost and freight A documentary collection (D/C) is a transaction finance is to enable exporter to:
to the named destination port. A step further whereby the exporter entrusts the collection of Procure raw materials., Carry out manufacturing
than FOB.CIF - Cost, Insurance and Freight: Risk the payment for a sale to its bank (remitting process.,Provide a secure warehouse for goods
passes to buyer when delivered on board the bank), which sends the documents that its buyer and raw materials., Process and pack the goods.
ship. Seller arranges and pays cost, freight and needs to the importer’s bank (collecting bank), Ship the goods to the buyers., Meet other
insurance to destination port. Adds insurance with instructions to release the documents to financial cost of the business. Types:
costs to CFR. the buyer for payment. Packing Credit, Advance against Cheques/Draft
Open Account etc. representing Advance Payments.
ConsignmentConsignment in international
An open account transaction is a sale where the Bill of Entry
trade is a variation of open account in which
goods are shipped and delivered before An account of goods entered at a customhouse,
payment is sent to the exporter only after
payment is due, which in international sales is of imports and exports, detailing the merchant,
the goods have been sold by the foreign
typically in 30, 60 or 90 days. quantity of goods, their type, and place of origin
distributor to the end customer (payment
method) or destination. It is issued by the customs
presenting the total assigned value and the
corresponding duty charged on the cargo.
Rules for Any Mode or Modes of Export contract Marine Insurance
Transportation: Marine insurance covers the loss or damage of
EXW - Ex Works: Seller delivers (without loading) The export contract is used for the international ships, cargo, terminals, and any transport or
the goods at disposal of buyer at seller's sale of certain products (industrial supplies, raw cargo by which the property is transferred,
premises. Long held as the most preferable term materials, manufactured goods), which are acquired, or held between the points of origin
for those new-to-export because it represents projected for resale, where the buyer is a trader, and the final destination. Cargo insurance is the
the minimum liability to the seller importer, distributor or wholesaler that will sell sub-branch of marine insurance, though Marine
FCA - Free Carrier: Seller delivers the goods to the products to another company or merchant. insurance also includes Onshore and Offshore
the carrier and may be responsible for clearing Though it is common practice to export products exposed property, (container terminals, ports,
the goods for export (filing the EEI). based a proforma invoice or quotation received oil platforms, pipelines), Hull, Marine Casualty,
CPT - Carriage Paid To: Seller delivers goods to from exporters, it is a safe practice to use and Marine Liability.
the carrier at an agreed place, shifting risk to the written and legal export contracts. Covers
buyer, but seller must pay cost of carriage to the Elements A marine policy typically covered only three-
named place of destination. Products, standards and specifications. quarter of the insured's liabilities towards third
CIP - Carriage and Insurance Paid To: Seller Units of measure in both figures and words. parties. The typical liabilities arise in respect of
delivers goods to the carrier at an agreed place, Total value. The total contract value in words collision with another ship, known as "running
shifting risk to the buyer, but seller pays carriage and figures, and in a specific currency. down" (collision with a fixed object is a
and insurance to the named place of Terms of delivery. Delivery terms, based on the "allision"), and wreck removal (a wreck may
destination. Incoterms. serve to block a harbour, for example).
DAT - Delivered at Terminal: Seller bears cost, Terms of payment. Amount, mode and currency. Transit Cargo
risk and responsibility until goods are unloaded Documentary requirements. Documents needed Cargoes that have been off-loaded at a port for
(delivered) at named quay, warehouse, yard, or for international trade transactions. transhipment are NOT allowed to exit the port
terminal at destination. Delay in delivery. Damages due to the importer by land or rail across international borders to a
DAP - Delivered at Place: Seller bears cost, risk from the exporter in the event of late delivery land locked country unless they are declared as
and responsibility for goods until made available owing to reasons other that force majeure. Cargo in Transit.. *** Cargo in Transit is the
to buyer at named place of destination. Seller Force majeure. Provisions in the contract movement of cargo that is. discharged at a
clears goods for export, not import. DAP defining circumstances that would relieve gateway seaport
replaces DAF, DDU. partners of their liability for non-performance of
DDP - Delivered Duty Paid: Seller bears cost, risk the contract.
and responsibility for cleared goods at named Applicable law. The law of the country that is to
place of destination at buyers disposal. govern the contract.