International Sell- Purchase Contract – Procedure & Comments 10/05/2006

International Sell-International Sell-Purchase Contract – Purchase Contract –

Procedure & CommentsProcedure & Comments

10/05/200610/05/2006

Procedure - 1Procedure - 1

Seller and Buyer Seller and Buyer conclude a conclude a sales contractsales contract, with method , with method of payment usually by letter of of payment usually by letter of credit (documentary credit).credit (documentary credit).

Essential Clauses of the ContractEssential Clauses of the Contract

Description of GOODSDescription of GOODS

Specification + Quality & QuantitySpecification + Quality & Quantity

PricePrice

Terms of paymentTerms of payment

Terms of deliveryTerms of delivery

Quality IdentificationQuality Identification by by inspectioninspection

by by types/specifications numberstypes/specifications numbers referenced to referenced to catalogues, leaf-lets, web-sites, and other catalogues, leaf-lets, web-sites, and other official corporative sourcesofficial corporative sources

by by personal testingpersonal testing – auctions – auctions

by by detailed descriptionsdetailed descriptions plans, manuals, plans, manuals, drawings, agendas, etc.drawings, agendas, etc.

by by useful outputs useful outputs

ETC (agreed by the both Parties)ETC (agreed by the both Parties)

Methods of Payment in Methods of Payment in International Trade - International Trade - Risk SpectrumRisk Spectrum

HIGHHIGH

EXPORTER RISK

LOWLOW

IMPORTER RISK

LOWLOW

HIGHHIGH

TRADE TERMSTRADE TERMS

Open Account

Documents AgainstAcceptance

Documents AgainstPayment

Time Letters of Credit

Sight Letters of Credit

Payment in Advance


Buyer Buyer appliesapplies to his issuing to his issuing bank, usually in Buyer's bank, usually in Buyer's country, country, for letter of creditfor letter of credit in in favor of Seller (beneficiary).favor of Seller (beneficiary).


1.1. Issuing bank Issuing bank requestsrequests another bank, usually a another bank, usually a correspondent bankcorrespondent bank in in Seller's country, Seller's country, to adviseto advise, , and usually and usually to confirmto confirm, the , the credit.credit.


Advising bank, usually in Advising bank, usually in Seller's country, Seller's country, forwards forwards letter of credit to Sellerletter of credit to Seller informing about the terms and informing about the terms and conditions of credit.conditions of credit.


If credit terms and conditions If credit terms and conditions conform to sales contract, conform to sales contract, Seller Seller prepares goods and prepares goods and documentation, and documentation, and arranges deliveryarranges delivery of goods to of goods to carrier.carrier.


Seller Seller presents documentspresents documents evidencing the shipment and draft evidencing the shipment and draft (bill of exchange) to paying, (bill of exchange) to paying, accepting or negotiating bank accepting or negotiating bank named in the credit (the advising named in the credit (the advising bank usually), or any bank willing bank usually), or any bank willing to negotiate under the terms of to negotiate under the terms of credit.credit.


Bank Bank examines the examines the documents and draftdocuments and draft for for compliance with credit terms. compliance with credit terms.

If complied with, If complied with, bank will bank will paypay, accept or negotiate., accept or negotiate.--GASTRONOM CaseGASTRONOM Case


Bank, if other than the Bank, if other than the issuing bank, issuing bank, sends the sends the documents and draft to documents and draft to the issuing bank.the issuing bank.


Bank Bank examines the examines the documents and draftdocuments and draft for for compliance with credit terms. compliance with credit terms.

If complied with, If complied with, Seller's draft Seller's draft is honored.is honored.


Documents release to Documents release to Buyer after paymentBuyer after payment, or , or on other terms agreed on other terms agreed between the bank and between the bank and Buyer.Buyer.


Buyer Buyer surrenders bill of surrenders bill of lading to carrierlading to carrier (in (in case of ocean freight) case of ocean freight) in in exchange for the exchange for the goodsgoods or the delivery or the delivery order.order.

Delivery OrderDelivery Order

A document from the consignee, shipper, or A document from the consignee, shipper, or owner of freight owner of freight ordering the release of ordering the release of freightfreight to another party. to another party. Bank Delivery Order to an AirlineBank Delivery Order to an Airline -- A letter -- A letter addressed to an air carrier from a bank who is addressed to an air carrier from a bank who is shown as consignee on an airwaybill shown as consignee on an airwaybill instructing the carrier to release a shipment.instructing the carrier to release a shipment. Often airlines will accept Often airlines will accept as a delivery order a as a delivery order a bank's endorsement on the airwaybillbank's endorsement on the airwaybill, , although an airwaybill is a non-negotiable although an airwaybill is a non-negotiable document.document.

