With the integration of the global economy, the international flow of resources is more free and frequent. In order to enhance the competitiveness of the supply chain of enterprises, it is already an issue that we have to face with a global perspective and global procurement.
Compared with domestic procurement, what concepts need to be understood in foreign trade procurement?
First, FOB, CFR and CIF
FOB（Free on Board）Free on board (followed by the port of shipment), means that the seller delivers the goods by loading the goods on the ship designated by the buyer at the designated port of shipment or by obtaining the goods that have been delivered to the ship, commonly known as “FOB”.
CFR（Cost and Freight）Cost and freight (followed by the port of destination) means that the seller delivers on board or by taking delivery of the goods so delivered.
CIF（Cost Insurance and Freigh）Cost, insurance and freight (followed by the port of destination), which means that the seller completes the delivery when the goods pass the ship’s rail at the port of shipment. CIF price = FOB price + I insurance premium + F freight, commonly known as “CIF price”.
The CFR price is the FOB price plus the shipping related costs, and the CIF price is the CFR price plus the insurance premium.
Second, demurrage and dispatch
In the voyage charter party, the actual unloading time (Laytime) of bulk cargo generally starts from 12 or 24 hours after the ship submits the “Notice of Loading and Unloading Preparation” (N.O.R) until the final draft survey is completed after unloading (Final Draft Survey) until.
The contract of carriage stipulates the loading and unloading time. If the Laytime end point is later than the unloading time stipulated in the contract, demurrage will be incurred, that is, the cargo cannot be fully unloaded within the specified time, resulting in the ship continuing to berth in the port and causing the shipowner to berth. The agreed payment to be paid by the charterer to the shipowner for increased in-port expenses and loss of sailing schedule.
If the Laytime end point is earlier than the loading and unloading time agreed in the contract, a dispatch fee (Despatch) will be incurred, that is, the unloading of the goods is completed in advance within the specified time, which shortens the life cycle of the ship, and the shipowner returns the agreed payment to the charterer.
Third, the commodity inspection fee
Declaration for inspection and quarantine will result in inspection fees, sanitation fees, disinfection fees, packaging fees, administrative fees, etc., which are collectively referred to as commodity inspection fees.
The commodity inspection fee is paid to the local commodity inspection bureau. Generally charged according to 1.5‰ of the value of the goods. Specifically, it is determined according to the amount of the invoice on the commodity inspection goods document. The commodity tax number is different, and the commodity inspection fee is also different. You need to know the specific commodity tax number and the amount on the document to know the specific fee.
Fourth, tariffs
Tariff (Customs Duties, Tariff), that is, import tariff, is the tax levied by the customs set by the government to the importing exporter when the imported export commodity passes through the customs territory of a country.
The basic formula for import duties and taxes is:
Import duty amount = dutiable value × import duty rate
From the perspective of the country, the collection of tariffs can increase fiscal revenue. At the same time, the country also adjusts the import and export trade by setting different tariff rates and tax amounts, thereby affecting the domestic economic structure and development direction.
Different commodities have different tariff rates, which are implemented in accordance with the “Tariff Regulations”.
Fifth, demurrage fee and storage fee
Detention fee (also known as “overdue fee”) refers to the overdue (overdue) usage fee for the container under the control of the consignee, that is, the consignee lifts the container out of the yard or wharf after customs clearance and fails to comply with the regulations. Produced by returning empty boxes within time. The time frame includes the time when the box is picked up from the dock until you return the box to the port area. Beyond this time limit, the shipping company will need to ask you to collect money.
Storage fee (Storage, also known as “over-stocking fee”), the time range includes the time the box starts when it is dropped at the dock, and it is until the end of customs declaration and the dock. Different from demurrage (Demurrage), the storage fee is charged by the port area, not the shipping company.
Sixth, payment methods L/C, T/T, D/P and D/A
L/C (Letter of Credit) The abbreviation refers to a written certificate issued by the bank to the exporter (seller) at the request of the importer (buyer) to guarantee the responsibility for payment of the goods.
T/T (Telegraphic Transfer in Advance) The abbreviation refers to the exchange through telegram. Telegraphic transfer is a payment method in which the payer deposits a certain amount of money to the remittance bank, and the remittance bank transmits it to the destination branch or correspondent bank (remittance bank) by telegram or telephone, instructing the inward bank to pay a certain amount to the payee.
D/P（Documents against Payment） The abbreviation of “Bill of Lading” is generally sent to the bank after shipment, and the bank will send the bill of lading and other documents to the importer for customs clearance after the importer has paid for the goods. Because the bill of lading is a valuable document, in layman’s terms, it is paid in one hand and delivered in the first hand. There are certain risks for exporters.
D/A (Documents against Acceptance) The abbreviation means that the exporter issues a forward draft after the goods are shipped, and together with the commercial (freight) documents, it is presented to the importer through the collecting bank.
Seventh, the unit of measurement
Different countries have different measurement methods and units for products, which may affect the actual quantity (volume or weight) of the product. Special attention and agreement should be paid in advance.
For example, in the procurement of logs, according to incomplete statistics, in North America alone, there are nearly 100 kinds of log inspection methods, and there are as many as 185 kinds of names. In North America, the measurement of logs is based on the thousand board ruler MBF, while the Japanese ruler JAS is commonly used in my country. The volume will vary greatly.
Post time: Sep-01-2022