ESP International Trade - Unit 2 - Pablo Ugalde Introduction International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries.
Limited growth Factors of production within the domestic (capital and labour) market
ESP International Trade - Unit 2 - Pablo Ugalde
Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries. Global trade allows wealthy countries to use their resources - whether labor, technology or capital - more efficiently. Ricardian model “Comparative advantage”
ESP International Trade - Unit 2 - Pablo Ugalde
ESP International Trade - Unit 2 - Pablo Ugalde ESP International Trade - Unit 2 - Pablo Ugalde 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)
ESP International Trade - Unit 2 - Pablo Ugalde
Top ten exporters (World)* 1. People’s 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
ESP International Trade - Unit 2 - Pablo Ugalde
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
ESP International Trade - Unit 2 - Pablo Ugalde
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
ESP International Trade - Unit 2 - Pablo Ugalde
Source: www.direcon.cl ESP International Trade - Unit 2 - Pablo Ugalde Source: www.direcon.cl
ESP International Trade - Unit 2 - Pablo Ugalde
ESP International Trade - Unit 2 - Pablo Ugalde Source: www.direcon.cl
ESP International Trade - Unit 2 - Pablo Ugalde
Chile’s 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 signed numerous double-taxation agreements which further aid the international investor in doing business.
ESP International Trade - Unit 2 - Pablo Ugalde
Incoterms 2000 International commerce terms are a series of international sales terms, published by International Chamber of Commerce (ICC) and widely used in international commercial 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 altogether uncertainties arising from different interpretation of such terms in different countries.
ESP International Trade - Unit 2 - Pablo Ugalde
Group E - Departure EXW – Ex Works (named place) The buyer is responsible for all charges.
ESP International Trade - Unit 2 - Pablo Ugalde
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 the buyer) 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) The seller must place the goods alongside the ship at the named port. FOB – Free on board (named loading port) The seller must load 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. Maritime transport only.
ESP International Trade - Unit 2 - Pablo Ugalde
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 and pay for insurance for the buyer. CPT – Carriage Paid To (named place of destination) The general/containerized/multimodal equivalent of CFR. The seller pays for carriage to the 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 risk passes when the goods are handed over to the first carrier.
ESP International Trade - Unit 2 - Pablo Ugalde
Group D – Arrival As of January 01, 2011 the eighth edition, IncoTerms 2010, have effect. The changes therein affect this section in that all of the following five terms are obsolete and replaced with these three: DAT (Delivered at Terminal), DAP (Delivered at Place), and DDP (Delivered Duty Paid). The new terms apply to all modes of transport. Incoterms 2000 = 13 Incoterms 3000 = 11
ESP International Trade - Unit 2 - Pablo Ugalde
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
ESP International Trade - Unit 2 - Pablo Ugalde
Source: Transfer of risk from the seller to the buyer Robert Wielgórski
ESP International Trade - Unit 2 - Pablo Ugalde
Vocabulary related to export and export products Import-export Vocabulary
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 sales invoice, except some entries specific to the export-import trade are added. Certain importing countries may require that the commercial invoice and the packing list be made out in, or translated to, the language of the 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 from the exporter indicating that the goods in question are manufactured in the exporting country, and that the amount shown in the invoice is the true 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 other documents, the description can be in general terms provided it is not inconsistent with the description in the L/C.
