Seyoum 9

Updated on 05/05/2015

BusAd 175: Introduction to International Trade

Spring 2011

Course #3819

Apr 18 - Jun 8, 2011

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Chapter Outlines, Sample Tests and Review Questions
	with your questions

Chapter 9:
Trade Documents and Transportation

The Class Text-Book

Export-Import Theory, Practices and Procedures by Belay Seyoum

(2nd Edition: Routledge, 2009) ISBN: 978-0-7890-3420-5

Click here on this image on the left to browse the information about this book at amazon.com

Chapter Outline

Seyoum Chapter 09

	Sample Multiple Choice Questions
	Talking-Points for the Review Questions

Information and materials on this page are based on those provided by the author, Dr. Belay Seyoum

Chapter Outline

Documents Frequently Used in Export–Import Transactions

Air waybill

The air waybill is a contract of carriage between the shipper and air carrier. It is issued by the air carrier and serves as a receipt for the shipper.

When the shipper gives the cargo to a freight consolidator or forwarder for transportation, the air waybill is obtained from the consolidator or forwarder.

Bill of exchange

A bill of exchange is an unconditional written order by one party (the drawer) that orders a second party (the debtor or drawee) to pay a certain sum of money to the drawer (creditor) or designated third party

Bill of lading

A bill of lading is a contract of carriage between the shipper and the steamship company (carrier).

	Chapter 01. Growth and Direction of International Trade
	Chapter 02. International and Regional Agreements Affecting Trade
	Chapter 03. Setting Up the Business
	Chapter 04. Planning and Preparations for Export
	Chapter 05. Export Channels of Distribution
	Chapter 06. International Logistics, Risk, and Insurance
	Chapter 07. Pricing in International Trade
	Chapter 08. Export Sales Contracts
	Chapter 09. Trade Documents and Transportation
	Chapter 10. Exchange Rates and International Trade
	Chapter 11. Methods of Payment
	Chapter 12. Countertrade
	Chapter 13. Capital Requirements and Private Sources of Financing
	Chapter 14. Government Export Financing Programs
	Chapter 15. Regulations and Policies Affecting Exports
	Chapter 16. Import Regulations, Trade Intermediaries, and Services
	Chapter 17. Selecting Import Products and Suppliers
	Chapter 18. The Entry Process for Imports
	Chapter 19. Import Relief to Domestic Industry
	Chapter 20. Intellectual Property Rights

It certifies ownership and receipt of goods by the carrier for shipment. It is issued by the carrier to the shipper.

A bill of lading can be (a) clean/claused, (b) inland, or
(c) through, as explained in the box alongside.

Consular invoice

Certain nations require a consular invoice for customs, statistical, and other purposes.

It must be obtained from the consulate of the country to which the goods are being shipped and usually must be prepared in the language of that country.

Certificate of origin

Some countries require a certificate of origin to enable them to determine whether the product is eligible for preferential duty treatment.

Clean/Claused bill of lading

The bill of lading form is normally filled out in advance by the shipper.
The carrier will check the goods loaded on the ship to ensure that they comply with the goods listed (quantity, condition etc.) on the bill of lading.
If all appears proper, the carrier will issue a clean bill of lading certifying that the goods have been properly loaded on board the ship.

Inland Bill of Lading

An inland bill of lading is a bill of lading issued by the railway carrier or trucking firm certifying carriage of goods from the place where the exporter is located to the point of exit for shipment overseas.
This document is issued by exporters to consign goods to a freight forwarder who will transport the goods by rail to an airport, seaport, or truck for shipment.

Through Bill of Lading

A through bill of lading is used for intermodal transportation, that is, when different modes of transportation are used.
The first carrier will issue a through bill of lading and is generally responsible for the delivery of the cargo to the final destination.

It is a statement as to the origin of the export product and usually is obtained from local chambers of commerce.

Inspection certificate

Some purchasers and countries may require a certificate attesting to the specifications of the goods shipped, usually performed by a third party.
Such requirements are usually stated in the contract and quotation.

Insurance certificate

When the exporter provides insurance, it is necessary to furnish an insurance certificate that states the type, terms, and amount of insurance coverage.
The certificates are negotiable and must be endorsed before presentation to the bank.

Commercial invoice

A commercial invoice is a bill for the merchandise from the seller to the buyer.
It should include basic information about the transaction: description of the goods, delivery and payment terms, order date, and number.

Dock’s receipt

This receipt is used to transfer accountability when the export item is moved by the domestic carrier to the port of embarkation and left with the international carrier for export.

Destination control statement

This statement appears on the commercial invoice, bill of lading, air waybill, and shipper’s export declaration. It is intended to notify the carrier and other parties that the item may only be exported to certain destinations.

Shipper’s export declaration

A shipper’s export declaration (SED) is issued to control certain exports and to compile trade data.

It is required for shipments valued at more than $2,500. Carriers and exporters are also required to declare dangerous cargo.

Pro forma invoice

A pro forma invoice is a provisional invoice sent to the prospective buyer, usually in response to the latter’s request for a price quotation.

Export packing list

This is a list that itemizes the material in each individual package and indicates the type of package (e.g., box, carton).

Manifest

A detailed summary of the total cargo of a vessel (by each loading port) for customs purposes.

Transportation

Air Transportation

Reasons for the Growth of Airfreight

Growing demand for imports of heavy equipment and services in many developing countries
The need for timely delivery of imports
Technological changes
The role of integrators and forwarders

Determinants of Air Cargo Rates

Distance
Weight and size of cargo
Commodity description
Special services

Carriage of Goods by Air

Major international rules: The international transportation of goods by air is governed by the Warsaw Convention of 1929 (original convention) and the amended convention of 1955.

