Sherie Griffiths

May 19, 2010

Glossary Of Terms – The ‘I’s:

Filed under: A-Z of International Trade Terms, Business, International Trade, International Trade Financial Solutions — Tags: , , , , , , , , , , , , , , , , , , , , , — sheriegriffiths.com @ 9:57 am

From Ray Stannnard, International Trade Financial Solutions

What?  We’re back to a single letter again this month!  It’s quite surprising how many international-related issues start with this letter.  I promise that next month we will start motoring – currently, I cannot think of any terms starting with the letter J – and K is also a challenge.  OK, then, the I’s.

ICC
In International terms, ICC stands for the International Chamber of Commerce.  Think of it as a Chamber of Commerce that covers much of the world.  Amongst their many responsibilities they formulate, interpret and put into place standards and procedures that are recognised globally. Without this, International Trade would rapidly deteriorate into local practices and chaos.  Some cynics will say this already happens, but things like the Letter or Credit rules are drawn up by the ICC. They are also responsible for arbitration, and the general opening up of global markets.  Visit their main website for more info.

Import Licence
These may still be required by some countries for some or all goods, including certain imports into the UK. Whilst compliance is the responsibility of the importer, as an exporter, it is a good idea to make sure they are doing so; after all, you want payment for your goods!

Import Paperwork
If goods are already in free circulation within the EU [see 'Free Circulation, Issue 17], paperwork is usually minimal.  However, if imports into the UK exceed £600,000 and/or your exports exceed £250,000, you need Intrastat declarations [see below].  Goods from outside the EU will require more documentation, possibly including an import licence [see above].
(All previous issues of the newsletter can be found as PDF files on my website.  Click on Articles/Newsletters on the left hand side.)

Incoterms
I have already covered these in Issue 12, at the start of the 1st actual Incoterm.
Inspection Certificate
This is what it says, but it is vital to ensure that the correct one is provided, if called upon.  Anyone can issue one, but it is more usual for an independent, random sample to be inspected by an accredited inspection company, such as SGS. Some countries may require these as a precondition of import into the Country. As ever, know the rules for the areas of the world in which you deal.
Insurance policy/certificate
If called for, it is usual for goods to be insured for 110% of their value, and will include details of quantity and route plus, if necessary, time limits and any transshipments. Insurance certificates called for under transferable Letters of Credit can cause an issue in as much as they will show the mark up amount that the middle man is taking to the other parties.  More later…
Intrastat
This is a system for collecting statistics on the physical trade in goods between EU member states.  If you import or export above the thresholds [currently £600k and £250k respectively] you must complete monthly returns on line, or face heavy fines and penalties.  There is a lot more info on the revenue’s website.  Just search for Intrastat.
Inward Processing Relief
I do not intend to include all of the many HMRC reliefs in this glossary, but this one is of note for anyone who imports goods for re-export, post processing. If you apply for IPR, you only pay VAT if you subsequently decide to sell them in the UK [or fail to met the conditions attached to IPR, of course].
ISP98
I toyed with whether or not to include, but it is still seen sometimes, so I voted it in.  ISP98 is a set of rules that govern Standby Letters of Credit [SLC].  I will cover both Letters of Credit [L/C's] and Stand bys in the relevant sections later on, but, in brief, all L/C’s and SLC’s must state under which set of internationally recognised rules they operate.  For L/C’s it should read UCP600, but for SLC’s, ISP98 is usually preferable to UCP600. Without going into too much detail, if you need further advice on ISP98 [or UCP600], please contact me.
Right, that’s the end of I. As I said at the start, J & K are presently blank, so here’s a challenge for everyone – send me an e-mail if you can think of any terms!

March 26, 2010

Glossary of Terms – The F’s

Filed under: A-Z of International Trade Terms, Business, International Trade, International Trade Financial Solutions — Tags: , , , , , , , , , , , , , , , , , , , , , , — sheriegriffiths.com @ 12:14 pm

From Ray Stannard, International Trade Financial Solutions.

 

The title of this post might be an unfortunate choice, but consistency is everything.  Good news re Incoterms – after ‘F’, there are no more!   As a result, I think we’ll start getting through letters more quickly.

FAS Incoterm 

Free Alongside Ship [named port].  The seller clears the goods for export and delivers them the relevant ship at a named port.  Thereafter, the buyer is responsible for the  goods.

FCA Incoterm 

Free Carrier.  Similar, but different, to FAS.  Again, the seller is responsible for the goods up to a location named by the buyer.  This could be the seller’s premises, or those of a carrier/forwarder.  If the term is FCA Seller’s Premises, the seller is only responsible for the loading of the goods; however, FCA Named Place  means that the seller is also responsible for the inland freight to that named place.

FCL

Full Container Load.  This is NOT an Incoterm.  This is where a container is used exclusively by one shipper.  Exclusive use, if you can fill the container, can result in lower shipping costs.