Delivered Ex Ship Delivered Ex Ship (named port of destination)(named port of destination)

" DES" means that the " DES" means that the seller seller deliversdelivers when when

the goods are placed the goods are placed at the at the disposal of the buyerdisposal of the buyer on board on board of the ship of the ship

not cleared for import not cleared for import

at the named port of destination.at the named port of destination.

Delivered Ex Ship - 2Delivered Ex Ship - 2

The seller has to bear all the costs and The seller has to bear all the costs and risks involved in bringing the goods to the risks involved in bringing the goods to the named port of destination named port of destination before before discharging. discharging.

If the parties wish the seller If the parties wish the seller to bear the to bear the costs and risks of discharging the costs and risks of discharging the goodsgoods, then the DEQ term should be , then the DEQ term should be used.used.

SELLER’S RESPONSIBILITY BUYER’S RESPONSIBILITY

GOODS HANDLING

SELLER’S RISK

SELLER’S COST

GOODS HANDLING

BUYER’S RISK

BUYER’S COST

PORT OF DESTINATION

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Checklist:Checklist: The following points should be kept in mind when The following points should be kept in mind when

choosing an Incoterm.choosing an Incoterm.

What method of transport is to be What method of transport is to be used? used?

What are the terms currently used? What are the terms currently used?

Are there any Are there any company policiescompany policies on on which terms should be used and which terms should be used and how much responsibility should be how much responsibility should be taken?taken?

Checklist:Checklist:

Are there any Are there any restrictionsrestrictions on the term to on the term to be used imposed be used imposed by the country of by the country of importation? importation?

Are there any Are there any commercial normscommercial norms in the in the country with which you are dealing? country with which you are dealing?

Discuss the terms to be used with your Discuss the terms to be used with your trading partner - it is important to take trading partner - it is important to take their point of viewtheir point of view into account. into account.


Ensure that Ensure that both parties understandboth parties understand and can carry out their obligations. and can carry out their obligations. Ensure that you are able to obtain Ensure that you are able to obtain enough information to give a enough information to give a quote for a quote for a certain Incoterm. certain Incoterm. Read Incoterms 2000.Read Incoterms 2000. The introduction The introduction gives good advice and can clarify certain gives good advice and can clarify certain issues and the individual terms issues and the individual terms themselves are accurately described. themselves are accurately described.


Ensure Ensure all staffall staff (especially those (especially those involvedinvolved in in sales and marketing) sales and marketing) are properly trainedare properly trained in in order to understand the basic principles of order to understand the basic principles of Incoterms and in particular the Incoterms and in particular the details of the details of the individual Incoterms. individual Incoterms. IncorporateIncorporate the terms decided the terms decided into all into all relevant commercial paperworkrelevant commercial paperwork such as such as invoices, quotations, terms and conditions of invoices, quotations, terms and conditions of sale. sale. Review the terms periodically and change Review the terms periodically and change them if necessary.them if necessary.

INCOTERMS REGULATE:INCOTERMS REGULATE:

distributions of documents, distributions of documents,

delivery conditions, delivery conditions,

distrubution of operation costs distrubution of operation costs

and distributions of operation risks. and distributions of operation risks.

INCOTERMS DOES NOT REGULATE:INCOTERMS DOES NOT REGULATE:

legislation applicable to points not reflected in legislation applicable to points not reflected in Incoterms, Incoterms,

payment method of the operation. payment method of the operation.

GoodsGoods

SellerSeller

Provide the Provide the goodsgoods, , commercial commercial invoiceinvoice or or electronic message, electronic message, and other and other documentationdocumentation as as required by the sales required by the sales contract. contract.

BuyerBuyer

Accepting GOODS Accepting GOODS delivereddelivered

PaymentPayment

PayPay for the goods as for the goods as provided in the sales provided in the sales contract. contract.

Licenses and Customs Licenses and Customs FormalitiesFormalities

Obtain at own risk and Obtain at own risk and cost cost any export any export licenses and licenses and authorizationsauthorizations and and carry out carry out all export all export formalities and formalities and proceduresprocedures, including , including those associated with those associated with transshipmenttransshipment to the to the named port of named port of destination. destination.

Obtain and pay costs Obtain and pay costs of of all import licenses all import licenses and authorizationsand authorizations and carry out and carry out all all import formalities. import formalities.

Carriage and InsuranceCarriage and Insurance

Contract for and pay Contract for and pay all costs of carriage all costs of carriage and transshipmentand transshipment (if necessary) to the (if necessary) to the named place and port named place and port of destination. of destination.

No obligation to No obligation to provide insurance.provide insurance.

No obligationNo obligation to the to the seller for either seller for either carriage or carriage or insurance. insurance.

