Updated : August 28, 2007
International Trade Know-How
In this daily changing business world, MarginUp
would like to remind you of some modest trading practices, especially for
those who are first-time or novice traders.
The combined use of the proper payment methods and shipping terms is always
encouraged and should be used with caution. Normally,
the T/T payment method is least preferred, as it poses the highest risk to
the importers, while the open account has the highest risk for
exporters. As to international transport, the International
Commercial Terms (INCOTERMS) available from International Chamber of
Commerce at http://www.iccwbo.org/,
are commonly used in international shipping. Below are some brief
summaries for your quick reference:
1. Payment Methods
Sorted in order of risk, open account is the riskiest for the
exporter, and payment in advance is the riskiest for the importer:
·
Open Account - the riskiest for the exporter,
usually used between large corporations or trading partners.
·
Documents Against Acceptance - also referred to by
sight draft, documents against payment, bill of exchange, usually used with
a bill of lading.
·
Letter of Credit (LC) - guaranteed by the banks;
here is how it works: an importer applies for LC through his/her bank
(opening bank), the opening bank send LC to exporter's bank (advising bank)
who notifies the exporter receipt of LC, freight forwarder dispatches the merchandise
and provides the documents to the advising bank, then the
advising bank forwards the documents to negotiating bank, which checks documents
against LC and authorizes payment, the Importer's bank gives him/her
the documents; with those documents, an importer can claim the merchandise.
·
Payment in Advance - T/T, check, international
money order; the riskiest for the importer.
2. Shipping Terms
Also known as INCOTERMS, traders usually use these
terms to communicate for quotations such as FOB his/her port, or CIF his/her
port. Your custom brokers and freight forwarders are able
to help you understand with these terms. Here's a short list of commonly-used
INCOTERMS:
·
Group F, Main Carriage Unpaid - FCA (Free Carrier),
FAS (Free Alongside Ship), and FOB (Free on Board)
·
Group C, Main Carriage Paid - CFR (Cost and
Freight), CIF (Cost, Insurance, and Freight), CPT (Carriage Paid To
Location), and CIP (Carriage and Insurance Paid To Location)
If you'd like to learn more about the definitions
of other INCOTERMS, please refer to International Chamber of
Commerce Publishing. Or if you're interested in learning more trading tips, please
refer to the book Building an Import/Export Business by Kenneth D. Weiss,
ISBN 0-471-17787-3.
3. Arbitration and Mediation
Please understand that
MarginUp is an International Trade Marketplace that does not provide any arbitration or mediation services. However, should
you encounter any fraud or scam, feel free to let us know. Also, there
is an international organization that is able to help you address those
issues :
International
Court of Arbitration:
http://www.iccwbo.org/court/
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