Country Of Origin | Sherie Griffiths

March 4, 2010

A-Z of Terms – D

Filed under: Uncategorised — Tags: Accepted Bill Of Exchange, Bill Of Exchange, Bills Of Exchange, Cigarettes, Country Of Origin, Credit Period, Customs Duty, Discount House, Drawee, Due Date, Duty Rates, Face Value, Financial Solutions, Free Circulation, Import Duty, International Trade, Letter Of Credit, Letters Of Credit, National Businesses, Payment Acceptance, Recourse, Vat — sheriegriffiths.com @ 10:25 am

From International Trade Financial Solutions.

Discount: Defined here in relation to the discounting of Commercial Paper – typically Bills of Exchange. Where a future dated Bill of Exchange has been accepted by the drawee [the one who's due to pay - see below], it may be possible to discount the Bill. A Discount House [or bank] may agree to advance the bulk of the face value of the bill, thus helping your cashflow. Discounting can be with or without recourse [see Recourse, later on]. Usually only bank endorsed bills will be discounted without recourse [except for some specific agreements - usually restricted to larger, multi-national
businesses].

Drawee: The party on whom a Bill of Exchange is drawn, i.e. the one who is buying and has to make payment.

Drawer: The party who draws up the Bill of Exchange – the seller.

Drawing: In terms of Letters of Credit, a drawing is the presentation of documents for payment/acceptance under the Credit. Depending on the terms of the Credit, a drawing may be for part or the whole of the value of the Credit.

Due Date: The date on which payment of an accepted Bill of Exchange or a drawing under a deferred Letter of Credit becomes due. [A deferred Letter of Credit is one where there is a credit period between presentation of documents and payment, but no Bill of Exchange has been called for].

Duty: Import Duty may have to be paid on certain imports into the UK. Generally, there is no duty on goods that are already in free circulation within the EU. For goods imported from outside the EU, rates depend on product and Country of Origin. Duty rates are always based on the CIF value of the goods [regardless of which Incoterm was actually used for the contract] and VAT is added to the CIF value. Care, rates can and do change regularly and at short notice. Customs Duty is different, and applies to specific goods irrespective of their origin, for example, cigarettes, alcohol, etc. coming into the UK. For both types, it is usual
to have to pay the relevant duty amount to HMRC before goods are released [but see Duty Deferment below].

Duty Deferment: For regular importers, it may be possible to obtain a Duty Deferment bond from your bank and lodge this with HMRC. The effect of such a bond is that goods are released quicker and you pay the duty in arrears. There is a cost insofar as the bank will view this as a contingent liability and may require security and will almost certainly charge you for its issuance. Also, the bond must cover an average 2 month’s value of imports.

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October 23, 2009

“Glossary of Terms – The C’s [and an 'I]“

Filed under: Uncategorised — Tags: Alphabetical Order, Cash Advance, Cash In Advance, Cia, Correct Position, Countries, Country Of Origin, Demonstration Purposes, Glossary Of Terms, Gsp, Heading, Importers, Incoterms, Insurance, Insurance Cover, Latter Course, Letter C, Origin C, Preferential Rates, Temporary Import — sheriegriffiths.com @ 10:10 am

After last month’s rest, let’s get back to looking at some of the more common terms frequently encountered when buying and selling overseas. With the letter ‘C’, we encounter some of our first Incoterms and here I have a problem. Incoterms come under ‘I’, but all 13 of them start with a letter that precedes ‘I’. So, either I list all 13 in their correct position and keep everyone waiting until we get to the letter ‘I’ or go out of order. As you can tell from the heading above, I think the latter course makes most sense. I just need to remember, when we do reach the letter ‘I’ that Incoterms have already been covered. There are many terms that start
with C, so I’ll spread them over the next 2 issues.

C. Carnet. This usually allows the temporary import of goods for display or for demonstration purposes only without having to pay duty. It does not apply to every
Country, and different rules apply, so you do need to enquire for any specific country in which you are interested.

CIA. Cash in Advance, i.e. paying up front. For exports, this means paying before the goods leave the Country.

CWO. Cash with Order, i.e. the payment accompanies the order. Note that the transaction is binding on both parties. CIA and CWO are similar, but do have differences. Note also that these are NOT Incoterms [see below].

Certificate of ….. There are many documents often called for or needed when moving goods between countries, e.g. Cert. of Origin, Inspection Cert., Insurance Cert., etc. I’ll cover the more common ones under their correct alphabetical order.

Cert. of Manufacture. Does what it says. Completed/prepared by the seller and often notarised.

Cert. of Origin [C/O]. A statement showing the origin of the goods. Many countries demand these – for importers, the amount of duty due may depend on the country of origin. Some countieshave lower duties [preferential rates]. If you are importing from one of these you may need a GSP C/O.
For exporters, you need to see what your destination country wants and, if necessary arrange for a C/O through your local Chamber of Commerce, many of whom can also arrange certification, if needed.

Now, to the one out of order, the I.

Incoterms: This stands for International Commercial Terms and is, broadly speaking, the terms of shipment. They set out the delivery terms of the underlying goods and are recognised internationally. There are 13 terms, split into 4 categories and each one will state which party [buyer/seller] is responsible for the goods at every stage of the shipment. Each Incoterm is identified by a 3 letter code and I will include each in the relevant part of this glossary, albeit that there are probably only 4 or 5 which are seen on a regular basis. Whenever you trade internationally, you MUST use one of the recognised Incoterms. To do otherwise will land you in all sorts of problems and disputes if anything goes wrong.

OK, back to the C’s.

CFR [or C&F]. Incoterm – Cost and Freight. Under CFR terms, the seller is responsible for clearing the goods for export and for all carriage costs associated in getting the goods to the port in the destination country. The buyer is responsible for all risks [and costs] after delivery, which occurs when the goods pass over the ship’s rail in the port of shipment. This is still a regularly seen Incoterm, although it should not be applied to containerised traffic; CPT should be used instead.

CIF. Incoterm. Cost Insurance and Freight. Similar to CFR except that the seller is responsible for the cost of insuring the goods between shipment and destination ports. Again, delivery occurs when the goods cross the ship’s rail in the port of shipment. Also, like CFR, CIF is commonly seen and is not suited to containerised transport; CIP should be used.

CIP. Incoterm. Carriage and Insurance paid to [named place]. Developed for container traffic where delivery typically takes place at a container terminal, which may be miles away from a port. Delivery is made when the seller delivers the goods to his carrier, after which the buyer assumes all responsibility, except for the insurance
of the goods, which remains the seller’s responsibility.

More C’s next month.

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