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DOCUMENTARY TRANSACTION

DOCUMENTARY TRANSACTION. Fundamental Problem-seller fears relinquishing control over its goods before payment, while buyer fears making payment before obtaining possession of the goods. Methods of Payment Cash in Advance Open Account and Consignment Documentary Collection Documentary Credit.

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DOCUMENTARY TRANSACTION

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  1. DOCUMENTARY TRANSACTION • Fundamental Problem-seller fears relinquishing control over its goods before payment, while buyer fears making payment before obtaining possession of the goods. • Methods of Payment • Cash in Advance • Open Account and Consignment • Documentary Collection • Documentary Credit

  2. DOCUMENTARY TRANSACTION • Approach • Documentary Transactions • Necessary Documents to Complete International Private Business Transaction • Decision to Export • Bill of Lading • Allocation of Risk Through the Use of Trade Terms

  3. Documentary Transaction • Documentary Transaction alleviates the seller’s risk of not being paid or the buyer’s risk of not receiving the goods. • Sale of Goods Contract is converted into a sale of documents contract. • Buyer contracts to buy documents and the seller promises to provide conforming documents to the buyer while goods or in transit. • Buyer can use documents to conduct additional transactions

  4. Documentary Transaction • Documentary Collections Documents • Draft or Bill of Exchange-foreign buyer’s check • Sight Draft-immediate payment due to seller. • Cash Against Document-buyer takes possession by either making payment or accepting the draft • Time Draft-payment due at some point in time in the future • Document Against Acceptance-documents transferring title to buyer upon acceptance of time draft.

  5. DOCUMENTARY TRANSACTIONS • Sales Contract • Parties to Sales Contract • Freight Forwarder • Customs Broker • Assortment of Common Carriers • Insurance Companies • Commercial Banks • Letter of Credit • Confirming Bank

  6. DOCUMENTARY TRANSACTIONS • Checklist for Sales Transaction • Entrance into Sales Contract • Letter of Credit • Confirming Letter of Credit • Hire Carrier of Goods • Insurance Policies • Inspection • Preparation for Shipment • Obtain Shipping Documents • Load Goods on Carriers • Transmit Shipping Document • Payment of Letter of Credit • Customs Clearance • Custom Duties

  7. DOCUMENTS • Documents Necessary to Complete International Private Business Transaction • Sales Contract-covers all necessary information to complete transactions in terms of performance, payment, description of goods and third parties. • Commercial Invoice-contains information about goods, seller, buyer and country of origin.

  8. DOCUMENTS • Documents • Bill of Lading-contract between owner and common carrier of goods. • Consular Invoice-invoice from country of departure. • Certificate of Origin-origin of export item. • Certificate of Inspection-specification of goods shipped

  9. DOCUMENTS • Documents • Insurance Certificates-insurance binder stating type and amount of coverage. • Shipper’s Export Document-allows host country to keep statistics on exports. • Export License-license to export • Packing Slip-list that itemizes the material in each individual package being shipped.

  10. DECISION TO EXPORT • Acquisition of Information in the Following Areas-Preparation of Pro Forma Invoice • Objective of Entering Foreign Market • Actual Cost of Exporting Products • Computation of Final Price in Foreign Market • Evaluation of Market Demand and Competition • Modification of Product to Meet Local Laws and Standards • Incidental Expenses in Travel and Communication

  11. BILL OF LADING • Bill of Lading • Functions • Carriage Contract between ship owner and shipper • Evidence of Receipt that the goods were delivered to ship • Document of Title • Forms • Electronic Bill of Lading • On Board Bill of Lading • Received For Shipment Bill of Lading • Straight and Order Bill of Lading • Clean Bill of Lading

  12. BILL OF LADING • Carriage of Goods By Sea Act • Applies to Bill of Lading • Imposes Duties of Performance on Part of Carrier • Provides for Defenses for Carrier If Goods Are Destroyed While In Transit • Per Package Limitation • See Chapter 10 of Text

  13. BILL OF LADING • Trade Terms-Allows contracting parties to allocate risk and cost of transporting goods. • Common Terms • CIF-(cost, insurance, freight)-the seller quotes the price for the goods including insurance and all transportation charges. • CFR-(cost and freight)-insurance costs excluded. • CPT-(carriage paid) and CIP (carriage and insurance paid)-modes other than water • EXW (ex work)-seller’s place. • FAS-(free along side)—FCA(free carrier), FOB-free on board • DES-(Delivered EX Ship)-goods delivered to destination specified on bill of lading.

  14. BILL OF LADING • Incoterms-created by International Chamber of Commerce to standardize allocation of risk-1990 and 2000-13 Categories • E Group (EX Work) • F Group (FCA, FAS, FOB) • C Group (CFR, CIF, CPT, CIP) • D Group (DAF, DES, DEQ, DDU, DDP) • 2000 Revisions-Export Clearance Obligations Under FAS, Loading of Goods on Buyer’s Vessel, Placing Import Clearance obligation under DEQ

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