DeliveryDelivery

Make the goods Make the goods available to the available to the buyer uncleared for buyer uncleared for importimport on board the on board the vessel at the named vessel at the named place and port place and port on the on the datedate or within the or within the time periodtime period specified specified in the sales contract. in the sales contract.

Take deliveryTake delivery of the of the goods once they goods once they are are made availablemade available at at the port. the port.

Risk TransferRisk Transfer

Assume all risks of Assume all risks of loss or damage to the loss or damage to the goods goods until they until they have been made have been made available to the available to the buyerbuyer at the named at the named place and port. place and port.

Assume all risk of Assume all risk of loss or damage loss or damage from from the time the goods the time the goods have been made have been made availableavailable at the port. at the port.

CostsCosts

Pay Pay all costs until all costs until the goods have the goods have been deliveredbeen delivered, , including including all export all export formalities, carriage formalities, carriage and transshipmentand transshipment (if necessary) to the (if necessary) to the named place and named place and port. port.

Pay all costs for the Pay all costs for the goods once they have goods once they have been made available been made available at the port at the port including including unloading.unloading.

Pay Pay all costs all costs relating to import relating to import formalitiesformalities including including duties, taxes and duties, taxes and other charges. other charges.

NoticesNotices

Provide Provide sufficientsufficient notice of notice of dispatch dispatch and projected arrivaland projected arrival that the buyer can that the buyer can take appropriate take appropriate action to arrange action to arrange pick-up of the goods. pick-up of the goods.

If, according to the If, according to the sales contract, the sales contract, the buyer is able to buyer is able to specify a specify a time for time for and/or a place of and/or a place of delivery,delivery, to give the to give the seller sufficient notice. seller sufficient notice.

Proof of Delivery, Transport Proof of Delivery, Transport DocumentsDocuments

ProvideProvide the buyer the buyer with the with the delivery delivery order and/or a order and/or a transport transport documentdocument enabling enabling the buyer to take the buyer to take delivery of the goods delivery of the goods at the port of at the port of destination. destination.

AcceptAccept the seller's the seller's transport document transport document so long as it is in so long as it is in conformity with the conformity with the sales contract.sales contract.

Proof of deliveryProof of delivery is a method to establish is a method to establish the fact that the recipient received the the fact that the recipient received the contents sent by the sendor. contents sent by the sendor.

Checking, Packing, MarkingChecking, Packing, Marking

SELLERSELLER ___ ___Pay all costs associated with Pay all costs associated with checkingchecking the the quality and quantityquality and quantity of the goods of the goods to be in conformity with the sales contract. to be in conformity with the sales contract.

Provide appropriate packingProvide appropriate packing (unless the (unless the goods are traditionally delivered unpackaged) goods are traditionally delivered unpackaged) as required for the transport of the goods, as required for the transport of the goods, to the to the extentextent that the buyer has made transport that the buyer has made transport circumstances known to the seller prior to the circumstances known to the seller prior to the execution of the sales contract. execution of the sales contract.

Provide Provide markingmarking appropriateappropriate to the packaging. to the packaging.

Inspection(s)Inspection(s)--

BUYERBUYER ___ ___ Pay for the costs of pre- Pay for the costs of pre-shipment inspection(s) shipment inspection(s) exceptexcept inspections inspections required by the country of export. required by the country of export.

OtherOther

Provide the buyer Provide the buyer at the at the buyer's request, risk buyer's request, risk and expenseand expense any and any and all assistance in securing all assistance in securing documentation documentation originating in the country originating in the country of export or of origin of export or of origin required for import.required for import.

Provide the buyer with Provide the buyer with information necessary information necessary to obtain insurance.to obtain insurance.

PayPay all costs associated all costs associated with securing with securing documentation from the documentation from the country of origin or country of origin or export required for export required for import. import.

ReimburseReimburse seller for seller for costs in providing such costs in providing such documentation or documentation or assistance. assistance.

Maritime and Inland Waterway Transport Only

FAS Free Alongside Ship (named port of shipment)

Group F

< FOB

Free on Board (named port of shipment)

Group C CFR Cost and Freight (named port of destination)

Any Mode of Transport

Group E EXW Ex Works (named place

Group F FCA Free Carrier (named place)

CPT Carriage Paid To (named place of destination)

Group C

CIP Carriage and Insurance Paid To (named place of destination)

DAF Delivered at Frontier (named place)

DDU Delivered Duty Unpaid (named place of destination)

Group D

DDP Delivered Duty Paid (named place of destination)

STRUCTURE of CONTRACTSTRUCTURE of CONTRACT

CONTRACT NoCONTRACT No

200_, Moscow200_, Moscow

ABCABC, hereinafter referred to as , hereinafter referred to as the the «Buyer», «Buyer», represented by abcrepresented by abc, on the one , on the one part, and part, and XYZXYZ, hereinafter referred to as , hereinafter referred to as the the «Seller», «Seller», represented by represented by xyzxyz , on the other , on the other part, have concluded part, have concluded the Contract the Contract on the on the following:following:

1.1. SUBJECT OF THE CONTRACTSUBJECT OF THE CONTRACT

The Seller The Seller has soldhas sold and and the Buyer the Buyer has boughthas bought on the basis of CIP as per INCOTERMS 2000 on the basis of CIP as per INCOTERMS 2000 the Equipment indicated in the Attachment No l. the Equipment indicated in the Attachment No l.