Ocean Freight

Ocean shipping is the least expensive and the dominant mode of transportation in foreign trade. It is especially suitable for moving bulk freight such as commodities and other raw materials.

Types of ocean carriers

Private fleet are large fleets of specialized ships owned and managed by merchants and manufacturers to carry their own goods.

Tramps, i.e., vessels leased to transport, usually, large quantities of bulk cargo (oil, coal, grain, sugar, etc.) that fill the entire ship (vessel).

Conference lines: A shipping conference line is a voluntary association of ocean carriers operating on a particular trade route between two or more countries.

Carriage of Goods by Sea

Major international rules:
Three conventions cover rights and duties of parties to a contract of carriage by sea (duty of carrier, carrier’s liability, period of responsibility, limitation of action, and limits of carrier’s liability)

The Hague Rules (1924)
The Hague–Visby Rules (1968)
The Hamburg Rules (1978)

Land Transport

Rail transport: handles bulk cargo; absorbs loading, unloading, and other charges
Trucking: compared to rail transport, trucking has the advantage of flexibility, faster service, and lower transportation costs
Inland Carriage
1. Inland carriage is the use of an inland carrier to move merchandise from the exporter’s warehouse to the sea or airport.
2. Major international rules governing inland carriage:
  (a) Convention on the Contract for the International Carriage of Goods by Road; and
  (b) Convention Concerning International Carriage by Rail.
  Both conventions cover areas such as liability for loss or damage to shipment, delays in delivery, and time limits for bringing action.

Freight Forwarders

A freight forwarder facilitates the movement of cargo to the overseas destination on behalf of shippers and processes the documentation or performs activities related to those developments.
Role and function of a freight forwarder:
1. Advises shipper on the most economical choice of transportation.
2. Books space and arranges for pickup, transportation, and delivery of goods.
Licensing requirements: To be eligible for a license as a freight forwarder in the US, the applicant must demonstrate to the FMC that he or she has
1. a minimum of three years’ experience in ocean freight forwarding duties in the United States;
2. the necessary character to render such services; and
3. a valid surety bond filed with the FMC.

Sample Multiple-Choice Questions

	True	False
1.			The air waybill is a contract of carriage between the shipper and air carrier. It is issued by the shipper and serves as a receipt for the air carrier.
2.			Three modes of transportation are available for exporting products overseas: air, ocean and land (rail and truck).

		True	False
Which of these organization would you identify as the forum in which fares and rates are negotiated among the member airlines?	3.			Federal Aviation Authority (FAA)
	4.			World Trade Organization (WTO)
	5.			International Air Transport Association (IATA)

Talking-Points for the Review Questions

What is the difference between a bill of exchange and a bill of lading? Are straight bills of lading negotiable?
A bill of exchange is an unconditional written order by one party (the drawer) that orders a second party (debtor or drawee) to pay a certain sum of money to the drawer (creditor) or designated third party. A bill of lading is a contract of carriage between the shipper and the carrier. It also certifies ownership and receipt of goods by the carrier for shipment. A straight bill of lading is not negotiable.

What is the significance of these documents for importers: certificate of origin, destination control statement, pro forma invoice?

A certificate of origin is required by certain countries to enable them to determine whether the imported product is eligible for preferential duty treatment. A destination control statement is intended to notify the carrier and other parties that the item may be exported only to certain destinations. Pro forma invoice is a provisional invoice sent to the prospective buyer (by seller) in response to the buyer’s request for a price quotation. It is needed by the buyer to obtain foreign exchange or import permit.

What factors are likely to contribute to the growth in air freight in future? Is it a major mode of transportation for cargo?
Heavy infrastructure investment in many developing countries (certain types of equipment do not fit into a standard ocean container), just-in-time delivery of supplies. No.

What are the three major types of ocean carriers?

Tankers, roll-on and roll-off (RO/RO) vessels, and bulk carriers.

What is the carrier’s duty under a bill of lading? Discuss the “Himalaya clause.”

Carrier’s duty under a bill of lading: making the ship seaworthy; properly manning, equipping, and supplying the ship; making the ship fit and safe for reception, carriage and preservation of the goods; properly and carefully loading, stowing, carrying, and discharging the goods. The Himalaya Clause entitles agents/employees of the carrier the protection of the Hague Rules.

State the major differences between the Hamburg rules and the Hague/Hague-Visby rules on carriage of goods by sea.

Limits of liability and its extension to independent contractors, carrier’s liability for delays in delivery, burden of proof to show fault.

Discuss the difference between a freight forwarder and NVOCC.

A freight forwarder facilitates the movement of cargo to the overseas destination on behalf of shippers. NVOCCs are international ocean carriers that do not operate their own vessels. They fulfill the role of the shipper with respect to carriers and that of a carrier with respect to shippers.

BG, a stevedoring company in the employment of Tatek shipping, negligently dropped several containers of soft drinks as it was loading them on the ship from Port Everglades, Florida. Is the container a package under the Carriage of Goods by Sea Act? The contents of the container were described in the bill of lading as 2,300 cases of soft drinks, with each case containing four six-packs. Can the shippers claim from Tatek and/or BG?

Based on previous cases, the container is not a COGSA package (the contents of the container were described as 2,300 cases of soft drinks, with each case containing four six-packs). Himalaya Clause could be valid.

Which of these is issued by the air carrier and serves as a receipt for the shipper.
6.	Consular invoice
7.	Air waybill
Which of the following is an advantage of air transportation?
8.		Generally expensive for high bulk freight.
9.		It is best suited for the products that are sensitive to low pressures and variations in temperatures.
10.		Standard domestic packing is sufficient.