FCR

Forwarder’s Certificate of Receipt.  This is a document issued by the Freight Forwarders nominated by the buyer to collect goods from the seller which confirms the receipt of goods in its custody.  An FCR can replace the transport document under a Letter of Credit, but only if it is specifically mentioned as the acceptable document evidencing transport.

FIATA

The International Federation of Freight Forwarders Association.  FIATA is an independent organisation which represents many [but not all] freight forwarders in many countries throughout the world.

FOB Incoterm

Free on Board.  Probably one of the most well known of the Incoterms and, technically, the most mis-used, since title passes when the goods pass over the ship’s rail.  FOB was designed in pre containerisation days, when goods were lifted by crane at the dockside.  Technically, FCA should be used for containerised shipments, but old habits are hard to break….

Foreign Currency Accounts

 The holding of an account in any currency other than Sterling.  Normally used where a business either has 2 way currency flows and/or operates a foreign exchange policy, grouping several invoices before conversion to another currency.  The possible downside of operation such accounts can be on cashflow insofar as funds ‘may be in the wrong currency’.

Foreign Exchange Risk

 Anyone who trades in a foreign currency will have a degree of Foreign Exchange risk. The risk is caused by the minute by minute fluctuations in exchange rates.  An appreciationof this risk and understanding of what steps can be taken to mitigate this risk isa vital tool for anyone who wants a successful overseas trading strategy [buying or selling].

Forwarding Agent

Often used by smaller businesses to clear customs for goods coming into the UK from outside the EU.

Forward Contracts

Used as part of the strategy to mitigate against adverse movements in exchange rates; an example of a widely available tool to manage foreign exchange risk [see above].  You agree to buy/sell a specific amount of currency at either a fixed future date or between a range of dates, agreeing the rate today.

Free Circulation

Goods that are already in circulation within the EU, having either previously entered into the EU, with all relevant duty paid, or having originated in the EU.  In the eyes of HMRC, goods in free circulation are not classified as imports or exports.

Free Trade Zone

A designated port/area in a Country where duty free import of non prohibited goods is permitted.  Often seen in developing countries to attract business and inward investment.

Freight Forwarder

A freight forwarder will look after the shipment of goods between seller and buyer, taking care of the freight, customs clearance, insurance, etc.  Many freight forwarders specialise in certain parts of the world, so it’s important to ensure that you use one with suitable knowledge and understanding of the Countries/regions in which you trade.

Sorry for a slightly long section, but on to G’s [and more?] next month.

March 3, 2010

A-Z of Terms – C

Filed under: A-Z of International Trade Terms, Business, International Trade, International Trade Financial Solutions — Tags: , , , , , , , , , , , , , , , , , , , , , — sheriegriffiths.com @ 10:17 am

From International Trade Financial Solutions.

CMR – Convention Merchandises Routiers: These are the conditions for the international movement of goods by road.

Collections: Again, held over from Issue 10. A bank collection is the collection of trade debts through the banking system whereby documents relating to the shipment of goods are passed through the banking system and exchanged either for payment or an acknowledgement of acceptance [usually by means of a Bill of Exchange] for payment at a fixed future date. Both buyer and seller must agree to this course of action at the start and, unlike Letters of Credit, there is no undertaking by the bank to pay. It is generally felt that this is a more secure method than open account trading.

Confirmed Letter of Credit: I will cover this when we look at Letters of Credit, later in the series.

Consignee: The party to whom goods are sent.

Consignor: Also known as the shipper; the party despatching the goods.

Consignment (1): The underlying goods sent by the consignor to the consignee.

Consignment (2): Care – if goods are exported subject to consignment, the exporter will only receive payment on completed sales. Any unsold may be returned to the seller, at the seller’s expense. Can be high risk and expensive.

Containerisation: The use of sealed containers into which goods are packed for shipment.

Convertible Currency: A currency that can be freely bought and sold for other currencies at will, e.g. Sterling, US Dollar, Euro, etc. Exporters must ensure that payment for their goods will be in a freely convertible currency. Note, however, that this may not necessarily mean that funds will be immediately available, if the country concerned still uses exchange control.

Correspondent Bank: A bank that operates in its own Country the business of a foreign bank.

CPT Incoterm: Carriage Paid To [named place]. The seller clears the goods for export and pays for delivery to a named place. The goods are deemed to have been delivered, and the responsibility for them passes to the buyer, once they have been taken by the seller’s carrier.

Customs: Generic term for HMRC. Whether you are importing or exporting, you must follow HMRC regulations, which are complex and detailed. If you use a freight forwarder or shipping agent, they can undertake much of the customs procedures on your behalf but, like tax returns, you are still ultimately liable for the accuracy, etc. of all declarations.

Customs Commodity Code: Also known as CN Code. An 8 digit code required for all goods to be exported outside the EU. Imports from outside the EU have a 10 digit code. These must be entered on the relevant documentation and are available from HMRC via their publication known as The Tariff.

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