international trade unit 2 blackboard

8/8/2019 International Trade Unit 2 Blackboard

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Unit 2

ESP International Trade - Unit 2 - Pablo Ugalde


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Introduction International trade is exchange of capital, goods,

and services across international borders orterritories. In most countries, it represents asignificant share ofgross domestic product (GDP).While international trade has been presentthroughout much of history, its economic, social, andpolitical importance has been on the rise in recentcenturies.



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Why is international

trade important?



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Domestic Trade

Limited market size

Limited growthwithin the domestic

market

InternationalTrade

More costly thandomestic (tariffs,delays, language,

legal system, culture)

Factors of production(capital and labour)



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Trading globally gives consumers and countries theopportunity to be exposed to goods and services notavailable in their own countries.

Global trade allows wealthy countries to use their

resources - whether labor, technology or capital - moreefficiently.

Ricardian model Comparative advantage

http://upload.wikimedia.org/wikipedia/commons/5/50/Canal_de_Panam%C3%A1_Mayo_2008_342.jpg


7/42ESP International Trade - Unit 2 - Pablo Ugalde
http://upload.wikimedia.org/wikipedia/commons/5/50/Canal_de_Panam%C3%A1_Mayo_2008_342.jpghttp://upload.wikimedia.org/wikipedia/commons/5/50/Canal_de_Panam%C3%A1_Mayo_2008_342.jpg


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International Trade Project Maximum 4 participants per group

PowerPoint presentation no more than 20 minutes

Export or import process (non-traditional product) Documents (bill of lading, commercial invoice, letter of

credit, certification of origin, bank draft)

Transport (incoterms, packing list, contract, conditions

of shipment, container, time of shipping, quantity) Payment methods (letter of credit, open account,

consignment, cash in advance, bank draft)



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Top ten exporters (World)*1. Peoples Republic of China (machinery and equipment)2. Germany(machinery, vehicles, chemicals, metals and manufactures, textiles)3. United States (Computers, electrical machinery, vehicles, military equipment)

4. Japan (transport equipment, motor vehicles, electrical machinery, chemicals)5. France (machinery and transportation equipment, chemicals, beverages)6. Netherlands (machinery and equipment, chemicals)7. Italy(engineering products, textiles, vehicles, transport equipment, minerals)8.

South Korea(electronics, automobiles, ships, machinery, robotics)

9. United Kingdom (manufactured goods, fuels, chemicals, beverages, tobacco)10. Canada (motor vehicles and parts, industrial machinery, chemicals, electricity)

*The World Trade Organization 2009



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Top ten exporter (Latin America)*1. Brazil (transport equipment, soybeans, footwear, coffee) (World 23)

2. Argentina (edible(comestible) oils, fuels and energy, cereals, motor vehicles) (37)

3. Chile (copper, fish, fruit, nitrates, paper and wood pulp, wine) (40)

4. Venezuela (petroleum, steel, chemicals, agricultural products)(52)5. Colombia (petroleum, coffee, coal, bananas, cut flowers) (56)

6. Peru (copper, gold, crude petroleum and petroleum products, coffee)(61)

7. Ecuador (petroleum, bananas, cut flowers, shrimp) (70)

8. Panama (bananas, shrimp, sugar, coffee, clothing) (82)9. Costa Rica (bananas, pineapples and coffee)(86)

10. Guatemala (coffee, sugar, petroleum, bananas, fruits and vegetables) (92)

*The World Trade Organization 2009



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Chile International Trade Chile's economy is heavily reliant on international trade to sustain its

economy

Chile's main trading partners are the United States, Japan, Germany,and Brazil

Latin America has been the fastest growing export market for Chile

Chilean exports have traditionally been dependant on copper and have

been consumed mostly by industrialized countries



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Source: www.direcon.cl


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Source: www.direcon.cl


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Chiles Trade Agreements Chile has established itself as an attractive global trading partner

with its commitment to an open economy and the numerous

Free Trade Agreements (multilateral, bilateral and regional)which it has signed. These agreements give Chilean companies

and companies operating in Chile access to 86% of the world's

GDP and have helped foreign trade to become an increasingly

important part of Chile's economy. Chile has also signednumerous double-taxation agreements which further aid the

international investor in doing business.



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Incoterms 2000 International commerce terms are a series of international

sales terms, published by International Chamber of

Commerce (ICC) and widely used in internationalcommercial transactions. These are accepted by

governments, legal authorities and practitioners worldwide

for the interpretation of most commonly used terms in

international trade. This reduces or remove altogetheruncertainties arising from different interpretation of such

terms in different countries.



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Group E - Departure EXW Ex Works (named place) The buyer is

responsible for all charges.