ESP International Trade - Unit 2 - Pablo Ugalde
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 on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified. A thorough bill of lading involves the use of at least two different modes of transport 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 good condition. It is also a document of transfer, being freely transferable but not a negotiable instrument in the legal sense.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents 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 good condition. It is also a document of transfer, being freely transferable but not a negotiable instrument in the legal sense.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents Letter of credit The documentary letter of credit, or commercial letter of credit is an arrangement whereby the applicant (the importer) requests and instructs the issuing bank (the importer's bank) or the issuing bank acting on its own behalf, pays the beneficiary (the exporter) or accepts and pays the draft (bill of exchange) drawn by the beneficiary, or authorizes the advising bank or the nominated bank to pay the beneficiary or to accept and pay the draft drawn by the beneficiary, or authorizes the advising bank or the nominated bank to negotiate, against stipulated document(s), provided that the terms and conditions of the documentary credit are fully complied with.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents A letter of credit (L/C) can be irrevocable or revocable. The L/C usually indicates whether it is an irrevocable or revocable 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, the confirming bank, if any, and the beneficiary. The payment is guaranteed by the bank if the credit terms and conditions are fully met by the beneficiary. The words "irrevocable documentary credit" or "irrevocable credit" may be indicated in the L/C.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents A revocable letter of credit can be amended or cancelled by the issuing bank at any time without the consent of the beneficiary, often at the request and on the instructions of the applicant. There is no security of payment in a revocable letter of credit (L/C). The words "this credit is subject to cancellation without notice", "revocable documentary credit" or "revocable credit" usually are indicated in the L/C.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents An irrevocable letter of credit (L/C) opened by an issuing bank whose authenticity has been confirmed by the advising bank and where the advising bank has added its confirmation to the credit is known as confirmed 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 the L/C.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents An irrevocable letter of credit (L/C) opened by an issuing bank in which the advising bank does not add its confirmation to the credit is known as an unconfirmed irrevocable letter of credit. The promise to pay comes from the issuing bank only, unlike in a confirmed irrevocable L/C where both the issuing bank and the advising bank promise to pay the beneficiary.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents In a restricted negotiable letter of credit, the authorization from the issuing bank to pay the beneficiary is restricted to a specific nominated bank. The sample letter of credit is a restricted negotiable credit, that is, the authorization from The Sun Bank to pay the UVW Exports is restricted to a specific nominated bank, which is The Moon Bank.
In a freely negotiable letter of credit, the authorization from
the issuing bank to pay the beneficiary is not restricted to a specific bank, any bank can be a nominated bank as long as the bank is willing to pay, to accept draft(s), to incur a deferred payment undertaking, or to negotiate the L/C. The words "this credit is not restricted to any bank for negotiation" or "this credit may be negotiated at any bank", or similar words, may be indicated on the L/C.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents The certificate of origin is a document certifying the country in which the product was manufactured, and in certain cases may include such information as the local material and labor contents of the product. Some importing countries require a certificate of origin to establish whether or not 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 based on the rules of the country of origin. The country of origin is the country where the goods are grown, produced or manufactured. 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 and sorting 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 Market Certificate of Origin. The trade agreement, import practice, and letter of credit (L/C) stipulation determine the type of C/O needed.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents Packing list is an extension of the commercial invoice, as such it looks like a commercial invoice. The exporter or his/her agent the customs broker or the freight forwarder reserves the shipping space based on the gross weight or the measurement shown in the packing list. Customs uses the packing list as a check-list to verify the outgoing cargo (in exporting) and the incoming cargo (in importing). The importer uses the packing 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 the breakdown in each package. It shows the total weight within a stated range of the package number and the weight of each package. Sometimes, it is necessary to include the size or dimensions (length-width-height) of the master package. The packing list and commercial invoice need not be signed, unless otherwise stipulated in the letter of credit (L/C). In practice, the original and the copy of the packing list and commercial invoice are often signed.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents A bill of exchange (bank draft) is a kind of check or promissory note without interest. It is used primarily in international trade, and is a written order by one person to pay another a specific sum on a specific date sometime in the future. If the bill of exchange is drawn on a bank, it is called a bank draft. If it is drawn on another party, it is called a trade draft.
ESP International Trade - Unit 2 - Pablo Ugalde
Documents In almost all export transactions an Import and Export Contract is written. It is a legal document which shows that the seller or exporter agreed to sell and that the buyer or importer agreed to buy a certain product or products at a specific date and price. A contract is very similar to a Pro forma because it also describes the product, states the price, shows the time and conditions of shipment and states all other terms the seller and buyer agreed on.
ESP International Trade - Unit 2 - Pablo Ugalde
Workshop Checking Guests In and Out (http://www.englishclub.com/english-for-work/hotel-check-in-out.htm)
(Bible in History - La Bible Dans L'histoire 8) John T. Willis - Yahweh and Moses in Conflict - The Role of Exodus 4-24-26 in The Book of Exodus-Peter Lang International Academic Publishers (2010)