Sherie Griffiths

May 19, 2010

Glossary Of Terms – The ‘I’s:

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 4, 2010

A-Z of Terms – D

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.

Hosted by Killer SEO SuperBlogs