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Group F Main carriage unpaid FCA Free Carrier (named places) The seller hands over the

goods, cleared for export, into the custody of the first carrier (named by thebuyer) at the named place. This term is suitable for all modes of transport,including carriage by air, rail, road, and containerized / multi-modal transport.

FAS Free Alongside Ship (named loading port) Theseller must place the goods alongside the ship at the named port.

FOB Free on board (named loading port) The seller mustload the goods on board the ship nominated by the buyer, cost and risk being

divided at ship's rail. The seller must clear the goods for export. Maritimetransport only.



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Group C Main carriage paid CFR or CNF Cost and Freight (named destination port)

Seller must pay the costs and freight to bring the goods to the port of destination.

CIF Cost, Insurance and Freight (named destination

port) Exactly the same as CFR except that the seller must in addition procure andpay for insurance for the buyer.

CPT Carriage Paid To (named place of destination) Thegeneral/containerized/multimodal equivalent of CFR. The seller pays for carriage tothe named point of destination, but risk passes when the goods are handed over to

the first carrier. CIP Carriage and Insurance Paid (To) (named place of

destination) The containerized transport/multimodal equivalent of CIF.Seller pays for carriage and insurance to the named destination point, but riskpasses when the goods are handed over to the first carrier.



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Group D ArrivalAs of January 01, 2011 the eighth edition, IncoTerms 2010,have effect. The changes therein affect this section in thatall of the following five terms are obsolete and replaced

with these three: DAT (Delivered at Terminal), DAP(Delivered at Place), andDDP(Delivered Duty Paid). Thenew terms apply to all modes of transport.

Incoterms 2000 = 13 Incoterms 3000 = 11



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Group D Arrival DAF Delivered At Frontier (named place)

DES Delivered Ex Ship (named port)

DEQ Delivered Ex Quay (named port) DDU Delivered Duty Unpaid (named destination

place)

DDP Delivered Duty Paid (named destination place)

Source: Chambre de Commerce Internationale (CCI), 16 de septembre du 2010. www.lemoci.com



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Source: Transfer of risk from the seller to the buyer Robert Wielgrski


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Vocabulary related to export and export

products Import-export

Vocabulary



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Incoterms website http://www-jime.open.ac.uk/2004/16/demo/Incoterms/Inco_what.htm



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Documents Commercial invoice (SAMPLE) The commercial invoice is a record or evidence of transaction

between the exporter and the importer. It is similar to an ordinary salesinvoice, except some entries specific to the export-import trade areadded.

Certain importing countries may require that the commercial invoiceand the packing list be made out in, or translated to, the language ofthe importing country, for example, in French for shipment to France,in Italian to Italy, and in Spanish to Mexico and Venezuela.

The content of a typical declaration includes a sworn statement fromthe exporter indicating that the goods in question are manufactured in

the exporting country, and that the amount shown in the invoice is thetrue and correct value. The description of the goods in the commercial invoice must

correspond with the description in the letter of credit (L/C). In all otherdocuments, the description can be in general terms provided it is notinconsistent with the description in the L/C.



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Documents Bill of lading (B/L)

A bill of lading is a document issued by a carrier to a shipper,acknowledging that specified goods have been received onboard as cargo for conveyance to a named place for delivery

to the consignee who is usually identified. Athorough bill oflading involves the use of at least two different modes oftransport from road, rail, air, and sea.

A bill of lading serves a number of purposes: It is evidence that a valid contract of carriage, or a chartering

contract, exists. It is a receipt signed by the carrier confirming whether goods

matching the contract description have been received in goodcondition.

It is also a document of transfer, being freely transferable but not anegotiable instrument in the legal sense.



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Documents A bill of lading serves a number of purposes:

It is evidence that a valid contract of carriage, or achartering contract, exists.

It is a receipt signed by the carrier confirming whethergoods matching the contract description have beenreceived in good condition.

It is also a document of transfer, being freely

transferable but not a negotiable instrument in thelegal sense.



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Documents Letter of credit

The documentary letter of credit, or commercial letter ofcredit is an arrangement whereby the applicant (the

importer) requests and instructs the issuing bank (theimporter's bank) or the issuing bank acting on its own behalf,pays the beneficiary (the exporter) or accepts and pays thedraft (bill of exchange) drawn by the beneficiary, orauthorizes the advising bank or the nominated bank to paythe beneficiary or to accept and pay the draft drawn by the

beneficiary, or authorizes the advising bank or the nominatedbank to negotiate, against stipulated document(s), providedthat the terms and conditions of the documentary credit arefully complied with.



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Documents A letter of credit (L/C) can be irrevocable or revocable.