The scope of work to be performed by The scope of work to be performed by the the Seller Seller consists of supply of consists of supply of the equipment the equipment and fulfillment of and fulfillment of the service, the service, specified in specified in Attachment No l.Attachment No l.

2.2. CONTRACT PRICECONTRACT PRICE

The total value of The total value of the contract the contract amounts to amounts to XXX,XXX.YYXXX,XXX.YY USD ( USD (write out figures bywrite out figures by

wordswords) including:) including:the equipment the equipment price YYY,YYY.yyprice YYY,YYY.yy USDUSDthe service the service priceprice ZZ,ZZZ.zz ZZ,ZZZ.zz USDUSD

and is understood and is understood CIP (PODCIP (POD), the cost of packing ), the cost of packing and marking included.and marking included.

The total The total contract contract value and prices for each value and prices for each contract contract item of item of the equipment the equipment and and the service the service are specified in are specified in Attachment No 1.Attachment No 1.

3. 3. TERMS OF PAYMENTTERMS OF PAYMENT

3.1. All payments under this 3.1. All payments under this contract contract are made in are made in US DollarsUS Dollars by by T/T remittance.T/T remittance.

3.2 Advance payment in the amount of one 3.2 Advance payment in the amount of one hundred percent (100%) of the total value of hundred percent (100%) of the total value of the the contract contract USD XXX ( USD XXX ( in writingin writing ) shall be paid by ) shall be paid by the Buyer the Buyer to to the Seller the Seller against against the Seller's the Seller's invoiceinvoice within YY ( within YY (in writingin writing ) days ) days from the from the date whendate when the Seller the Seller make out an invoice to make out an invoice to the Buyerthe Buyer

4. 4. TERMS OF DELIVERYTERMS OF DELIVERY

4.2.4.2. The The delivery datedelivery date of of the equipment the equipment shall shall be considered the date of air waybill and/or be considered the date of air waybill and/or multimodal transportation, to be issued by the multimodal transportation, to be issued by the first first Seller's Seller's forwarder or carrier.forwarder or carrier.The The arrival datearrival date of of the equipment the equipment is the date of is the date of arrival of arrival of the equipment the equipment at the customs at the customs warehouse in warehouse in PODPOD

4.3. 4.3. The Consignee The Consignee under the under the contract contract isis

as follows:as follows:

Consignee:Consignee: DATADATA

4.4. The name of 4.4. The name of Sellers Sellers forwarder or carrierforwarder or carrier and and transportation routetransportation route are to be confirmed by are to be confirmed by the the Seller Seller to to the Buyer the Buyer by fax message not later by fax message not later than XX days before the shipment date.than XX days before the shipment date.

4.5. 4.5. Prior deliveryPrior delivery of of the equipment the equipment is allowed is allowed after after the Buyer's the Buyer's consent only.consent only.

4.6.4.6. Shipping documents of each shipment Shipping documents of each shipment (lot) of (lot) of the equipment the equipment shall include:shall include:

invoice;invoice;

packing List;packing List;

waybill;waybill;

insurance policy.insurance policy.

4.7.4.7. The Seller The Seller shall send by fax to shall send by fax to the Buyer the Buyer a shipping a shipping advice on shipment with attached invoice and packing list not advice on shipment with attached invoice and packing list not later than later than XXXX before the shipment date. before the shipment date.The following data shall be specified in the The following data shall be specified in the shipping adviceshipping advice::

contract No;contract No;

invoice No;invoice No;

invoice amount;invoice amount;

description of description of the the equipment;equipment;

port of loading;port of loading;

port of destination;port of destination;

consignee name;consignee name;

shipping date;shipping date;

AWB No;AWB No;

Flight No;Flight No;

B/L No;B/L No;

Vessel name;Vessel name;

Number of packages;Number of packages;

Gross weight;Gross weight;

Measurements/volume.Measurements/volume.

Summary: Doing Business in Summary: Doing Business in ANYWHERE…ANYWHERE…

Remember……Remember……

““Experience is the name every one Experience is the name every one gives to their mistakes…”gives to their mistakes…”

(Oscar Wilde)(Oscar Wilde)