The L/C usually indicates whether it is an irrevocable orrevocable letter of credit. In the absence of such indication,

the L/C is deemed to be irrevocable. An irrevocable letter of credit cannot be amended or

cancelled without the consent of the issuing bank, theconfirming bank, if any, and the beneficiary. The payment

is guaranteed by the bank if the credit terms andconditions are fully met by the beneficiary. The words"irrevocable documentary credit" or "irrevocablecredit" may be indicated in the L/C.



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DocumentsA revocable letter of credit can be amended or

cancelled by the issuing bank at any time without theconsent of the beneficiary, often at the request and on

the instructions of the applicant. There is no securityof payment in a revocable letter of credit (L/C). Thewords "this credit is subject to cancellationwithout notice", "revocable documentary credit"

or "revocable credit" usually are indicated in the L/C.



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DocumentsAn irrevocable letter of credit (L/C) opened by an

issuing bank whose authenticity has been confirmedby the advising bank and where the advising bank has

added its confirmation to the credit is known asconfirmed irrevocable letter of credit. The words"we confirm the credit and hereby undertake ..." or" we add our confirmation to this credit and

hereby undertake ..." normally are included in theL/C.



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DocumentsAn irrevocable letter of credit (L/C) opened by an

issuing bank in which the advising bank does not addits confirmation to the credit is known as an

unconfirmed irrevocable letter of credit. Thepromise to pay comes from the issuing bank only,unlike in a confirmed irrevocable L/C where both theissuing bank and the advising bank promise to pay the

beneficiary.



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Documents In a restricted negotiable letter of credit, the authorizationfrom the issuing bank to pay the beneficiary is restricted to aspecific nominated bank. The sample letter of credit is arestricted negotiable credit, that is, the authorization from The

Sun Bank to pay the UVW Exports is restricted to a specificnominated bank, which is The Moon Bank.

In a freely negotiable letter of credit, the authorization fromthe issuing bank to pay the beneficiary is not restricted to aspecific bank, any bank can be a nominated bank as long as the

bank is willing to pay, to accept draft(s), to incur a deferredpayment undertaking, or to negotiate the L/C. The words "thiscredit is not restricted to any bank for negotiation" o r "thiscredit may be negotiated at any bank", or similar words, maybe indicated on the L/C.



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Documents The certificate of origin is a document certifying the country in which theproduct was manufactured, and in certain cases may include such informationas the local material and labor contents of the product.

Some importing countries require a certificate of origin to establish whether ornot a preferential duty rate is applicable. A popular example of the certificate of

origin is the Form A, which is often called the GSP Form A. The certificate of origin (C/O)is an alternative to the declaration or the

certification and/or legalization of the commercial invoice. The C/O is basedon the rules of the country of origin.

The country of origin is the country where the goods are grown, produced ormanufactured. The manufactured goods must have been substantially transformed in the exporting country as the country of origin, to their present

form ready for export. Certain operations such as packaging, splitting andsorting may not be considered as sufficient operations to confer origin. The certificate of origin includes the Form A, Chamber of Commerce

Certificate of Origin, Exporter's Certificate of Origin, and Free Trade MarketCertificate of Origin. The trade agreement, import practice, and letter of credit(L/C) stipulation determine the type of C/O needed.



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Documents Packing list is an extension of the commercial invoice, as such it looks like acommercial invoice.

The exporter or his/her agent the customs broker or the freight forwarderreserves the shipping space based on the gross weight or the measurementshown in the packing list.

Customs uses the packing list as a check-list to verify the outgoing cargo (inexporting) and the incoming cargo (in importing). The importer uses thepacking list to inventory the incoming consignment.

The description of the goods in the packing list can be in general terms,provided it is not inconsistent with the description in the L/C.

It shows the total quantity within a stated range of the package number and thebreakdown in each package.

It shows the total weight within a stated range of the package number and theweight of each package. Sometimes, it is necessary to include the size ordimensions (length-width-height) of the master package.

The packing list and commercial invoice need not be signed, unless otherwisestipulated in the letter of credit (L/C). In practice, the original and the copy ofthe packing list and commercial invoice are often signed.



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DocumentsA bill of exchange (bank draft) is a kind of check or

promissory note without interest. It is used primarilyin international trade, and is a written order by one

person to pay another a specific sum on a specific datesometime in the future. If the bill of exchange isdrawn on a bank, it is called a bank draft. If it is drawnon another party, it is called a trade draft.



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Documents In almost all export transactions an Import and Export

Contract is written. It is a legal document whichshows that the seller or exporter agreed to sell and that

the buyer or importer agreed to buy a certain productor products at a specific date and price.

A contract is very similar to a Pro forma because it alsodescribes the product, states the price, shows the timeand conditions of shipment and states all other termsthe seller and buyer agreed on.



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Workshop Checking Guests In and Out

(http://www.englishclub.com/english-for-work/hotel-check-in-out.htm)



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Workshop Import Export documentation



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End of Unit 2